Three Parties, Two Contracts
You contract with the provider, the provider employs the person, and between you and the person there is nothing.
Day-to-day direction
Any employment obligation to the person
Promising the person anything about their job
Being the person's employer
YoursThe provider'sCrosses the twoNeither contract
Four matters, and no share: what any one agreement covers differs by agreement. One crosses both, and the handoff is where these arrangements fail. One sits in neither contract. The line that is not there, and the one people keep acting as though were.
The sides of the triangle, and the operations that have to travel along them
YouThe providerNeither contractYou and the provider
A commercial service agreement, negotiated, signed, and enforceable by either of you
The provider and the person
A local employment contract, with everything an employment relationship carries in that country
You and the person
A working relationship with no document behind it, which is where you spend every day
Getting anything changed about the person's employment
A request from you that only the other two parties can complete
Across the handoff: A written change request, the person's agreement, and a document the provider issues under local law
Deciding what the person works on
Direction, which never moved and never needed to
Ending the arrangement
Two endings on two clocks, in two documents that do not reference each other
Across the handoff: Your notice under the service agreement, the person's notice under their employment contract, and whatever local process applies
YoursThe provider'sCrosses the twoNeither contract
Six matters drawn · no share
Six relationships and operations, and the one you use most often has no document at all. One buyer's own arrangement, set out for itself; which party is the employer for which purpose differs by jurisdiction.
You contract with the provider. The provider employs the person. Between you and the person there is a working relationship and no contract at all.
The contractual distinction in “Three Parties, Two Contracts” also matters when buying workforce software. For teams researching dual n back training, dual n back training should be evaluated against a named operational decision, clear ownership, export requirements and a tested exit process rather than treated as a substitute for the employment agreement.
Three parties, two documents, and the leg you use every day is the one that does not exist on paper.
The Oyster global-employment library provides an external reference for the issue raised in “Three Parties, Two Contracts”. It is most useful when the team records which principles apply to this arrangement and which require local advice.
The triangle, drawn once
Put yourself at one corner, the provider at another, the person at the third. Two of the three sides carry a signed agreement. The third carries the actual work.
Everything confusing about these arrangements follows from that picture, and most of it stops being confusing once the picture is in your head.
Why the missing side is not an oversight
An employer of record exists precisely so that the employment relationship sits somewhere other than with you. Creating a contract between you and the person would undo the product.
The gap is the thing you bought. Complaining about it is complaining about the purchase.
What travels along your side
Instructions, money, requests, complaints about service, notice to end. All commercial, all enforceable, all between two companies.
Speed on this side is a function of the service agreement and of how well you brief. It is the side you have most control over and the side buyers neglect most.
A request that arrives complete — figure, effective date, reason, named person — moves faster than one that arrives as a question. That is true of every supplier and it is unusually true here, because the provider has to turn your request into a local legal document.
What travels along their side
Pay, contract terms, statutory entitlements, discipline, dismissal, grievances about employment. All employment, all local, and none of it subject to your instruction.
You can ask. You cannot require, because requiring is what an employer does and you are not one.
What travels along the third side
The work. Direction, feedback, priorities, context, the daily relationship, and the entire reason the person is any use to you.
None of it needs a contract. All of it is yours, and it is the part nobody thinks to plan for because it happens by itself.
Operations that have to turn a corner
Pay rises, title changes, notice variations, bonuses, contract amendments, termination. Each starts with you and finishes somewhere else.
Those are the ones with a note of their own in this collection, because each takes longer than it should and fails in a predictable way.
Why the corners are slow
A request leaves you, is interpreted by an account manager, is drafted by a local team, is put to the person, is signed, and is reflected in payroll at the next cut-off.
Six steps where an employer would have had one. Most of the delay is structural rather than anybody being unhelpful.
The matters that fall outside the triangle
Belonging, progression, equity, recognition, whether this person can see a future with you. None of the three relationships carries them.
They have a whole section in this collection. They are also the commonest reason an arrangement that was working stops.
What the person sees
One company that pays them and one company they work for, which are different companies, neither of which is clearly in charge of their career.
That is a strange position to be in and it is worth saying out loud to them rather than hoping they have not noticed.
The sentence worth giving your managers
We direct the work. Their employer does everything that is employment. Anything about their contract has to come to me, and I take it to the provider.
One sentence, repeated, prevents most of the damage described in this section. It is also the sentence nobody thinks to say, because it seems too obvious once you know it.
Drawing it for the person as well
A short note to the person at the start — who employs you, who to ask about pay and leave, who to ask about work, who to raise a problem with — is ten minutes and removes a recurring confusion.
Most providers do not do this and most buyers assume they do.
What the shape cannot tell you
Whether this arrangement suits what you are doing. The triangle is a description, not a verdict: it works well for a small number of people in places you will not have an entity, and badly as a substitute for building a company somewhere.
Where the line falls is a judgement for you, with your own advisers, and it depends on things no diagram holds — how long you expect to be there, how many people, and whether the ones you hire this way are meant to be peripheral or central to what you do.