Co-Employment

HR Glossary for HR Professionals

Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Co-Employment

What Is Co-Employment?

Co-employment describes the relationship between an organization and a PEO. Often, smaller companies will hire a PEO to handle many of the HR matters which the organization is currently unequipped to handle. This can involve the PEO taking partial ownership of current employees and then leasing them back to the organization.

What Is a PEO?

A PEO is a business entity that provides a variety of administrative tasks for an organization, including HR services, onboarding, payroll, benefits, and more. This is done through a co-employment relationship in which PEOs effectively become the employer of record. This does not, however, mean that the business loses ownership; it simply means that the PEO is taking over HR responsibilities.

This can be helpful for smaller organizations looking for an affordable way to outsource their HR needs. This being said, there are many factors to consider when determining whether or not a PEO meets an organization’s needs both effectively and efficiently.

How Does Co-Employment Work?

Co-employment effectively splits responsibilities between two different entities, such as an organization and a PEO. The business owner will, however, maintain ownership and all control over the business. This means that the PEO will manage specific portions of the business, such as:

  • Payroll
  • General HR support 
  • Talent acquisition and management strategy
  • Filing taxes
  • Workers’ compensation
  • Offering advice and support

What Are the Benefits of Co-Employment?

Co-employment offers smaller companies access to high-end benefits that would otherwise be too difficult to acquire. This can include better medical coverage, retirement plans, HSAs, and even educational assistance in some cases. 

Co-employment can also offer more streamlined and efficient HR practices. This can include ease of processes such as payroll or workers’ compensation. Simplifying these can be of great benefit to smaller employers and businesses. 

All in all, the PEO will be able to support a business via multiple means. They will help manage documentation such as I-9s, and they can help conduct employee reviews and surveys. This is a great way to discern employee satisfaction. They will often assist with job descriptions and other aspects of the recruitment process as well. 

When to Consider Co-Employment?

Co-employment should be considered when a small business is unable to support growth from an HR perspective. PEOs can be of great help to employers who are looking to focus all of their efforts on building the organization and expanding outward. For most companies in this situation, HR needs can be overwhelming. This is the perfect opportunity to explore what a PEO could offer. 

Related Terms: PEO

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