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Is Co-Employment the Same as Joint Employment?

Co-employment and joint employment are not the same, largely because of workforce management. In a co-employment arrangement, only one party makes labor-related decisions, but in joint employment, both parties have input on wages, hours, new hires, terminations, etc. Here are the definitions of each which should help clarify the distinction between these two similar-sounding conditions. Understanding the difference can help an organization avoid running afoul of the laws and regulations governing both types of labor arrangements.

What is Co-Employment?

Contingent laborers provided to an employer via a staffing arrangement (like a PEO, or staffing company) are technically employed by two entities at the same time. The hiring authority (typically a business) that directs the workers’ day-to-day activities, and the staffing company or PEO that manages the compensation, benefits and other HR/administrative portion of things. In a co-employment arrangement, both the hiring authority and the sourcing company maintain responsibility for compliance with all applicable laws and regulations governing labor as workers are technically employed both by the business and the co-employer.

Co-employment commonly exists in the contingent workforce arena when staffing agencies engage independent contractors on their clients’ behalf. So, the staffing supplier is responsible for HR functions such as recruiting, hiring, and payroll, while the hiring company manages the work agreement. Because both the staffing supplier and the hiring company have obligations to the contractor, both may be legally considered as an employer.

What is joint employment?

Joint employment exists when an employee is employed by two (or more) employers such that the employers are responsible, both individually and jointly, for compliance with a statute. Both the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) provide for joint employment.

While there might be joint employment exposure in all industries, some have a higher likelihood of running up against joint employment scenarios. For example, home health care agencies typically share staff and common management. Construction is another one due to the common practice of having laborers work for a sub-contractor or a general contractor. The agriculture industry typically employs farmworkers who work for a farm labor contractor or possibly a grower. Warehousing and logistics, hospitality and our own staffing industry round out the list of industries most likely to be exposed to joint employment dynamics due to the common practice of shared labor.

Co-employment vs. joint employment: What you need to know

Co-employment and joint employment, while often used interchangeably, bear a critical distinction that sets the course for employer-employee relationships. 

Co-employment is a contractual relationship between a company and a professional employer organization (PEO)—a third-party organization that can offload specific HR tasks, —where the two parties divide up certain employer responsibilities. With co-employment, the company still has full control over who they hire, which benefits they offer, and other crucial workforce management decisions. 

Joint employment, on the other hand, is when multiple employers govern the same employees and have input on their daily management.

To make matters even more confusing, there are a few other employment models that can be similar to these:

  •  Employee leasing: An arrangement where a staffing agency offers client companies access to skilled workers, bypassing direct employment complexities. Temporary employees engaged through leasing return to the staffing firm after fulfilling their obligations.
  • Employers of Record (EORs): A service that hires foreign employees on a company’s behalf without requiring them to establish a local entity or co-employment agreements.

Admittedly, all this can be a lot to keep up with. Read on as we help you better understand the various employment arrangements and human resources outsourcing opportunities.

How does co-employment work?

Before we dig into the co-employment relationship, it’s necessary to understand the function of a PEO. A company may turn to a PEO to streamline administrative HR tasks, like running payroll, administering benefits, maintaining compliance, and providing workers’ compensation insurance. A PEO not only provides access to better—and more affordable—employee benefits than a small or mid-sized business might otherwise have been able to offer its employees, but it can free up much-needed time for businesses to focus on other aspects of daily employee management. 

If your company enlists a PEO, it “co-employs” your workforce for administrative purposes, like paying employees and filing payroll. Under a co-employment contract, companies still maintain complete control over who they hire, how much they pay employees, which benefits they administer, and other day-to-day HR decisions. PEOs just do the mundane, menial work like processing the wages, providing access to health insurance, and paying the taxes. 

Co-employment advantages

While sharing the responsibilities regarding your most important asset—your employees—with an outside organization may feel nerve-wracking, the benefits of co-employment make it well worth overcoming that fear. In fact, according to the National Association of Professional Employer Organizations (NAPEO), partnering with a PEO can actually help your business grow 7-9% faster and lower your turnover by 10-14%. 

