Small and medium-sized businesses often find themselves caught up in complicated HR-related management and administration. Businesses may end up compromising on their operational efficiency and productivity by managing their HR activities on their own. However, for any company, minimizing risks and maximizing their human resources potential must be a priority for growth. To achieve this, some companies are shifting towards co-employment services offered by Professional Employer Organizations (PEOs).
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What is Co-Employment?
Co-employment means that two different organizations divide employer responsibilities between themselves. Often, co-employment involves a client business and a Professional Employer Organization (PEO).
Usually, this type of co-employment arises via a client service agreement in which the PEO agrees to become the co-employer or employer of record for its client. In such an arrangement, both the company and the PEO hire the employees. The company manages performance, targets, and control over employee roles. On the other hand, the PEO handles the administrative and compliance tasks associated with the employees. This is similar to arrangements also known as ‘employee leasing‘.
Co-employment is a common operating model for national PEOs operating in the US.
In summary, the control over the following functions remain with the original company:
The PEO takes care of the co-employment tasks related to the backend management of the employee. This includes:
Benefits of Co-Employment
An expanding company that opts for co-employment services can benefit in multiple ways by hiring a PEO as its employer of record. One of the primary benefits of co-employment is that the PEO assumes the company’s legal and administrative responsibilities towards employees, freeing it to focus on core business. Let’s look at some of the other benefits of co-employment:
Myths About Co-Employment
Many companies are confused about what to believe about co-employment and what it means to hire a PEO. Here are some of the most common myths about co-employment:
Choosing the Right PEO for Co-Employment
Managing the multifaceted HR functions can be challenging for a company, especially a young startup or a small enterprise. A PEO can simplify the HR responsibilities of the company by becoming its co-employer.
Horizons offer an array of personalized co-employment and market entry solutions for all your HR and expansion requirements. Contact us today to learn more about our peerless co-employment solutions for your business expansion and management.
Frequently asked questions
Co-employment risk (or ‘co employment risk’) is the risk that a company will be classified as a co-employer by the authorities, without any desire from the company to be classified in that way.
The best way to mitigate this risk is to have a clear agreement with a PEO which sets out the responsibilities of each party
Co-employment issues may arise where there are three parties involved in an employment situation (such as an employee, the company that employee works in (the client company), and a third party contracting agency). It is possible for the authorities to interpret both the client company and the contracting agency as co-employers and liable for employer obligations.
The best way of managing potential co employment issues is to have a legally compliant agreement between the client company and the third party clearly establishing the responsibilities of each.