Co-employment risk: A matter of mitigation, not elimination

April 24, 2020

There’s a mistaken belief that it’s possible to eliminate nearly all forms of co-employment risk. This leads many companies to focus on risk-removal rather than risk-management.

  • So what is co-employment? 
  • What are the misunderstandings around it? 
  • And what are the co-employment risks that need managing?


What is co-employment?

Co-employment is when a third-party supplier (i.e. a staffing agency) works with a client (i.e. an operator) to fill roles at the client’s company. Crucially, that supplier doesn’t just find employees for a fee, but takes an active role in their employment arrangements.

This might mean shared responsibilities for employment issues. 

For instance, the supplier may handle payroll and taxes for temporary workers, while the client manages their place of work, supervise workloads and handle on-site health and safety. 

Hence the term “co-employment”.

Understandably, there are risks associated with co-employment

What if the new contractor causes a safety incident or has legal issues relating to visas? Does the supplier or client take responsibility?

The rules around co-employment are far from clear and are also country-specific, which doesn’t help with the energy industry having international operations.

Knowing where primary employer responsibility lies can also become a legal issue, naturally leading clients to minimize the risk of having this burden shifted onto them.

Old wives’ tales and misunderstandings

This results in a number of misinformed practices.

For example, to avoid independent contract workers being counted as employees, some operators force contractors to leave for six months after working with them for two years. But in a legal setting, this offers limited protection.

Or there’s the idea that by spreading contracts across various workforce solution suppliers, there’s lower risk. However, this loses the benefits of a preferred supplier relationship. Similar to most supply chain issues, suppliers are more inclined to actively resolve any risk-related issues if you are a bigger client for them.


The risk-mitigation triple check: avoiding co-employment issues

If there’s a major incident, co-employment can be a thorny subject and there are no guarantees.

Rather than trying to completely offload the risk, you can mitigate it by picking the right partner. 

However, this requires due diligence in three key areas:

1. Finance: 

If a problem occurs, your supplier must have the financial clout to weather the storm. 

A smaller supplier may feel easier to dictate terms to. But if it can’t afford to settle the liability, lawyers will most likely look to the client to cover costs.

2. Legal and compliance:

A supplier well-versed in employment law is less likely to create risk. 

  • Does the prospective partner have experience dealing with legal and compliance issues? 
  • How well resourced is their compliance team? 
  • How efficient is their record-keeping? 

3. Safety

The most important consideration in any workplace is employee safety.

So, it’s important to consider:

  • Where your prospective partner is registered
  • Their health and safety policies
  • Their culture and track record managing employment relationships. 

The latter two aspects are linked to geographic footprint too. Suppliers with a global network of offices and an established track record in different countries are more likely to keep up with local employment law and safety issues than those based in a few locations.


So, on the matter of co-employment risk elimination, are companies wasting time prioritizing perfection rather than pragmatic policies?

Quite possibly – but through due diligence to find the right partners they can take a more informed and lower-risk approach.

At Airswift, we provide compliant workforce solutions for clients, both as a staffing company and consulting adviser. 

Our services include global employment outsourcing or acting as an employer of record. 

We are uniquely positioned to support your needs when you expand, consolidate, or review your talent strategy.

If you would like to discuss further, please contact us

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This post was written by: Sam Cross, Senior Vice President – North America at Airswift