What is Co-Employment?

By: Insperity Staff
January 25th, 2012

If you’re like most employers, you spend an inordinate amount of time on payroll, recruiting and other human resource (HR) tasks at the expense of what truly matters—growing your business. If HR duties are keeping you from being more competitive, a co-employment relationship with a professional employer organization (PEO) might be the best solution.

What is Co-Employment?

The National Association of Professional Employer Organizations (NAPEO) defines co-employment as the contractual allocation and sharing of employer responsibilities between a PEO and its client.

In a co-employment agreement, workers are technically employed by two separate entities: the business owner, or client employer, who controls their daily duties and core job functions; and the PEO, or co-employer, who handles personnel-related functions.

Co-employers do not supply a workforce; they supply services and benefits to a client employer and its existing workforce. The client employer maintains control of all business decisions and operations while the co-employer manages employee-related aspects of business operation.

Why Co-Employment is Essential to HR Outsourcing

Business owners who align with a PEO in a co-employment relationship transfer a substantial portion of the risk and responsibilities associated with employees to the co-employer.

The structure of the relationship allows the PEO to offer better benefits and benefit options, handling of wage and employment tax responsibility, freedom from the responsibility of reporting, collecting and depositing the taxes with state and federal authorities, and assistance with workers’ compensation coverage and claim management.

Common Misconceptions About Co-Employment Relationships

There are a number of misconceptions about co-employment that exist because of pre-conceived notions about outsourcing in general. The most common is the belief that contracting with a PEO will result in a loss of control for the business owner. In reality, the structure of a co-employment relationship allows client owners to retain control over staffing and business decisions, while the PEO assumes certain employer responsibilities and risks.

Many business owners also worry that their employees will not embrace the new arrangement, that workers will be considered temporary or non-permanent, or that their existing HR staff will be terminated. Again, these concerns are valid but unwarranted.

A co-employment relationship is administrative in nature and is beneficial to employees because it extends a greater depth and breadth of benefits and services than could typically be offered by the client owner alone. There is little, if any, disruption to existing employees when the relationship is established, and at no time is employee “leasing” involved in the agreement. Lastly, co-employers often align with existing HR departments to provide much-needed expertise in areas where they may fall short. The result is a stronger organization, and a better way of doing business.

How Can Your Business Benefit?

Entering into a co-employment relationship may be just the boost your business needs to get ahead in today’s competitive marketplace. We invite you to learn more by downloading our free guide, Human Resource (HR) Outsourcing: Co-Employment Explained today.

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