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

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

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

So what is co-employment? what are the misunderstandings around it? And what risks 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.

This might mean shared responsibilities for employment issues. For instance, the supplier may handle payroll and taxes for the contractor, while the client may manage their place of work, supervise their workload and handle their on-site health and safety. Hence the term “co-employment”.

Understandably, there are risks

What if the new contractor makes a major safety error causing an accident 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 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

This results in a number of misinformed practices.

For example, to avoid contractors being counted as employees, some operators force contractors to leave for six months once they’ve been working for 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 due diligence triple check

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 through picking the right partner. However, this requires due diligence in three key areas:

  1. Finance: If a problem occurs, your supplier needs 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.
  2. Legal and compliance: Does the prospective partner have experience in dealing with legal and compliance issues? How well resourced is the compliance team? How is their record keeping? A supplier well-versed in employment law is less likely to create risk.
  3. Safety: The most important thing in any workplace is employee safety. So it’s important to consider where your prospective partner is registered, its health and safety policies, culture and track record. The latter two aspects are linked to geographic footprint too. Suppliers with a global network of offices and established track records 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, are companies wasting time prioritising 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.


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

At Airswift, we provide compliant workforce solutions for clients. Services include talent mapping, compliance and consulting. 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