Let’s jump into some of the ways co-employment relationships can help increase employee satisfaction and grow your business.

Access to premium benefits

Many small and medium-sized businesses opt for co-employment because of the top-tier (and cost-effective!) health benefit options and other services a PEO can provide. PEOs offer access to higher-quality benefits and manage healthcare enrollment and claims. Some even provide extras, like education support and commuting benefits.

Seamless payroll management

In a co-employment arrangement, the PEO takes care of timely payroll and tax management. This becomes especially valuable if you don't have a dedicated or full-time HR department, as PEOs can ease the complexities of payroll while your business expands. A PEO can also give your employees access to workers’ compensation, providing coverage and assisting with claims administration. 

Compliance expertise 

PEOs often have a team of HR advisors who stay updated on evolving HR regulations and can provide best-practice advice. They offer guidance on best practices for:

  • Correctly classifying independent contractors
  • Adhering to employment laws
  • Running payroll
  • Tax reporting and other IRS compliance
  • Managing unemployment and workers’ compensation claims
  • Creating workplace policies

HR support

If your company doesn't have its own HR team, PEOs may be able to advise on best practices for different HR services. Within some co-employment agreements, you can opt to have dedicated HR experts or teams, offering both strategic and administrative services. Alternatively, if you have existing HR resources, you may still choose to work with PEOs to tap into their specialized expertise.

What is joint employment?

Joint employment is a type of employment arrangement where two or more employers work together to make important decisions regarding employees. This understanding is critical in HR, particularly for complying with employment laws. Additionally, both employers must follow the same rules to treat workers fairly and legally. However, it’s important to note that for companies looking to expand globally, an EOR is not a joint employer; it’s the sole employer.

Examples of joint employment decisions

In a joint employment relationship, the involved employers typically share the following decisions:

  • Wage and compensation structure: Employers make collaborative decisions on how wages and compensation structures are established to ensure fairness and alignment.
  • Work hours and scheduling: Employers jointly determine employee work hours and create schedules that accommodate both their needs.
  • Hiring processes: Employers actively participate in the process of recruiting, hiring, and onboarding new hires, ensuring a cohesive approach.
  • Employee termination and layoffs: Employers make collective choices regarding employee terminations or layoffs, taking into account both their perspectives.
  • Work assignments and tasks: Employers collaborate on assigning tasks and responsibilities to employees to maintain a balanced workload distribution.
  • Employee benefits and leave policies: Employers share responsibility in managing employee benefit plans, as well as creating and administering leave policies.
  • Labor laws compliance: Employers ensure compliance with labor laws and regulations collectively, preventing discrepancies between the employing entities.
  • Workplace safety and training: Employers take joint measures to ensure workplace safety and provide training for employees.
  • Workplace grievances and conflicts: Employers handle workplace grievances and conflicts together, fostering a harmonious work environment.
  • Workplace policies and codes of conduct: Employers handle and enforce workplace policies and codes of conduct through mutual agreement.

Joint-employment laws and employer liability

As of July 31, 2021, the DOL Wage and Hour Division implemented fresh guidelines that revoked the previous Joint Employer Rule (JER) and reinstated the joint employer rules that were in effect before March 16, 2020.

This change emerged because the previous JER conflicted with the standard understanding of joint employment at the DOL. Moreover, it inaccurately narrowed down the range of scenarios where joint employment should be considered.

Let's discuss the different joint-employment laws in detail below.

Joint employers and FLSA

The Fair Labor Standards Act (FLSA) monitors situations where employers jointly control employees to ensure fair pay and labor practices. Its goal is to make sure employers follow the rules in joint employment situations.

Joint employers bear equal responsibility for violations related to wages and hours, like failing to pay employees overtime when they work for both entities.

For example, if Employee A works at two different locations, both employers need to ensure the employee receives overtime pay if their total hours exceed 40 in one workweek. Similarly, if you hire an employee through a staffing company and they work more than 40 hours per week, both you and the agency must ensure they receive proper overtime compensation.

