What Is Co-employment?

Co-employment is an agreement between at least two legal entities on managing employees or independent contractors. 

Employers have numerous responsibilities to the employees and contractors in their organization. By partnering with a third-party entity, they agree to share these responsibilities. While the organization manages the employee’s daily activities, the PEO handles payroll, hiring, and termination of the employment contracts. 

Co-employment is arguably one of the best employment arrangements for small and medium-sized businesses. It simplifies their processes and ensures they can focus on business-related activities for growth.

How Does Co-employment Work?

Co-employment is often borne out of a business’ realization that it cannot meet specific targets with its current resources. Before initiating a co-employment partnership, the organization assesses its current needs, challenges, and possible solutions.

The steps organizations follow when entering a co-employment partnership are as follows.

• Adequate consultation with PEO platforms on agreement and partnership roles.
• Signing the Client Service Agreement (CSA) with the PEO.

Usually, the co-employer handles the personnel or administrative obligations such as payroll, compensation, and conflict resolution. The business oversees daily activities such as task performance, information sharing and group project collaboration.

Advantages of Co-employment

Limited liability 

Beyond cutting costs, virtually every business focuses on reducing liability. Working with a co-employer helps you limit risks and liability. When a co-employment partner bears specific responsibilities, they also shoulder the accompanying risks.

Reduced hiring costs

From 2020 to 2021, companies spent over $92 billion on hiring costs to hire, onboard and train employees. The additional monthly cost of hiring an employee can be nearly as high as their monthly salary. Working with a PEO enables cutting costs in this area.

Sufficient time to focus on the company vision

Large corporations have the finances and staff strength to take on multiple responsibilities. Small and medium-scale businesses often find employment-related activities overwhelming while devoting time to business growth and expansion planning. A co-employment arrangement simplifies the processes for these organizations.

Unlimited access to global talent 

Sourcing global talent is challenging. However, partnering with a co-employment partner such as a PEO takes the burden of hiring and onboarding global talent. 

Employment laws and payroll compliance

Every country has unique employment laws governing how organizations carry out their employment activities. Navigating these country-specific employment laws can be challenging, especially for organizations entering a new market. But working with a global Professional Employer Organization (PEO).

Common Misperceptions About Co-employment Relationships

Co-employment means you no longer need your HR staff.

Working with a PEO takes much of the burden off your HR team. Although it’s understandable to assume you can entirely depend on them, their primary aim is to offer support. Co-employment allows you to enhance your HR team’s abilities but not replace them.

Co-employment is for large corporations.

Co-employment is suitable for both small firms and large enterprises.

Small businesses usually begin operations with few employees while the business owner juggles multiple responsibilities. Reports show that small businesses partnering with PEOs grow at least 7% faster than the average firm. By involving a PEO in a co-employment agreement, having enough staff to relieve the burden on the owner becomes feasible.

Hiring independent contractors over employees enhance the co-employment risk.

Every business faces risk the moment they enter into a co-employment arrangement. Being susceptible to the risks is not a result of hiring more independent contractors. Hiring full-time employees can be equally risky.

Co-employment is not the same as joint employment.

Joint employment and co-employment are different. While co-employment agreements make you an equal employer, joint employment doesn’t. In co-employment, you retain the rights as the primary employer, meaning you call the shots while the PEO focuses on HR duties. The staffing company has a say in hiring, firing, and working conditions in a joint employment setting.

PEO and Co-employment

Since a PEO lets you share liability while you remain in charge of business proceedings, they are ideal co-employment partners. Upon signing a CSA, a PEO performs the following duties in the partnership:

• Onboarding talent
• Issuing payments
• Making social security deductions
• Giving tax forms to employees or contractors
• Managing employees

The PEO works with the client and takes necessary action regarding staffing, payroll, and tax filing per the client’s directives. More importantly, partnering with a PEO in a co-employment arrangement can ensure that the client complies with employment and tax laws. It is best practice to carry out adequate research on the PEO platforms at your disposal before signing the CSA.

Simplify Global Employment With Skuad

Global employment is simplified and straightforward when partnering with a global PEO like Skuad. Skuad enables organizations to hire independent contractors and full-time employees, manage payroll, and ensure compliance with country-specific employment laws without setting up a subsidiary.

By handling organizations’ entire employment lifecycle, Skuad enables organizations to scale their business operations with reduced employment costs, less effort, and an efficient HR administration. To know more about Skuad, book a demo today.