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5 Co-employment Risks And Issues You Should Know About

Co-employment is about sharing the legal employer responsibilities of an employee by two or more employers. Does that sound difficult? Let us break it down for you. Co-employment is a type of arrangement where two different organizations possess legal rights and obligations for an employee.

That means, under the co-employment arrangement, a single employee has two different employers and the employee is accountable to both of them. Co-employment generally occurs when organizations collaborate with various staffing agencies to hire independent contractors.

Since the co-employment arrangement is pretty complicated on its own, it is evident that there’ll be some risks involved.

In this article, we’ll highlight some of those co-employment issues and the potential solutions. So, let’s get started!

1. Poor classification of independent contractors

Organizations often fail to set up a proper classification process for independent contractors. This could invite many future inconveniences for any business entity.

To begin with, you may get the title of “Employee misclassification” during an audit. Hence, it matters that each independent contractor you collaborate with is properly vetted.


  • Keep yourself updated with the latest co-employment laws and restrictions.
  • If you’re collaborating with an external staffing agency, make sure that you clarify the classification requirements with them beforehand.

2. Treating independent contractors as employees

One of the major co-employment concerns is treating individual contracts as in-house employees. It is possible that both you and your team have a good working rapport with the independent contractor.

However, make sure that you can set some boundaries. Extreme dependency on independent contractors can result in workflow issues.


  • Set up a program for your current employees where you can train them about interacting with independent contractors.
  • Educate your existing employees and managers on how much internal information they should share with independent contractors.
  • Value the services of an independent worker and treat them as separate business entities.

3. Absence of open communication

Another critical co-employment risk is the absence of open communication between the independent contractor and employees. Organizations often don’t have an organized communication network to interact with the independent contractors and assign them their responsibilities. This creates confusion and various co-employment issues.


  • Create a strict workflow that you can follow while interacting with independent contractors.
  • To avoid any co-employment risk, ensure that you have assigned one employee to interact with the independent contractor.
  • Prepare a detailed guideline that will list all the expected services and deliverables from the independent contractor to avoid co-employment issues.

4. Ask the right set of questions

Classification of independent contractors can be a tedious process. However, you cannot ignore it at any cost. Remember that you’re sharing some confidential information with the temporary worker when you’re entering into a co-employment agreement. So, if you don’t focus on the classification part well, it may lead to questionable consequences.


The easiest solution to this co-employment risk is asking the right set of questions. You can always prepare a questionnaire and ask the independent contractor to fill it. This will make sure that there are the least co-employment issues involved in classification.

Here are some of the questions that you can ask:

  • What are your expectations as an independent contractor? What employment status do you prefer?
  • How do you wish to get paid?
  • What is your preferred way of communication?
  • Is there any type of investment that you’re willing to make?
  • Any co-employment lawsuit factors you want to inform us about?
  • Can you sign a co-employment agreement immediately?

5. Not treating the independent contractors as business entities

Another common co-employment risk source is how you treat independent contractors. They are separate business entities and it’s a mistake if you do not treat them like one. We understand that employers demand control when it comes to a co-employment agreement. But, they should not forget that independent workers have their own freedom and obligations.


  • Set proper work boundaries and don’t force independent contractors to work extra hours.
  • Independent workers may not need to visit on-site unless it is very urgent.
  • Independent workers have their own planned schedule, respect that.
  • You should not force the independent contractors to work from your office.

Best Practices to Avoid Co-employment issues

Here are a few co-employment best practices that every business should know about:

1. Implement an EOR solution

Are the co-employment concerts bothering you? Then you should think of implementing an EOR solution. It takes care of all the co-employment laws and makes onboarding painless for employers. Here’s how an employer of record services can help you:

  • Hiring and onboarding a global workforce without worrying about compliance.
  • Experimenting with hiring in new markets without any co-employment risk.
  • Growing a global workforce and acquiring the best talents without any legal restrictions.

2. Opt for a PEO solution

You can also opt for Multiplier’s PEO solution to mitigate the co-employment concerts. Here’s how a Professional Employer Organization (PEO) solution can help you:

  • It can help you stay compliant with the local labor laws. So, even if you hire international employees, staying compliant with the co-employment laws will not be a challenge.
  • A PEO solution takes care of payroll, contracts, and benefits in a single platform. Hence, employers can easily include it within their co-employment workflow.
  • If you’ve hired an independent international contractor, a PEO solution can assist you. It will ensure that you’re handling multi-currency payments in a hassle-free manner.

Get The Multiplier Advantage

We hope you had a good understanding of co-employment risks. Next time you’re planning to enter into a co-employment agreement, make sure that you collaborate with an HR outsourcing solution like Multiplier to make the process trouble-free. Apart from offering excellent PEO and EOR benefits, Multiplier can also help you with the following:

  • Building an outstanding HR infrastructure
  • Handling global employment and benefits
  • Working with global contractors and mitigating co-employment risks
  • Regular guidance with security and compliance aspects

So, make your onboarding journey better with Multiplier. Click here for the free demo!

Binita Gajjar
Binita Gajjar

Content Marketing Lead

Binita is a Content Marketing Lead at Multiplier

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