Co-employment

Co-employment is a legal and operational relationship where two organisations, typically a business and a third-party provider, share employer responsibilities for a worker. These responsibilities can include payroll, benefits, taxes, compliance, and even disciplinary action.

In most cases, one party (often the business) manages day-to-day operations, while the other (often a PEO or Employer of Record) handles HR, legal, and administrative duties.

In a co-employment setup, the responsibilities of employment are split between:

• The client company, which supervises the employee's work, goals, and performance
• The co-employer (e.g., a PEO or EOR), which handles HR, payroll, legal, and tax compliance

This structure allows businesses to hire in regions where they don’t have a legal entity, or where managing employment independently would be too complex or risky. Each party is accountable for specific aspects of the employment lifecycle, typically defined by a service agreement.

“Co-employment offers growing businesses a compliant way to expand globally without sacrificing employee experience.” –HR Operations at Native Teams

Co-employment isn’t limited to one industry or business model. Here are a few typical use cases where this structure adds value and efficiency.

PEO partnerships

When businesses engage a Professional Employer Organisation (PEO), both the business and the PEO become co-employers. The PEO manages benefits, taxes, and compliance, while the business retains control over daily tasks and performance.

Global hiring via Employer of Record (EOR)

An Employer of Record (EOR) acts as the legal employer on behalf of a company that wants to hire talent in foreign countries. In this co-employment model, the EOR ensures legal compliance while the client business directs the employee’s work.

Temporary staffing

Temporary or contract workers hired through staffing agencies often fall under a co-employment model. The agency handles payroll and HR, while the client business supervises the work.

Yes, co-employment is legal in many countries, but the rules vary by jurisdiction. To stay compliant, businesses must clearly define the roles and responsibilities of each party and ensure employment contracts are properly structured.

Some legal systems scrutinise co-employment arrangements closely, particularly in cases of tax liability, termination, or benefits disputes. Working with a reputable EOR or PEO helps reduce the risk of legal complications.

Co-employment brings several advantages to both employers and employees. Let’s break down how each side benefits from this shared-employer model.

For employers

• Global expansion without entity setup: Businesses can hire internationally without establishing a legal entity in each country.
• Reduced compliance risks: Employment regulations are handled by experts familiar with local laws.
• Simplified HR and payroll: Administrative tasks are outsourced, saving time and resources.

For employees

• Access to local benefits: Employees receive benefits in line with local standards and expectations.
• Legal protection: Employees are formally employed through a regulated process.
• Professional onboarding and support: EORs and PEOs provide clear communication and structured HR services.

While co-employment offers flexibility, there are potential risks if not managed properly:

• Misclassification: Employees must be clearly distinguished from independent contractors.
• Liability confusion: Unclear division of responsibility can lead to legal disputes.
• Compliance issues: Failing to comply with local labour laws may result in fines or legal action.

To reduce these risks, work with a trusted provider like Native Teams that offers clear agreements, local expertise, and full legal compliance.

Although similar, EOR and co-employment are not always identical. With EOR, the provider becomes the full legal employer for tax, payroll, and compliance purposes, while the client directs the employee's tasks. This creates a form of co-employment, but with the EOR bearing more legal weight.

Read: What is an Employer of Record (EOR)?

At Native Teams, we simplify global hiring through our compliant Employer of Record services. We handle the legal, tax, and administrative responsibilities while you focus on your team’s success.

Whether you’re expanding into a new market or hiring remote workers across borders, we provide a seamless co-employment experience that supports both your company and your team members.

• Co-employment means shared responsibility between two employers.
• It’s common in PEO, EOR, and temporary staffing arrangements.
• Legal compliance is crucial to avoid risks and penalties.
• Native Teams offers co-employment support through our EOR solution, ensuring smooth global hiring.