Navigating Co-Employment: Risks, Strategies, and Benefitsby@ShubheshOjha_6lqkf77g
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Navigating Co-Employment: Risks, Strategies, and Benefits

by Shubhesh OjhaMay 9th, 2024
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Co-employment involves sharing employee obligations between entities, offering benefits like cost savings and expertise access but also carrying risks like legal complexities and control issues. Mitigate risks through strategies like partnering with certified employers and maintaining clear communication for a successful co-employment experience.
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The business landscape has been evolving, and thus, co-employment has emerged. Understanding the basic principles of this term is as important as knowing the benefits. There are multiple risks associated with such arrangements that can alter your perception. As a result, we are here to understand what co-employment stands for, its associated risks, and a few strategies to overcome those hurdles.

Understanding Co-employment

As the name suggests, co-employment is a business arrangement or partnership where a firm shares the employee obligation with another employer. Hence, two or more entities share the control or supervision of a single employee.

In most cases, the businesses share the responsibilities with a professional employer organization(PEO). However, there are other ways in for organizations to form a contract of co-employment.

Employers can opt for employee leasing, where the organization utilizes an employee’s skills for a short period. Employer of record (EOR) services are also possible, in which the service provider becomes the legal employer of the employee.

Note: There are significant differences between PEO and EOR.

Credit: Gust

Potential Risks of Co-employment

Since we now understand this arrangement, let’s look into a few potential associated risks.


In this partnership, all parties must adhere to employment laws. Failing to do so by either can lead to legal issues for both. Hence, the legal risk during co-employment is high since you might fall into trouble due to your partner’s incompliance.

Control Issues

Since different entities have different norms and cultures, employers may face issues while controlling the workforce. The employees may also face obstacles in the workplace when they receive conflicting directions from the employers. This can result in a decrease in productivity, employee satisfaction, and the employer brand.

Financial Risk

Risks related to payroll management are always present. This risk is amplified during partnerships since there can be clashes between employers. When any one of the employers fails to comply with the laws, the other may incur expenses to rectify the situation.

Strategies to Mitigate Co-Employment Risks

Having gone through the potential risks of this arrangement, it may not be worth the energy or benefits. However, there are multiple strategies you can undertake to mitigate the risks associated with such a partnership.

Certified Employer

Check whether your partner is a certified co-employer or not. Ensure they are either approved by the IRS or the ESAC. A certified employer secures you in multiple ways. Your business will not be affected if your partner fails to oblige with legalities during payments. Additionally, you can end the co-employment agreement whenever you feel it is necessary.

Clear Contractual Agreements

Ensure that you have cleared the agreements in the contracts beforehand. Be transparent and do not undergo any malpractice to acquire more benefits. A clear contractual agreement would strengthen the relationship and protect you from future discrepancies.

Communicate & Collaborate

Having effective communication between the co-employers results in thriving for similar goals. Both employers need to align their thoughts on procedures and expectations. In addition, the employers shall have regular meetings, share insights, and have open communication channels. This would prevent any misunderstanding and promote transparency.

Compliance Maintenance

Ensure that you are updated on any changing employment laws. Monitoring the different aspects of payroll is also preferred. In addition, organizations can opt for payroll management software or service providers.

Credit: LucidChart

Benefits of Co-Employment

Cost Savings: Sharing employment responsibilities can lead to cost savings for both parties. Co-employers can share benefits administration costs, workers’ compensation insurance, payroll processing, and other HR-related expenses.

  • Access to Experts: Employers in co-employment arrangements often gain access to specialized HR expertise and resources. They could also get access to a global talent pool.

  • Scalability: Such arrangements can provide flexibility in scaling the workforce up or down based on business needs. This is particularly beneficial for companies with fluctuating staffing requirements or seasonal demand.


Co-employment refers to the arrangement between two or more entities where they share the employer status for an employee. There are multiple benefits associated, such as cost reduction, access to expertise, etc. However, it involves certain legal and organizational risks.

There are numerous strategies to overcome these risks, such as acquiring a certified partner and maintaining clear communication. One can say that effective co-employment can benefit an organization in multiple ways when followed efficiently.