Joint employers and FMLA

If you qualify as a joint employer under FLSA rules, note that all businesses employing the worker must report them for Family and Medical Leave Act (FMLA) purposes. 

The FMLA defines primary and secondary employers in joint employment scenarios. To determine primary or secondary status, consider:

  • Authority over employment matters: Which employer can make decisions about hiring, firing, and work assignments?
  • Payment decisions: Who decides how much and when the employee is paid?
  • Benefits provision: Which employer provides leave or unemployment benefits?

Primary employers are typically responsible for offering benefits, making employment decisions, and handling payments.

In the context of FMLA joint employment, both employers share the responsibility of assessing employer coverage and employee eligibility. Unless the employee has worked at the secondary employer's site for at least a year, the primary employer's worksite generally applies.

With the updated FLSA joint employment ruling, the concept is clear: if you and another company both share control over an employee, you're joint employers. So, if one employer fails to fulfill legal obligations, the other can be held liable. 

This means you now have increased employer liability to comply with various labor laws, including wage regulations, overtime compensation, benefits administration, and workplace safety measures.

What’s the Difference Between Co-Employment and Joint Employment?

In both co-employment and joint employment, there are two employers. For our purposes, the secondary employer is the one that benefits from the workers’ services. The primary employer is the one that pays them.

Co-employment is a voluntary arrangement in which one entity (often a Professional Employer Organization, or PEO) agrees to perform administrative/HR tasks for another entity, usually including providing benefits, HR services, and taking on the obligations of an employer in each jurisdiction where the workers will be.

Unlike an employee leasing or staffing agency relationship, when a co-employment relations ends, the employees stay with the secondary employer. They don’t go back into a pool.

In co-employment, the employees and all parties acknowledge up front that this is a co-employment relationship, with the terms and conditions of employment dictated by the secondary employer. The offer letter and employee handbook will generally explain to the new hire the nature of the co-employment relationship.

No one worries about being deemed in a co-employment relationship because co-employment is an intentional choice. It’s not something that a court declares.

Joint employment, on the other hand, is a legal conclusion, often not a relationship that is acknowledged by the parties. The most common scenario for joint employment is when a staffing agency provides workers for staff augmentation, with the workers fully integrated into the secondary employer’s workforce and supervised by the secondary employer’s managers.

Joint employment can arise when labor services are provided by a staffing agency, a subcontractor, or a consulting firm. In a joint employment situation, there are two distinct employers. The staffing agency, subcontractor, or consulting firm is the primary employer and, if there’s not joint employment, then it’s the sole employer.

The primary employer determines wages and benefits and often selects the workers to be hired. Those workers often provide services for multiple companies, either sequentially or simultaneously.

If a secondary employer terminates a worker’s assignment, the worker stays with the primary employer. The primary employer can reassign the worker to another job site or make its own determination whether to keep the worker employed. You’ll want your staffing agency agreement to make clear that you can end a worker’s assignment but that you have no right to control the worker’s employment status with the agency.

There is a contractual relationship between the two companies that one will provide services for the other. But joint employment is not a foregone conclusion. Joint employment can exist, for example, if the secondary company makes decisions about the workers’ wages, working conditions, schedules, training, etc. To oversimplify a bit, joint employment is somewhat likely in a staffing services situation; less likely when retaining professional outside consultants.

Unlike with co-employment, joint employment does not involve a trilateral understanding among the worker and the two companies that the worker is employed by both.

Generally, the secondary company will argue that it does not control wages and working conditions, is therefore not a joint employer, and is therefore is not liable for any employment-related errors by the primary employer. The determination of whether joint employment exists is a legal determination, not based on an agreement among the parties and the worker.

What you’re worried about, therefore, is a finding of joint employment. Joint employment is not unlawful, but it creates unplanned risks and liabilities for the secondary employer. For example, if a staffing agency fails to pay its employees as required by law, the secondary employer is fully liable for the underpayment and the other legal consequences, even though it had no control over the primary employer’s payroll practices.

