A contractual partnership in which a firm shares employment obligations with a professional employer organization is co-employment (PEO). This benefits businesses that want to reduce some of the costs and liabilities of being an employer. However, this does not imply that employers relinquish control or ownership of their businesses.
Through co-employment, businesses can continue to manage their personnel and day-to-day operations while the PEO handles HR-related responsibilities. Regarding workforce management, co-employment and joint employment are not the same. Only one person makes labour-related decisions in a co-employment agreement. On the other hand, collaborative work or joint employment considers both parties’ input regarding wages, hours, new hiring, terminations, and so on.
Business advantages
Co-employment arrangements are popular among small and midsized firms for various reasons, including high-quality, cost-effective health insurance. PEOs handle enrolment, claims, and other aspects of plan administration and provide coverage. Some offer advantages besides health insurance, such as retirement savings plans, education reimbursements, and other perks.
Payroll as a service
The benefit of co-employment in payroll is that they can administer payroll components on behalf of the company, such as calculating wages and deductions, paying employees, and filing employment taxes with government agencies with the help of a PEO. Many PEOs can also integrate payroll with timekeeping and insurance services, reducing errors and eliminating repetitive data entry.
Expertise in compliance
Risk and compliance professionals at PEOs stay on top of changing HR requirements and work with clients to design solutions that can help them avoid fines and penalties. Tax reporting, unemployment and workers’ compensation claims, & workplace policies are all topics of concern.
Coverage for workers’ compensation
PEOs relieve businesses of one hassle by providing workers’ compensation insurance coverage on behalf of their clients and handling any claims that may arise. They also conduct safety audits and offer employee training programs to reduce workplace injuries and liabilities.
Support from Human Resources
A PEO can help businesses that don’t have a dedicated HR team inside. Depending on the extent of strategic support necessary, organizations in a co-employment structure may have a specialized HR team. On the other hand, if they have their resources, they can continue employing them and working with the PEO when they require more expertise.
Management of talent strategy
Benefit packages associated with co-employment make organizations appear more appealing to potential employees. Additionally, they help with staff onboarding, training, and performance management. Some PEOs also offer strategic services to assist firms in adapting to changing workplace demographics and the growing use of contracts.
Despite the common misconception that employers lose control of their business activities in co-employment arrangements, that is hardly the case. The primary employer controls the employees’ day-to-day tasks, while the PEO only handles administrative HR tasks like payroll.
It is legal to hold multiple jobs in many countries. However, many employers have a built-in agreement in their offer letter that restricts employees from working with other clients. Exclusivity is baked right into the contract for many employees, in which case it is illegal to hold multiple jobs.
Employee leasing is when a leasing agency lends its staff to a client for a specific project or task and takes the employee back after completion. However, the client does not pay the employee; the leasing agency pays the employee’s compensation.
The benefits of co-employment outweigh the risks. However, if the PEO fails to pay the taxes on time or isn’t registered by the IRS, the employer will have to pay the penalties. The primary employer must be careful when deciding on a PEO.
No, they are not the same thing. In co-employment, only the primary employer has control over an employee’s tasks, and the PEO is responsible for administrative tasks; however, in joint employment, there are multiple employers, and everyone has control over the employee.
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