What Is Co-Employment and Is it Right for Your Business?

Co-employment is a way for company owners to outsource their payroll, HR, benefits, and comply with legal regulations. Since a significant portion of time and money can go into achieving compliance with state and federal labor regulations, it can be helpful to outsource these responsibilities.

What is Co-Employment?

Co-employment is the term given to the relationship between a business and a professional employer organization (PEO). There is no risk associated with entering a co-employment agreement, and business owners to retain the authority of their business.

The agreement only gives the PEO legal permission to accomplish certain important tasks. These might include the handling of payroll, benefits, withholdings, and workers’ compensation claims.

There are two roles in a co-employment agreement:

1) Role of the Executive

The business owner takes on the executive role and will still be the primary employer for the staff. They have control over the business and decide everything regarding hiring staff and letting people go.

The PEO essentially performs services for the executive, and they aren’t given authority besides the permission to handle sensitive payroll information. However, business owners can choose which services they need to receive when approving a co-employment agreement.

2) Role of the PEO

A PEO is a co-employer, but it does not become the main employer. The role of the PEO is only to complete the services outlined in the co-employment contract.

The role of the co-employer is only to manage sensitive personal data, like payroll. They can offer businesses better benefits since their packages are higher-tier and have a large number of total employees.

There are also several ways co-employment can help with business compliance. PEOs help companies with accounting and human resources services, but they can also support businesses in staying compliant.

Is it Right for Your Business?

If you need more time and currently spend too many hours on benefits and payroll management, it might be time to consider a PEO for your company. You’d also have access to premium, top-tier benefits offered at a reasonable price point. These benefits are nice to have access to because they’re normally reserved just for bigger companies.

Does your business need policies or employee handbooks? Are you looking to implement diversity initiatives? A co-employment partnership can help here too.

PEOs can also improve employee retention rates; so if yours has been suffering, it might be worthwhile to consider. Finally, a PEO might be right for you if your company needs to ensure that there is always support for compliance and HR concerns.

However, businesses that don’t want to combine their benefits, compliance, payroll, and HR teams might not find co-employment a good fit. Startups looking to remain lean might not want to begin expanding until they have been established first.

Co-employment can be a simple way for businesses to comply legally and outsource payroll, HR, and benefit support tasks. Business owners that are looking to regain more time and control over their operations might want to consider working with a PEO.

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