What Does Co-Employment Mean?

  • What Does Co-Employment Mean?

    • The idea of “co-employment” is that a business forms an arrangement with a PEO wherein the employer remains in charge of his employees’ day-to-day activities. Meanwhile, the PEO handles HR responsibilities. Put another way — you’re still the boss over your employees. It’s still up to you to make sure they’re doing their jobs correctly every day. On the other hand, the PEO takes care of your employees’ needs, whether they relate to training, payroll, or benefits.

    A co-employment arrangement often has positive results when it comes to helping businesses retain employees. When an employee feels like his needs are satisfied, he has a more positive image of the company for whom he works. He is then less likely to leave.

    A co-employment arrangement can also help a company accommodate both state and federal laws. This is a comfort to your employees, who feel more secure knowing that their company is on the up-and-up and doing the right thing.

    What Is Co-Employment & How Does It Work?

  • What Is Co-Employment & How Does It Work?

    • Co-Employment (or employee leasing) is a relationship that is formed by either using a staffing agency or a Professional Employer Organizations (PEOs). The term is used to express the relationship between a business, its employees and the PEO or staffing agency. With a co-employment relationship there will be two entities that share employment and legal responsibilities towards the employees of an organization.

    A business may choose to outsource its administrative needs, such as its human resources department, to a PEO which will fill in that role. This then creates a co-employment relationship between the company and the PEO over all of the employees of the business. In effect, each employee will have two employers.

    The first employer is the business (often called the “worksite employer”) and the employee must follow this employer when it comes to all business related decisions. On a day to day basis, the employee will be dealing with the company employer.  

    The second employer is the PEO and the employee must follow the PEO when it comes to all administrative related decisions. Exactly what falls under the scope of the business and the PEO will be clearly outlined in the agreement between them. This allows the company to retain absolute control over what needs they will outsource and what they will continue to do in-house.

    Benefits of Co-Employment

    The idea of co-employment can sound unsettling to many business owners because they fear it signals a loss of control over the company. However, that is completely unfounded because at the end of the day the company retains total and complete control over itself. Any authority granted to the PEO as a co-employer is limited to the exact terms of the PEO agreement. In reality, a co-employment relationship with a PEO provides numerous benefits to everyone involved from the employees to the business owner. Some of the most common benefits of a co-employment relationship include:

    Access to greater employee benefits: businesses often struggle to provide a comprehensive benefits package, working with a PEO businesses will be able to use their relationships to obtain better benefits for their employees. A competitive benefits package can also be crucial in hiring and retaining talent for your company.
  • Reduced liability: each PEO that works with your business has a speciality whether it is human resources, workers compensation claims or accounting, what this means is that you can reduce your concerns as an owner about inaccurately reporting or filing information especially when you are not an expert in that field.
  • Increased focus on business: businesses that enter into a co-employment relationship allow themselves the time to focus on their actual business model instead of drowning in non-core but essential administrative tasks such as payroll.

    • The benefits of a co-employment relationship with a PEO are well worth looking into in order to regroup your business to be more efficient and focused.

    Explaining Co-Employment to Employees

    If you are about to enter into an agreement with a PEO, you should take out the time to explain the process to your staff first. Introducing new teams to your existing staff can be worrisome for them, therefore by speaking to them first you can ease some of their fears regarding co-employment.

    One of the first things you should assure your employees about is that when it comes to daily businesses issues they still need to look to their existing supervisors for guidance and instruction. It is only for specific PEO administrative issues such as benefits planning that they should go to the PEO co-employer.

    Secondly, your employees may be concerned that including a PEO to your business may cause serious disturbances to their work. However, the PEOs you will work with know how to integrate into a business with a minimal amount of disturbances. It is important to remember that a PEO is only handling a small part of your company and is not involved in your core decision making.

