The Borrowed Workforce: A Board-Level Audit of Intra-Group Secondments
Photo: Richter Frank-Jurgen, CC BY-SA 2.0, via Wikimedia Commons
Secondments are one of the quieter ways in which a UK group moves capability around. A specialist from the parent spends six months with a subsidiary; a finance lead from one trading company covers a vacancy in another; a project manager is lent to a newly acquired entity while it finds its feet. The commercial logic is usually sound. The governance often is not.
All too often the arrangement rests on an email chain, a payroll recharge and a shared assumption that everyone knows who is in charge. That assumption can become expensive when an individual resigns, raises a grievance, suffers an injury at the host site, or is found not to have the right to work in the UK. For subsidiary boards, the question is not whether secondments should happen. It is whether the group can evidence, if asked, who employed the individual, who directed the work and who carries the associated liabilities.
Begin with the employment relationship, not the recharge
A recharge is an accounting consequence, not a legal foundation. The starting point is the contract of employment. Which entity is the employer? Does the contract permit the individual to be seconded? Is there a written secondment letter setting out duration, reporting lines, location, duties and the right to return? Has the host entity accepted its obligations in writing?
Conduct can blur the picture. If the host entity controls day-to-day work, sets hours, approves leave, handles discipline and pays the individual's expenses, an inference of a different employment relationship may be argued. That is not to say a secondment automatically becomes a transfer, but ambiguity is the enemy of good governance. The board should be able to point to documents that make the intended structure clear and consistent with what happens in practice.
Payroll, benefits and the tax footprint
Intra-group secondments often trigger a payroll recharge to reflect salary, employer National Insurance and pension contributions. The board should ask whether the recharge is complete. Benefits in kind, bonus accruals, company car arrangements, private medical cover and share scheme participation may sit outside the recharge and create uneven costs between entities. Expenses policy also matters: who approves travel, and which entity bears the cost?
Tax residence and PAYE arrangements deserve specific attention where the individual works across borders or spends significant time in another jurisdiction. Even within the UK, the allocation of employment costs between connected companies should be documented and reviewed, not left to a year-end adjustment. The point is not to turn directors into tax advisers. It is to ensure the group's advisers have a clear fact pattern and the subsidiary board understands the cost it is carrying.
Right to work is a shared control, not a host-site courtesy
Right-to-work checks are sometimes assumed to be handled by HR at head office. That assumption weakens when the host entity is the one receiving the work and the individual's documents are held in a parent company file. The group should identify which entity is responsible for the check, where evidence is retained and how repeat checks or follow-up checks are handled where required.
Immigration status adds a further layer. Sponsored workers may have conditions attached to their permission, and a secondment that changes duties, location or reporting lines should be reviewed against those conditions before it begins. A simple schedule recording the check, the date, the document type and the responsible entity is more useful than a reassurance that it was done.
Authority, supervision and vicarious liability
The host entity needs to know what it can ask the secondee to do. Authority limits should be set out in the secondment letter and reflected in the group's delegated authority matrix. Can the individual approve purchase orders, sign contracts, commit the host entity to expenditure or make representations to customers? If not, who can?
Supervision is equally important. Health and safety obligations attach to the workplace, and the host entity should treat the secondee as it would its own employee for induction, risk assessments and accident reporting. Grievance and disciplinary routes should be explicit. So should whistleblowing: a secondee who raises a concern at the host entity should not fall between two policy documents.
Vicarious liability follows the reality of control as much as the paper. Boards should consider insurance, indemnities and the scope of any parent guarantee. They should also ask whether the host entity's directors understand the risk they are accepting when they direct someone who is not on their payroll.
Exit arrangements need to be designed in
Secondments end. Sometimes they end badly. The board should approve a return route, notice arrangements and handover requirements at the outset. Who confirms the end date? Who removes system access? Who recovers equipment and confidential information? What happens if the host entity wants to retain the individual, or the employing entity needs them back early?
A short exit checklist prevents the untidy drift that turns a fixed-term arrangement into an implied permanent one. It also protects the group's confidentiality position when the individual returns to a different entity with knowledge of the host's customers, pricing or disputes.
Five questions for the subsidiary board
The board does not need to approve every secondment. It does need a protocol. A useful review can begin with five questions:
- Can we list every secondee currently working in this entity, with employer, start date, end date and reporting line?
- Is there a written secondment letter consistent with the contract of employment and with what happens in practice?
- Are payroll, benefits, expenses and tax recharges complete and reviewed?
- Who holds right-to-work evidence, and who is responsible for immigration conditions?
- Who can instruct the secondee, what are their limits, and how does the arrangement end?
Secondments are a normal feature of group life. They should not be an undocumented one. A simple protocol, approved by the parent and adopted by each subsidiary, turns a scattered HR habit into a governance control. It gives directors evidence, gives managers clarity and gives the group a defensible answer when the arrangement is tested.
