What is Co-Employment?

May 14, 2019

What is Co-Employment?

Many business owners spend more time than they ever thought possible handling human resource issues like recruiting, payroll and taxes for their business. This can become a gargantuan task, especially if you are dealing with several employees and an ever-expanding business. One way to address this issue is to partner with a Professional Employer Organization or PEO, such as Consolidated Personnel Services, for your business. If you do this, you will enter into what’s known as a co-employment relationship, where you and the PEO share employment responsibilities over your employees. This relationship is also sometimes called employee leasing. To better understand the effects of co-employment and what it will and will not impact in terms of running your business, read below:

What is Co-Employment?

The terms of your co-employment relationship will likely be outlined in detail in your contractual agreement, which is a legal agreement that outlines the details of employee sharing. However, in general, co-employment with regard to PEO’s includes outsourcing the benefits and payroll aspects of your employees while still retaining day-to-day control over your employee management. The term co-employment is defined by the National Association of Professional Employer Organizations as “the contractual allocation and sharing of employer responsibilities between a PEO and its client (you).” This basically means that your employees will go from being employed only by you to being employed by both your business and the PEO.

The Breakdown of Responsibilities When Businesses Join a PEO

You as a business owner will retain the responsibilities listed below:

  • Hiring and/or firing employees will remain your responsibility.
  • You will manage your employee’s performance.
  • You will set and maintain your employee’s day-to-day schedule and tasks.

The PEO will be responsible for the following when joining forces with your business:

  • Paperwork, claims, and benefits.
  • Deal with worker’s compensation or unemployment claims and other employer risk issues.
  • Employee tax forms and employer taxes.
  • Payroll functions for your business.

How to Know If Entering a Co-Employment Relationship is Right for Your Business

A co-employment relationship with a PEO is designed to help solve various problems primarily relating to HR issues in all sizes of businesses. Some PEO services can even help with onboarding, recruiting and compliance. The following are a few of the benefits your business can derive from a co-employment relationship with a PEO:

  • Provides You Access to a Better Range of Services: Co-employment will provide your business access to a higher quality of services that you would otherwise enjoy. For example, when you team up with a PEO, you will benefit from the long list of reputable benefit providers. This means you know you are offering your employees the best rates and options for the payroll process, health insurance, and 401(k) plans.
  • Gives You a Renewed Ability to Focus on Your Business: When your business was in its infancy, handling all your own payroll, taxes, HR issues and the like were not that big of a deal. However, as your business has expanded, so has the immense amount of paperwork that needs to be completed for each and every employee. This can become time-consuming and downright confusing. When you partner with a PEO in a co-employer relationship, though, you can once again focus on your business and allow them to handle the paperwork and HR related matters.
  • It Can Save You Money: Who doesn’t want to save a little money and reduce their overhead operating costs? This is a win, win for sure. To replace the job of a PEO, you would have to hire an HR professional, insurance broker and more. However, when you work as a co-employer with a PEO, they handle all these tasks within the one organization, often saving you a great deal of money when compared to paying separate professionals. Of course, you do have to pay for their services as you would any service. In the case of many businesses, though, it can end up saving you money overall, especially when you consider the value of the time you currently spend trying to do the job yourself.

Why Co-Employment is Necessary

When you join a PEO within a co-employment relationship, you then transfer much of the legal responsibility and risk from yourself as a business owner and onto them. This also gives the PEO the freedom to handle the wages, report, collect and deposit taxes with federal and state authorities along with giving them the ability to deal with claim management and worker’s compensation. It is a necessary part of partnering with a PEO. This type of relationship is especially helpful when employees have complicated tax situations or are contract employees.

You Do Not Lose Control

Perhaps the single most common misconception to do with co-employment is the idea that it takes control away from you the business owner. This simply is not true. You still retain control over all business and staffing decisions. You simply hand over the risks and responsibilities associated with employing your staff. There is little to no disruption in terms of an existing employee. As mentioned above, you will also maintain all control of organizational structure and determine your employee’s day-to-day tasks as well as job functions and schedules. You will not lose control!

Partnering With a PEO in a Co-Employment Relationship

There are many ways in which your business can benefit from a co-employment relationship with a PEO. If you are still wondering how this relationship would look in the reality of your day-to-day business, feel free to contact us at Consolidated Personnel Services and we can walk you through the process of partnering with a PEO.



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