What is Co-employment?

Posted by HR Division of Propel HR on 11/21/19 2:00 PM
HR Division of Propel HR
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Posted on: November 21, 2019

Coemployment_112019_02What's holding your business back? Many small to mid-sized businesses are finding that time-consuming HR-related administrative responsibilities are keeping them from getting ahead. Co-employment with a Professional Employment Organization, or PEO, can help. 

Co-employment is a contractual allocation of specific responsibilities between two companies -- the employer and the PEO. Both companies have rights and share responsibilities for employees. The employer maintains control over business decisions and operations, as well as the core job functions of its workers. The PEO takes care of specific HR-related responsibilities, such as payroll processing and benefits administration. 

READ MORE: 2019 Year-end HR Checklist

How are responsibilities shared?  

The co-employment partnership is designed to complement and protect your business -- not control it. Basically, both companies become co-employers of the employees. Here's how the responsibilities are shared:

Employer's role & responsibilities: 

  • Maintains control of all business decisions and operations
  • Manages the day-to-day activities of its employees
  • Oversees performance management and reviews
  • Manages recruitment and retention activities

PEO's role & responsibilities:

  • Handles HR-related administrative tasks, such as payroll processing, employee benefits administration
  • Reports and collects local, state, and federal employment taxes
  • Provides access to a team of HR experts for guidance on employee relations and HR-related issues
  • Helps to prevents employee-related compliance risks
  • Provides access to better benefits and health insurance plans

What happens when something goes wrong? 

Coemployment_112019_01A simple mistake or breach of trust can be devastating. Who is responsible for a missed tax deadline? Who pays the penalty for a compliance error? In a co-employment relationship, the risks are shared between the PEO and the employer. Because the employer reports its wages under the PEO's Federal Employer Identification Number (FEIN), PEOs are trusted with a body of sensitive information, such as employee data, Social Security numbers, and financial information. That’s why it’s important to work with a  PEO certified by the IRS. If something goes wrong, the liability shifts to the certified PEO, not the employer.

What can co-employment do for your company? 

Coemployment_112019_04A co-employment partnership allows small to mid-size businesses compete with larger businesses. PEOs are able to pool employees together in order to negotiate better benefits packages and gain access to top-rated health plans, which smaller employers may not get on their own. By taking over time-consuming HR-related tasks, an IRS-certified PEO can be a valuable partner to help a business grow.

To learn more, download our FREE E-guide, The Small Business Guide to Choosing the Right PEO. You’ll learn how to save time, money, and ways to offer your employees better benefits, such as health insurance.

Choosing the Right PEO

Topics: Featured, Human Resources, PEO, HR, CPEO, "HR Services", Outsourced HR Services, Human Resources Services

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HR Division of Propel HR

The HR Division is made up of a team of professionals with a vast level of experience and HR expertise, assisting organizations of all sizes and within a wide variety of industries. They readily partner with clients to address strategic and compliance challenges surrounding the employment life-cycle and the ever-changing laws that regulate it. Inquire below about how they can help you!