A business restructure is one of the highest-risk periods for workforce management. The decisions made about sequencing, communication and how different workforce categories are treated can affect the legal outcome, the retention of people the business needs to keep, and the organisation’s ability to operate during the transition.
This guide covers how labour hire fits into a business restructure — when it helps, when it creates risk, and how to sequence the workforce elements of a restructure without making avoidable mistakes.
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Key takeaways
- Labour hire is most useful in a restructure as a coverage mechanism during transition — maintaining operational continuity while the permanent workforce is being reorganised.
- Using labour hire to replace direct employees who have been made redundant is legally risky and can undermine the genuineness of the redundancy.
- The sequencing of workforce decisions in a restructure — who is told what and in what order — affects both legal risk and the retention of key people.
Where labour hire helps during a restructure
The most straightforward legitimate use of labour hire in a restructure is operational continuity. When an organisation is reorganising its permanent workforce — through redundancies, role redesigns, or a change in organisational structure — there is typically a period where the permanent headcount is either uncertain or depleted, and operations still need to run. Labour hire provides coverage during that gap without creating additional permanent employment obligations that would then need to be unravelled.
Specific scenarios where labour hire coverage is genuinely useful during a restructure:
- Covering roles that have been vacated while the organisation decides whether to backfill them permanently or restructure them away.
- Maintaining production or service levels during a consultation period when permanent employees are uncertain about their futures and productivity may be affected.
- Providing specialist capacity for the restructure itself — for example, project management or change management roles that are needed for a defined period and then no longer.
- Bridging a skills gap when restructuring moves certain work to a different part of the organisation and the receiving team needs temporary support during the transition.
The timing risk — what not to do
The risk that most employers underestimate is the gap between ending a direct employment relationship and using labour hire to perform the same work. Courts and the Fair Work Commission assess genuine redundancy in part by looking at whether the role was actually no longer required — or whether it was restructured in form but continued in substance through a different employment model.
Where a direct employee is made redundant and a labour hire worker is placed in what is substantively the same role shortly after, this can support an unfair dismissal claim on the basis that the redundancy was not genuine. There is no safe timeframe that guarantees protection — the question is whether the decision to engage labour hire was driven by a genuine operational need that is different from the role that was eliminated, or whether it was a way of continuing that role without the employment obligations. The former is defensible; the latter is not.
Sequencing — the order in which decisions are communicated
In a restructure involving both direct and labour hire workers, the sequencing of decisions and communications matters. Telling direct employees they are at risk of redundancy before the labour hire arrangements have been reviewed can prompt speculation that labour hire is being used to replace them — even if that is not the case. Getting the sequence wrong creates industrial relations risk and can make the consultation process harder to manage.
A workable sequence for most restructures involving mixed workforces:
- Determine the future operating model first — what roles are needed, at what scale, and in what employment category.
- Identify which labour hire arrangements will end, be extended or be restructured as part of the new model — notify the provider before or at the same time as commencing the direct employee consultation process.
- Commence formal consultation with direct employees at risk — with a clear picture of the future model that includes the labour hire component, so there is no ambiguity about what work will exist post-restructure.
- Do not place new labour hire workers in roles that are substantively the same as those under consultation until the consultation process is complete and the redundancy decisions are final.
Retaining key people through uncertainty
Restructures create voluntary attrition risk. High performers who are uncertain about their future often make decisions before the process is finalised — they are the ones with the most options. Labour hire can play a practical role here: if the organisation can confirm to a key person that their role is secure, and use labour hire to manage uncertainty in other parts of the operation, the restructure is less likely to produce collateral exits in areas where retention is critical.
For the redundancy obligations that apply in parallel to the considerations covered in this guide, see redundancy and labour hire: managing workforce reduction without the liability. For casual conversion obligations that may interact with restructure decisions, see casual conversion under Fair Work.
Related reading
For a closely related guide, read Redundancy and Labour Hire: Managing Workforce Reduction Without the Liability.
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FAQ
Do we need to consult labour hire workers during a restructure?
Labour hire workers are employees of the provider, not the host — so the formal consultation obligations under the Fair Work Act (for direct employees at risk of redundancy) do not extend to them. However, the provider as employer may have consultation obligations to those workers if their employment is being affected. In practice, notifying the provider early and giving them time to manage their workers’ transitions is both good practice and often required under the commercial agreement.
Can we keep labour hire workers on site while direct employees are being consulted?
Generally yes, where the labour hire workers are in different roles or performing different work. If labour hire workers are performing substantially the same work as direct employees who are under consultation, their presence on site can complicate the consultation process and raise questions about the genuineness of the redundancy. Be clear about what work each group is performing and why the labour hire component is retained.
How much notice should we give a labour hire provider when ending placements as part of a restructure?
As much as the commercial agreement requires plus as much additional time as you can give. Providers need time to source alternative placements for their workers — the more notice they have, the better their ability to redeploy workers and avoid employment terminations. In a restructure context, four weeks is a reasonable minimum; more is better, particularly for workers who have been on long-term placements.
What if we need to restructure our labour hire arrangements themselves — changing providers or models?
Changing providers or moving from labour hire to direct employment as part of a restructure is a commercial decision, but it has workforce implications. Workers placed by the outgoing provider remain employed by that provider — they do not automatically transfer. If the new model requires the same workers, they need to be engaged afresh, which may involve new employment agreements, new probationary periods, and a break in continuity of service that affects their entitlement calculations going forward. Take advice before restructuring the employment model, not just the commercial arrangement.
Next step
If you need workforce support during a business restructure or transition, explore managed skilled workforce solutions.
General information only: This article is for general informational purposes only and does not constitute legal advice. Legislation varies by state and territory — consult a qualified employment lawyer or Fair Work adviser for guidance specific to your situation.
