Co-Employment: It's About Risk Management, Not Risk Elimination
Sam Cross
Thursday Jun 14, 2018  

This piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

Perfect is the enemy of the good, so the old saying goes. And it certainly rings true when it comes to co-employment in the oil and gas sector. By acting in the mistaken belief that it’s possible to eliminate co-employment risks (almost) entirely, many companies are focusing efforts on the wrong things and missing out on valid ways to mitigate it.

So, what are the persistent misunderstandings around co-employment, and how should oil and gas companies go about managing their risk?

The Importance of Co-Employment

Co-employment is an arrangement where a client – such as an offshore operator for example – works with a staffing agency or workforce solutions provider to fill roles. Crucially, that third party supplier doesn’t just act as a recruitment agency, finding employees for a fee, but takes an active role in their employment.

This might mean that a contractor is ‘employed’ by the supplier in that they retain responsibility for payroll, taxes, benefits etc. However, at the same time their regular place of work will be run by the operator, their ‘boss’ might be employed by the operator, and responsibility towards the employee’s on-site health and safety resides with the operator.

Hence the term “co-employment”. Both the client and supplier hold a portion of the responsibilities usually owed to an employee by the employer.

Understandably, there are risks involved. What if this new contractor makes a major safety error that causes accident or injury? The client certainly won’t want to take responsibility. Or what if there are legal issues relating to visas or right to work? Again, if at all possible, shift that liability onto the supplier.

But the rules around co-employment are far from clear cut, and can vary from territory to territory – a complicating factor for international operations such as are typical in this sector. In practice, which party counts as the real ‘employer’ and therefore retains responsibility can become a matter for the legal teams.

As a result, clients naturally look for ways to eliminate the risk of being pinned with ‘employer’ responsibility instead of the supplier.

Old Wives’ Tales

This leads to a number of misinformed practices. For example, some operators have rules in place that flag whether a contractor has been working for them for two years, at which point they are forced to leave for six months so as not to be counted as an employee.

The problem is, this is misguided advice. Remember the duck test: if it looks like a duck, swims like a duck and quacks like a duck, it’s probably, in fact, a duck.

If a contractor looks like an employee, acts like an employee and turns up to work every day the same as an employee, there’s a real risk that a court may find that they are, in fact, an employee. Six months off here and there is only a limited protection against that.

Or take the idea that by spreading contracts across a variety of workforce solution suppliers, risk is reduced. After all, the thinking goes, if there’s a problem with one it may not be replicated across the others.

However, that’s not necessarily the case, and ignores the benefits of a preferred supplier relationship. If you represent a small slither of business for a supplier, they are less likely to tolerate risk. If you are a major contract for them, they are more likely to work hard to make sure that relationship works. That goes for co-employment as much as any other supply chain issue.

The Right Partner: The Triple Check

The point is, when push comes to shove, if there is a major incident, co-employment is a thorny subject and there are no guarantees. Rather than trying fruitlessly to completely offload the risk then, instead look at ways of mitigating it.

This boils down to picking the right partner. Instead of fretting about passing on risk, think about how to reduce it in the first place. In practice, this means doing your due diligence and putting a new supplier under the spotlight in three main areas.

Financial Due Diligence

In the event of a problem, the best supplier is one with the financial clout to weather the storm.

A smaller supplier may feel easier to dictate terms to, but if disaster strikes and it doesn’t have the balance sheet to settle the liability, then the lawyers will look to who’s next in line – most likely the client.

Legal And Compliance Due Diligence

Does the prospective partner have a history and experience in dealing with legal and compliance issues? How well resourced is the compliance team? How is their record keeping? Does it deliver all services itself or rely on partners? If the latter, what are they like? A supplier well-versed in employment law is far less likely to inadvertently create risk.

Safety Due Diligence

The most important thing in any workplace is employee safety – easy in an office environment, harder in an offshore oil and gas posting. So when selecting a workforce solutions provider it’s important to consider where it’s registered, what its health and safety policies are like and whether it has a good safety culture and track record.

The latter two aspects are inextricably linked to geographic footprint too. A supplier with a network of global offices and an established track record in different markets around the world is far more likely to be au fait with local employment law and safety issues than one who attempts to serve the world from just a couple of locations.

So, are companies wasting efforts in search of perfect co-employment risk management at the expense of effective policies? Quite possibly – but by refocusing on the quality of their supplier partners and performing the necessary due diligence, they can take a more informed and ultimately lower-risk approach.

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