We investigate labor exchange teams in rural communities, which are prevalent in many developing countries. We show theoretically that these teams are beneficial to employers, who can outsource the monitoring of workers. Team members are incentivized to exert high effort because any deviation would lead to the dissolution of their production team. Data from Tanzania support the model's predictions: members of labor exchange teams are more likely to obtain paid work and are often hired to perform tasks for which monitoring is costly. Consequently, this informal arrangement helps reduce moral hazard in the context of employment relationships.