Co-employment: Definition, Benefits

What is the Definition of Co-employment?

Co-employment is a business relationship in which two or more firms share employee responsibilities for the same set of employees. It is a business arrangement or relationship in which both entities have rights and responsibilities towards employees.

They distribute responsibilities, with one handling payroll, benefits, or compliance, and the other handling administrative duties. A common relationship is that of a company and a PEO (Professional Employer Organization).

When a company partners with a PEO, it shares responsibilities towards employees. The PEO manages HR operations like payroll, taxes, and benefits, while the client company looks after an employee’s daily tasks and performance.

What are the Benefits of Co-employment?

1. Cost Efficiency

Organizations that are going for a co-employment business arrangement can save money, as they can cut down on internal HR staff requirements and might reduce additional costs like providing salaries, benefits, and provision of office space for employees.

2. Better Benefits Opportunities

Partnering with a reputable and large co-employment firm, a company can have access to improved benefit packages and can offer its employees better perks. This might be advantageous to companies as they might not have afforded it otherwise, resulting in a higher rate of drawing and retaining employees.

3. Risk Reduction and Compliance Adherence

Co-employment partners are well-versed in new compliance laws and rules. They bring to the table expertise that can help companies keep up with the latest laws and norms, ensuring they adhere to all the rules diligently and avoid legal consequences and penalties.

4. HR knowledge

Businesses can gain expert knowledge in an array of HR related aspects, enabling companies that lack in HR expertise to enhance their experience and run Hr departments more efficiently.

5. Diminished Administrative Pressure

A company partnering with a co-employment firm like a PEO can significantly cut down on administrative burdens, as the PEO shares half of the HR and administrative functions and manages several time-consuming tasks that would otherwise have to be handled by HR teams.

6. Enhanced Focus on Key Operations

Businesses, after collaborating with co-employment companies, can concentrate more on the core business activities, as they can rethink time and resource allocation more effectively without having to worry about a part of HR functions.