What Is Co-Employment? Definition, Pros & Cons – Forbes Advisor

Co-employment allows business leaders to focus on running their business and making strategic decisions by outsourcing HR-related administrative tasks. Here are a few of the more prominent benefits offered by a co-employment arrangement.

Access to Compliance Expertise

Complying with the myriad employment and HR laws and responsibilities can be overwhelming, especially for entrepreneurs and small businesses that lack the time and resources to balance HR duties with other business tasks. By relying on the compliance expertise of a PEO via co-employment, businesses are assured that they are in compliance with applicable laws and regulations.

Simplified Payroll Administration

In a co-employment arrangement, the PEO is responsible for paying employees on time and for withholding the required taxes. The PEO also reports wages and payroll taxes on behalf of the employee. Co-employment can also use a PEO to determine proper exempt/non-exempt classifications, ensure overtime wages are paid correctly and issue and file W-2 forms.

Ensuring a smooth payroll process can cause many headaches for small business owners who lack dedicated HR departments, and PEOs can help serve that need while smaller teams grow.
It is also worth noting that with co-employment, the company can contract with the PEO to provide workers’ compensation coverage under a policy sponsored by the PEO.

Strategic Advice on Employment Matters

In addition to payroll and other routine tasks, a PEO can help you manage other important duties that might otherwise require an in-house HR team. Among other things, a PEO can help businesses make strategic decisions regarding their workforce by:

  • Managing I-9s
  • Designing employment performance reviews
  • Building compensation structures
  • Implementing training and leadership development courses
  • Recommending succession plans
  • Providing job descriptions
  • Building employee recognition programs

Seamless Administration of HR-Related Services

One common fear that employers have about co-employment is that outsourcing HR will be a disjointed, chaotic ordeal when a new team takes over the administrative process. But in truth, well-implemented co-employment arrangement can work seamlessly with existing management workflows. As long as employers communicate their needs with the PEO, the process can be highly beneficial to smaller teams.

Access to Competitive and Cost-Effective Health Insurance Benefits

In a co-employment arrangement, a business can contract with the PEO to provide quality, cost-effective health insurance benefits for its employees. Since established PEOs are likely to have industry knowledge and existing relationships with insurance providers, they are well-equipped to provide your company with competitive benefits. Not only can the PEO provide the coverage, but it can also manage enrollment, claims and other benefits-related administrative matters. This is especially helpful for keeping employees interested in working for their employers instead of going to competitors.

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