Co-employment: A matter of risk management, not risk elimination

Sam Cross, Senior Vice President, North America at Airswift, says efforts to eliminate co-employment risks are misguided. Instead, oil & gas operators should manage risk by finding the right partner.

Upstream, Co-employment, Airswift, Hiring, Employment, Employee

When it comes to co-employment in the oil and gas sector, many companies act in the mistaken belief that it’s possible to eliminate co-employment risk. In so doing, they are missing out on valid ways to mitigate risk.

Co-employment is an arrangement where a client – such as an offshore operator – 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 and other such matters. 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 might reside with the operator. Ultimately, both client and supplier hold some of the responsibilities usually owed to an employee by an employer.

Risky business

There are risks involved. If this new contractor makes a major safety error that causes accident or injury, the client certainly won’t want to take responsibility. If legal issues arise relating to visas, liability will likely shift to the supplier.

But the rules surrounding co-employment are not clear-cut and can vary from territory to territory – a complicating factor for international operations, which are typical in this sector. In practice, understanding which party retains responsibility can become a matter for legal teams. As a result, clients look for ways to eliminate the risk of being pinned with ‘employer’ responsibility.

Misinformed practices

In response to this dilemma, some operators flag when a contractor has been working for them for two years and force them to leave for six months, so as not to be counted as an employee.

This effort is misguided. Use 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 comes to work every day like an employee, there’s a risk that a court may find that they are, in fact, an employee.

Another common tactic: spread contracts across a variety of workforce solution suppliers to reduce risk. After all, the thinking goes, if there’s a problem with one, it may not be replicated across the others.

However, that ignores the benefits of a preferred-supplier relationship. If you represent a small sliver of business to 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.

The right partner: a three-pronged approach

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 to offload risk, look at ways to mitigate risk.

This boils down to picking the right partner. This means putting a new supplier under the spotlight and doing your due diligence in three main areas: finance, legal and safety.

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 lawyers will look to next party in line – most likely the client.

An ideal partner will have history and experience in dealing with legal and compliance issues, with a well-resourced compliance team, strong record-keeping and reliable delivery service. A supplier well-versed in employment law is far less likely to inadvertently create risk.

The most important factor in any workplace is employee safety – easier in an office environment than an offshore oil and gas posting. When selecting a workforce solutions provider, consider where it’s registered, what its health and safety policies are like and its safety track record.

Safety and legal prowess are inextricably linked to geographic footprint. A supplier with a network of global offices and an established track record in different markets around the world is far more likely to understand local employment law and safety issues than one which attempts to serve the world from just a couple of locations.

Are companies wasting effort in search of perfect co-employment risk management at the expense of effective policies? Possibly – but by focusing on the quality of their supplier partners and performing the necessary due diligence, they can take a more informed approach and reduce risk.

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Oil & Gas Middle East - November 2018

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