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How Does Co-Employment Work?

How Does Co-Employment Work?


Co-employment is a contractual arrangement where an outside firm, known as a PEO, takes care of all HR and benefits for your employees. Legally, the PEO (professional employer organization) acts as the employer of record for your staff.

Here is how the co-employment relationship works:

  • Your company and the PEO firm sign a co-employment contractual
  • On paper, the PEO officially employs your staff
  • You retain total control over your workers and what they do
  • The PEO can now handle a variety of legal responsibilities for your work force
  • The PEO can also bargain for employee benefits packages for your company

What are the benefits of co-employment?

Co-employment comes with four main benefits:

  1. Better, more affordable benefits. Insurers typically price benefits based, in part, on the number of employees you have. That means larger companies get better benefits at better prices. A PEO may co-employ workers from dozens of companies, however, with a collective “work force” of many thousands. Once you enter into co-employment, they can offer you top-tier employee benefits at very low prices.
  2. Professional HR services. PEOs typically handle all aspects of HR for their clients and can reduce employee turnover, improve workplace climate, and even improve performance.
  3. Handling disputes. Unlike other HR providers, a PEO is the “employer” for legal purposes, and can represent you in disputes, complaints, unemployment cases and more.
  4. Costs savings. Even though your company will pay for the PEO’s services, you’re also likely to realize significant cost savings. These are both real savings in terms of benefits costs and HR staff costs, and projected savings from better risk management and government compliance.

PEOs may charge a percentage of payroll, or a flat fee per employee.

The co-employment relationship isn’t right for every company, but it can be very advantageous, especially to companies that:

  • Are growing quickly
  • Are small or medium businesses
  • Want professional HR work without the cost of internal staff
  • Want to save money on benefits

Does co-employment come with any risks?

No. Legally, your co-employment contract will guarantee that you retain all executive power in the relationship; the PEO does not gain any ownership or managerial power. It simply provides HR and benefits serves.

In many cases, a PEO will actually reduce your risk and potential liability by improving HR practices, ensuring government compliance and offering employee training where needed.

Is co-employment right for your company?

Co-employment puts a seasoned team of HR professionals to work for your company, while bringing you better benefits at a lower cost. Einstein HR has decades of experience as a PEO and understands how to offer top-level service to clients of all sizes, in all industries. Let us give you a free consultation on your PEO needs. Fill out the form to your right or contact us and get your free consultation today.

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