    The last issue you should be aware of is allaying concerns of employees that have works tasks that may overlap with the PEO’s. For example, if you already have a human resources administrator you will want to speak with them regarding their new relationship with a PEO. The PEO is not there to replace them but to work with them and take over tasks that may be secondary and non-essential to their job. This relationship will allow your existing employees to have greater time to focus on the parts of their work that are crucial to the company, it may even give them the freedom of time to create greater innovations for your business.

    How PEO Can Help Your Business

    PEO assists businesses by helping them fill in a gap in their company. We match companies and PEOs together so that your business has the best PEO for your specific need. Also, because of our existing and ongoing relationships with various PEOs we will negotiate on your behalf to find you not just the right PEO for you but also at a cost that is reasonable for your company. Create a co-employment relationship with a PEO so that you can use your time to grow your business to its fullest potential.

    Who Is The Employer Of Record With Co-Employment?

  • Who Is The Employer Of Record With Co-Employment?

    • In the modern business world, the use of PEOs (or professional employer organizations) is becoming much more common. PEOs like the ones in PEO’s nationwide network can provide many human resources and accounting services for a fraction of the cost of a permanent, in-house staff. In order to work with a PEO, though, a client company must sign a co-employment arrangement. While preserving the employer status of the business owner, this arrangement designates the PEO as an employer of record who is legally able to perform tasks associated with employment.

    Rather than working as a PEO, PEO is a brokerage service that matches businesses with appropriate professional employer organizations within our extensive nationwide network. We can help client companies by finding the perfect PEO for their specific needs, taking advantage of the more than 200 years of combined industry experience present in our network.

    Co-Employment and the Employer of Record

    When a business signs a co-employment agreement with a PEO, the two entities become co-employers of that client company’s employees. While this may seem strange at first glance, it is an arrangement that allows the PEO to provide much-needed services. In this arrangement, the client business owner often is known as the Executive and the PEO is known as the Employer of Record.

    The Executive

    Nothing about the Executive’s status changes other than the fact that they no longer have to spend time and energy handling the services that are under the purview of the PEO. They retain control over the direction of their company, have final say in all hiring and firing decisions, and decide which services they want the PEO to handle.

    The Employer of Record

    In the co-employment relationship, the PEO becomes an employer of record of the client company’s employees. This means that they are able to handle sensitive information like payroll matters and employee benefits package information. Business owners can rest at ease, as the PEO (while technically an employer) is still under the direction of the client company owner and the co-employment relationship can be terminated at any time.

    What Are The Benefits Of A Professional Employer Organization (PEO)?

    Reasons for Signing a Co-Employment Agreement

    According to expert estimates, PEOs now work with roughly 175,000 companies across the nation. In fact, the PEO and HR outsourcing is growing much faster than the overall economy. These statistics suggest that there are numerous benefits to the co-employment arrangement, and the data bears this out.

    Saving Time

    By having a PEO handle services like payroll, employee benefits, wage garnishments, risk management, and more, business owners can free up their time to focus on growing their company. Instead of being mired in paperwork, clients are able to expand their market share, attract more customers, refine their products, and oversee the day-to-day work of their business.

    Saving Money

    PEOs also save business owners money in a variety of ways. Outsourcing HR and accounting needs is often much less expensive than hiring an in-house, salaried staff. Additionally, PEOs can provide expert assistance on safety procedures, the handling of federal labor regulation compliance, lowering a company’s risk profile, and more. All of this reduces extraneous costs and saves business owners money.

    Attracting Top Talent

    Another important service that PEOs can provide is raising the quality of recruitment procedures. Not only do PEOs handle the recruitment process, but simply working with a PEO can increase the likelihood of a business attracting more qualified personnel. This is because, as an employer of record, the PEO can count all of the employees of all of its client companies as its own employees. This gives the PEO a better bargaining position for high-quality employee benefits packages and lowers the individual cost of those benefits by spreading the cost across a wider employee pool.

    How Does Co-Employment Help Companies Provide Employee Benefits?

  • How Does Co-Employment Help Companies Provide Employee Benefits?

    • By entering into a co-employment arrangement with a PEO, business owners will have access to a wider range of benefits for their employees. This is because a PEO often serves many different businesses, with the pool of employees that are paying into those benefits encompassing all of those disparate companies.

