Co-employment

Co-employment is an arrangement where two entities share employer responsibilities for the same worker: one directs the day-to-day work, the other runs payroll, benefits and HR compliance. It comes in two flavors — by design and by accident — and the second one is where the lawsuits live.

By design: the PEO model

In a PEO relationship, co-employment is the product: your entity remains the worksite employer, the PEO becomes the administrative employer, both are named in the arrangement, and the responsibilities are contractually split. Staffing agencies create a similar structure for temp workers. This is lawful, common and mostly a US pattern.

By accident: the risk version

Accidental co-employment happens when a company treats someone else’s workers — agency temps, vendor staff, long-term contractors — like its own employees: direct supervision, performance reviews, company equipment, integration into teams. Courts can then deem the client a joint employer, importing liability for wages, overtime, benefits and discrimination claims it thought belonged to the vendor. It’s the corporate-scale sibling of individual misclassification, and the tests rhyme: control over the work decides, not the label on the contract.

Where the confusion with EOR comes from

An Employer of Record is deliberately not co-employment in most jurisdictions’ framing: the EOR is the sole legal employer, while the client directs work under a services agreement. In practice the day-to-day looks similar — which is why regulators in some countries scrutinize long-term EOR arrangements, and why serious EORs cap assignment structures that look like disguised staffing. If you’re comparing the models, start with our EOR rating and the EOR vs PEO distinction.