What is Co-Employment?
Co-employment is a business arrangement where two or more employers share responsibility for hiring, managing, and compensating employees. This typically occurs when a company partners with a staffing agency, Professional Employer Organization (PEO), or Employer of Record (EOR) service. In this arrangement, each employer may take on different responsibilities, such as payroll, benefits, and compliance, while the other focuses on the day-to-day work environment and supervision of employees.
How does co-employment work?
In a co-employment setup, one employer, such as the company, supervises and directs the employees’ daily tasks, while the other employer, such as an EOR, handles administrative functions like payroll, tax compliance, and benefits. This division of responsibility helps mitigate compliance risks and streamlines HR processes. For instance, Employer of Record services can provide companies with the necessary infrastructure to manage employees internationally while ensuring legal compliance in different jurisdictions.
What are the benefits of co-employment?
Co-employment offers numerous benefits, especially for companies expanding into new markets or looking to manage a distributed workforce. These include:
- Compliance with local labor laws: A partner like an EOR ensures that all employment activities adhere to local regulations.
- Reduced administrative burden: HR tasks such as payroll, tax filings, and benefits management are outsourced to a trusted partner.
- Access to global talent: Partnering with Global Recruitment Services can make it easier to source, hire, and onboard employees in different countries.
To learn more about the benefits of expanding into international markets, read our blog on the benefits of expanding into new markets.
What is the difference between co-employment and traditional employment?
In traditional employment, a single company assumes full responsibility for all aspects of an employee’s work arrangement, including HR administration, payroll, and compliance. In co-employment, these responsibilities are split between two parties. For example, a company may outsource payroll and benefits administration to an EOR while retaining control over the employee's daily tasks and performance management.
Is co-employment the same as using a staffing agency?
No, co-employment is not the same as using a staffing agency. While both involve multiple employers, staffing agencies typically recruit and place temporary employees, and they are the employer of record for these workers. Co-employment, on the other hand, often refers to long-term partnerships where both parties (the company and an EOR or PEO) share responsibilities over permanent or contract employees. For more information, you can explore our comparison of Employer of Record vs. Staffing Agency.
What are the compliance risks in a co-employment relationship?
Co-employment can reduce many compliance risks, especially when working with an EOR. However, companies must ensure that their responsibilities in the arrangement are clearly defined. Misclassification of employees or failure to comply with local employment laws are potential risks. Partnering with an experienced EOR, like Safeguard Global’s Employer of Record services, helps companies stay compliant across multiple jurisdictions.
Does co-employment apply to independent contractors?
Co-employment primarily applies to traditional employees. Independent contractors are self-employed, and they are typically responsible for their own taxes and benefits. However, managing contractors across different countries can pose legal challenges. Safeguard Global offers contractor management services to ensure compliance with local laws when hiring and managing independent contractors globally. For more information on independent contractors, check out our blog on What is an Independent Contractor.
Can co-employment help with global expansion?
Yes, co-employment can significantly simplify global expansion. An EOR partner can manage all the complex legal and administrative tasks involved in employing workers in new countries, allowing your company to focus on growth. By partnering with an EOR, you can mitigate risks and reduce the time needed to establish a legal presence in new markets. Learn more about how co-employment through an EOR can support your global hiring strategy by visiting our Employer of Record services page.
Are there any drawbacks to co-employment?
The primary drawback of co-employment is the potential for confusion regarding roles and responsibilities if they aren’t clearly defined upfront. Companies should ensure that they maintain clear communication with their co-employment partners to avoid any overlap or mismanagement of employee relations.
How do I know if co-employment is right for my company?
Co-employment is an excellent option for companies that:
- Are looking to expand into new markets but lack local HR infrastructure.
- Want to reduce their HR administrative burden.
- Need assistance with compliance in complex legal environments.
If your company is exploring global growth, a partnership with Safeguard Global can streamline the process. Visit our Global Recruitment Services page to see how we can help.
Conclusion
Co-employment offers a flexible, compliant solution for businesses looking to manage employees across different regions without the burden of handling HR tasks in-house. Whether you are looking for assistance with global recruitment, contractor management, or employer of record services, co-employment can support your business’s growth while reducing compliance risks.