How to mitigate Co-Employment Risk?

Article author
Nneka
  • Updated

There are specific rules and risks depending on the country in question, but in general, documenting the employee’s relationship with Remote and preventing direct contracting with and payments from the client preserves the Employer of Record (EOR) relationship and limits co-employment risk. 

To ensure compliance in all countries where we operate, Remote must handle all HR issues directly with the employee, such as changes to the terms of employment, disciplinary actions and terminations.

Decreases Co-Employment Risk Increases Co-Employment Risk
No contract between employee and client. Client contracts directly with the employee
Contract between Remote and employee that clearly sets out the employer/employee relationship between Remote and the employee and sets out the employee's job duties. Client explicitly refers to the employee as customer’s employee on public materials
Remote pays taxes for the employee and reimbursements are paid by Remote The employee is reimbursed directly by the client for expenses

In general, co-employment risk is always higher in the consulting model countries than in EOR model countries. Below, actions or practices carried out by the client may contribute to increasing their exposure to co-employment risk and should therefore be avoided especially in consulting model countries:

  • Sending offer letters: We are not involved, so clients are the one assuming risks if they choose to send offer letters directly to candidates. The risk in not too big, but in some countries, an offer letter can create a binding employment contract, which cannot be rescinded without following a termination process. Also, clients are now able to request offer letters from the Remote platform.
    See also: How do I create an offer letter on Remote?

  • Paying for travel expenses: Ideally, in all cases and countries, employees are advised to make the bookings themselves and then request a reimbursement through Remote. However, if the client does choose to use some other expense management tool and pay for this directly, the co-employment risk would not be more than usual.
    See also: Add an expense

  • Sending proof of employment letters: Employees can request this on the platform and we would issue the letter with Remote's entity as the employer by default. If an employee asks to get the client's name added as well, this is something we can do.
    See also: Can Remote provide a proof of employment letter?

  • Mentioning employees on the client's website: This is fine and employees can also mention the client's name on LinkedIn.

  • Requesting employees to follow internal Company policies: Given that the company policy is not an employment agreement, it therefore, doesn't establish an employment relationship between the client and the employee. It also doesn't require a signature so the risk attached to this is minimal. We recommend that the policies refer to the employees as "consultants" to mitigate any co-employment risks.

  • Providing equipment: Ideally, employees should pre-pay for the equipment and request a reimbursement. If clients want to buy this directly, there's generally not a problem. However, if they want any agreements executed regarding the equipment, the agreement should not refer to them as an employee, but rather as an employee of Remote providing service to the client.

  • Using the client's own system to submit paid time off (PTO): The risk associated with this is very limited.

  • Issuing corporate cards: The risk shouldn't be too big, especially if there's no agreement between the client and the employees. If the client is concerned about the risks and it's extremely important for them to provide the credit cards anyway, they can send a letter to be acknowledged by Remote in order to mitigate some of the risks.

  • Materials (training, handbook): There is always a co-employment risk each time the client sends documents directly to employees, but that's a risk clients should be comfortable taking, since it would not be higher than usual. Our recommendation to mitigate the co-employment risk here is to refer to the individuals as "consultants" instead of employees.

Was this article helpful?

0 out of 0 found this helpful

Have more questions? Submit a request

Comments

0 comments

Article is closed for comments.