Understanding the Triangular Employment Relationship: Key Insights for Employers and Agencies

Temporary staffing has become an essential solution for businesses looking to stay agile and responsive in a fast-changing world. While flexible staffing brings plenty of benefits, many organisations don’t fully appreciate the legal complexity that can come with it, particularly under what’s known as the triangular employment relationship.

In our recent webinar, Cathi and Georgia from Tribe had the pleasure of chatting with Shelley Eden from Shelley Eden Law, an employment law specialist, about all things Triangular Employment.

Our discussion offered some valuable reminders and insights for any organisation engaging temporary or contingent workers. Here are some of the key takeaways:

What is a Triangular Employment Relationship?

At its core, a triangular employment relationship involves three parties:

• The Agency (Employer): The entity that employs the temporary worker and holds their employment contract.

• The Employee: (Candidate): Usually, a temporary worker placed through the agency.

• The Controlling Third Party (Client): The organisation where the worker performs their day-to-day tasks, and who supervises and directs their work.

This isn’t just an administrative setup, it’s a legally recognised structure under the Employment Relations Act, which outlines clear responsibilities and potential liabilities for everyone involved.

Why It Matters

Businesses often treat temporary workers with a “care-free” approach, assuming minimal responsibility since the worker is technically employed by an agency. However, case law now shows that the client can be held partially or fully liable if their actions contribute to a personal grievance or unfair treatment.

If a client’s actions – for instance, an unreasonable request to remove a worker – contribute to a personal grievance or unfair treatment, the client could be found partly (or even fully) liable alongside the agency. In some cases, courts have even recognised clients as joint employers, which blurs the lines of accountability even further.

Key Areas of Risk

The most common risks tend to arise around:

• Unjustified dismissal: Where a worker is removed from a role unfairly.

• Discrimination or harassment: Where the client’s behaviour contributes to a grievance.

• Employment agreement obligations: Including leave, pay, performance management, and disciplinary processes.

Even if a contract gives a client the right to remove a temporary worker “at any time”, the law can still override that clause if the removal contributes to a personal grievance.

Best Practices for Clients

The best way to protect both your organisation and your people is through strong communication and clear processes with your agency partner.

1. Contact the agency early: If issues arise, loop your agency in immediately so actions are coordinated and fair.

2. Keep feedback flowing: Report performance, attendance, or behavioural concerns promptly.

3. Clarify roles and responsibilities: Ensure agreements clearly define supervision, induction, training, performance management, and grievance handling.

4. Onboard effectively: Set clear expectations from day one from start times and dress codes to KPIs and health and safety procedures.

By adopting these practices, businesses can mitigate risk and foster a productive, professional environment for temporary staff.

At Tribe, we work closely with our clients to support every stage of the process, from transparent communication and solid documentation to smooth onboarding and people-first management. That collaboration helps minimise risk while ensuring every worker feels valued and set up for success.

The Bottom Line

Temporary staffing can be a powerful solution, but it’s not a “set and forget” arrangement. Understanding the triangular employment relationship helps protect everyone involved - the agency, the client, and the employee.

With the right partner and the right processes in place, businesses can enjoy the flexibility of temporary staffing without the legal headaches.

At Tribe, we’re here to make sure your workforce solutions are not only flexible and efficient but fully compliant too.