    In other words, PEOs have more employees paying into the benefit pool than merely one company. This means that they can offer benefits at a lower individual price as well as offering more benefits than the average small business can provide on its own. Though outsourcing HR services through a co-employment agreement has become increasingly common among businesses of all sizes, the fact that it creates a larger pool of benefits makes co-employment especially useful for smaller companies with between five and 100 employees.

    Are There Risks to Co-Employment?

    If you are the owner of a new or small business, you may be asking yourself if co-employment is right for your company. You may be worried about potential risks. After all, the word “co-employment” sounds as if someone is taking away your employees! However, a co-employment arrangement can be a very beneficial relationship for your business.

    The only true risk involved in a co-employment relationship occurs when the written co-employment agreement is poorly constructed. This can muddy the waters regarding your business’ responsibilities and the responsibilities of the PEO. An example of this is a recent court case in which Microsoft was found to have overstepped its bounds with its independent contractors and was ordered to pay out almost $100 million as a result.

    Fortunately, at PEO the co-employment agreements are drafted ahead of time, approved by both you and the PEO of your choice, and do not go into effect until they are signed. We keep in contact with you throughout the duration of your co-employment relationship with the PEO and track your satisfaction. This dedication to client satisfaction has provided us with the highest customer satisfaction rate in the industry.Do Workers Receive Comprehensive Benefits Through a PEO?

    Does Co-Employment Have an Impact on Employees?

    By outsourcing your company’s HR needs via a co-employment relationship, you can have a significant positive impact on your employees in a number of ways.

    • Better employee benefits means happier employees who stay with the company longer.
    • Better employee benefits means more interested recruits.
    • PEOs are experts at creating employee handbooks, which equates to a less-confusing workspace.
    • PEOs are able to take much of the workload off of the owner, allowing you to focus on your business and your employees.

    Being in a co-employment relationship with a PEO does not mean that your employees will have an additional burden or workload. It simply means that they are legally considered “employees” of the PEO so that the PEO can then provide services like benefit management and payroll accounting.

    What Are The Benefits Of A Professional Employer Organization (PEO)?

    Hallmarks of a Good Co-Employment Agreement

    Every co-employment agreement will be different, since each business is unique and has unique needs. But there are a few guidelines that should be considered when drafting and signing a co-employment agreement.

    Clarity of Roles

    The agreement should clearly state how both the business and the PEO are supposed to function, and what services are the responsibility of each entity.

    Defined Duration

    The agreement should last for a short period of time, such as one year, with options for renewal if both parties desire in the future.

    Dispute Resolution Options

    The agreement should dictate how any disputes ought to be handled and resolved in order to protect both you and the PEO.

    Why Is Co-Employment Important to HR Outsourcing?

  • Why Is Co-Employment Important to HR Outsourcing?

    • HR outsourcing can be done with or without co-employment. However, depending on what your business needs, co-employment may offer you far more than other types of HR outsourcing—and it has some advantages that traditional outsourcing cannot match.

    To start with, let’s look at traditional outsourcing vs. co-employment with a PEO:

    • Traditional HR Outsourcing:
      • You hire HR professionals as contractors, either on-site or off-site, to do specific tasks
      • The contractor does not represent you legally
      • The contractor may offer benefits management, but cannot change the kinds of plans you qualify for
    • Co-Employment:
      • Your HR provider becomes the legal “employer of record” for your work force
      • The provider (the PEO) can now represent you in employee disputes, unemployment claims and other types of claims
      • Your company may now qualify for better benefits or better prices because you are a larger organization when teamed with the PEO.

    Does your particular company need all of these advantages? It depends. If all you need is someone to do payroll or administer benefits, then no—traditional outsourcing can work well. If you are looking for cost savings, better benefits, and a comprehensive HR solution, then co-employment is the right way to go.

    Do I get better HR results with co-employment?

