Ever feel like you're juggling porcelain plates while trying to run your business? Between paperwork, payroll, and staying on top of ever-changing laws, it's enough to make your head spin. But what if there was a way to keep everything in the air without breaking a plate (or breaking down)?
Enter co-employment: the business world's best-kept secret for handling HR headaches. It's like having a tag-team partner for all those employer duties you'd rather not deal with. Curious? Let's dive into what co-employment is, how it works, and why it might just be the game-changer your business needs.
What is co-employment?
Co-employment is a strategic partnership in which a company and a Professional Employer Organization (PEO) share employment responsibilities and liabilities. Phew. That was a mouthful. In the simplest terms, co-employment means outsourcing some parts of being an employer. Let's unpack that more.
What is a PEO?
But first, in case you're not familiar, a PEO or Professional Employer Organization is a company that specializes in outsourced HR. Businesses work with PEOs rather than hiring a large HR team or working with multiple HR vendors.
What is an "employer of record"?
In a co-employment relationship, the PEO becomes the "employer of record" (EOR) for the employees. This is a legal term. And It means that the PEO is acting as an employer for payroll, HR, and tax purposes. As the business owner you are still the boss and maintain control of your business and continue to oversee the actual work your employees perform.
How does co-employment work?
While HR may have you thinking about dimly lit offices and unpleasant conversations, there's a lot more to it. PEOs typically offer:
- Employment admin: On and off-boarding paperwork, employee handbooks, etc.
- Payroll and compliance: Processing, labor laws, time-tracking software, etc
- Workers' compensation and safety: Insurance, claims, training, etc
- Benefits: Health Insurance, 401 (k) retirement, ancillary benefits, etc.
- Wellness programs: Flu shots, health coaching, counseling, etc.
If you decide to outsource any or all of the above to a PEO, you would be in a co-employment partnership.
How does co-employment help mitigate risk?
As an employer, you face a lot of compliance requirements and risk:
- Discrimination and harassment claims
- Wrongful termination
- Wage and hour violations
- Workplace safety violations
- Employee benefits mismanagement
- Employee misclassification (Contractor vs. employee)
- Data privacy breaches
- Immigration law violations
- Family and Medical Leave Act (FMLA) violations
- Americans with Disabilities Act (ADA) non-compliance
- Occupational Safety and Health Administration (OSHA) violations
Even if you make an innocent mistake, noncompliance can result in hefty lawsuits and fines. Co-employment helps mitigate that risk in a few ways:
- Keeping you updated on all employer laws and requirements (which change often)
- Helping you navigate sticky situations— like termination in a compliant way
- Assuming some of the liability of being an employer
For example, say a PEO provides safety training and workers' comp insurance for a manufacturing facility. Employees are still responsible for following the safety policies, but if an accident occurred, the PEO would handle the claim and manage the consequences.
What types of businesses benefit from
co-employment?
Co-employment typically benefits small and medium-sized businesses(those with 5 to 500 employees) the most. If your business needs robust HR but can't justify hiring a multi-person HR team, then you're in the right category. Businesses with high compliance risks also typically benefit from co-employment because they can share the liability of employment with a PEO. A few key industries in particular that benefit from
co-employment include:
- Manufacturing
- Transportation
- Construction
- Professional services
- Co-ops
- Non-profits
- Franchises
What are some misconceptions about
co-employment?
While co-employment has been around since the early 1960s, it's not a very common word. And there are a few common misconceptions.
Some businesses worry that co-employment means giving up control over their workforce. However, in a co-employment arrangement, the company still retains control over day-to-day operations and manages the work performed by the employees. The PEO primarily handles HR functions, compliance, and administrative tasks.
Another misconception is that co-employment is an expensive route to take. In reality, it can lower your HR costs by thousands. PEOs can leverage the combined buying power of all their clients to provide lower-than-average costs for everyone — particularly when it comes to benefits. Many businesses don't consider that they're already paying for HR whether through their own time or with multiple vendors.
What should you consider when selecting a co-employment partner?
Not all co-employment partners are the same. Some are large, national operations. Others are niche and regional. Before you commit to a PEO, do your research. Assess what you're looking for from a business perspective. Do you need a PEO that can:
- Collaborate with your internal HR staff?
- Visit you onsite?
- Dedicate an HR manager to your business vs. having a roster of different reps?
- Offer industry-specific safety training?
- Provide time-tracking HR software?
While there are many more things to consider, like experience and reputation, these questions should get you off to a good start.
Find your co-employment champion
While co-employment carries some misconceptions, it's a tested business model that's been around for decades. If your business could benefit from more robust risk management, then co-employment could be the right solution for you.
Next steps? Meet with an HR expert at PRO Resources. We can help assess your current business risks and map out priorities for you. Schedule a free consultation to get started.