    In some ways, yes. There are many traditional HR providers that do good work, and it’s possible to completely outsource HR without using co-employment. However, PEOs tend to offer comprehensive HR services and high-level HR strategy. That can mean:

    • Recruiting, training and onboarding
    • Management development
    • Bottom-up systems to improve employee performance
    • Reduced employee turnover
    • Risk management
    • Government compliance
    • …plus all of the usual HR features like payroll, taxes, employee termination and more

    Does co-employment have any risks or drawbacks?

    Co-employment is designed to benefit you, the client. That’s why you retain all the executive power in the relationship. Your company remains a fully autonomous business, and you retain all the authority over your workers. Your co-employment contract ensures this, and contracts can be customized along with the services provided to make sure you are getting exactly what you need.

    The main things you should look at when evaluating whether co-employment is right for your company include:

    • Does my company need comprehensive HR support, or only help with some tasks?
    • Do I have a desire to offer better employee benefits?
    • Am I seeking savings on benefits?
    • Would my company benefit from compliance oversight or risk management?

    If the answer to any of these questions is yes, co-employment may be a good choice.

    What Is the Difference Between Co-Employment Vs. Employee Leasing?

  • What Is the Difference Between Co-Employment Vs. Employee Leasing?

    • The main difference between co-employment and employee leasing is that employee leasing companies supply workers on-site, usually on a temporary basis, to perform the HR work that a client business needs. Under the co-employment arrangement with a PEO, however, the PEO provides the services needed by the client business and becomes a co-employer of the client company’s employees. In other words, the PEO does not supply workers on-site to work directly for the client business temporarily.

    In short, the client business owner receives new employees on a temporary basis through employee leasing and receives services from the PEO through co-employment. Although co-employment may sound as if the client business owner loses control of their business, this is not true. The relationship merely means that the PEO can act as an employer to handle sensitive services like payroll and employee benefit information.

    The Prevalence of PEOs

    Using PEOs through the co-employment arrangement is becoming the business wave of the future due to its many benefits. Many large corporations are served by PEOs as well, since using a PEO is a great way to save money in the long run. However, many of partner PEOs specialize in providing HR and accounting services to new and small businesses with as few as five employees.

    Benefits of the Co-Employment Relationship

    With the HR outsourcing industry growing at a rate faster than the overall American economy, it is obvious that the use of PEOs and co-employment arrangements is becoming the new norm. The reason for this shift away from the on-site, full-time staff can be attributed to the many benefits of the co-employment arrangement.

    Co-Employment Provides Expertise

    The PEOs nationwide network boast over two centuries of combined HR industry experience. When teaming up with them, a business owner can rest assured that their company is in the hands of experts who understand issues like local labor laws, federal regulations, risk management, and more. Business owners and employers can reduce stress and rely on the expertise of PEOs with many more knowledgeable employees than may be available via an in-house HR and accounting team.

    Co-Employment Creates Unique Opportunities

    Since co-employment is such a unique relationship between the PEO and the client business, it allows for greater flexibility and benefits that are otherwise unattainable. For example, PEOs add the client company’s employees to their own employee pool, giving them more leverage for negotiations regarding employee benefits packages and allowing them to reduce the individual costs of benefits by spreading them across a wider employee pool. By using co-employment, an employer may be able to access higher-tier benefits packages than otherwise feasible, attracting better talent and retaining employees for longer.

    Co-Employment Lowers Costs

    The cost of a PEO is often lower than hiring a full-time human resources staff. Usually, the PEO is paid either as a percentage of monthly payroll or with a flat monthly rate per employee. Either way, this is usually less expensive than providing competitive HR and accounting salaries and employee benefits to the HR staff.

    Co-Employment Reduces Risk

    There are many ways in which hiring a PEO can lower employer liability and reduce a client company’s risk profile. For example, PEOs can help employers draft comprehensive anti-harassment policies, update their safety protocol, handle workers’ compensation claims, ensure compliance with federal regulations, and more. This, in turn, may result in the business having a better chance at partnering with other businesses, attracting customers, and hiring top talent at key positions due to the company’s stability and low risk.