With so many different kinds of human resources outsourcing (HRO) companies, it can be confusing and a bit intimidating to choose a partner in the PEO, HRO, or co-employment space. If you decide to work with a professional employer organization (PEO) like VensureHR (which you should) it’s important to understand its operating model.
This model is called co-employment – and don’t let the name take you down the wrong path. We’ll be thorough when answering the question, “What is co-employment?” – and we’ll even break down the benefits and risks of co-employment.
According to NAPEO, co-employment refers to a contractual client service agreement (CSA) that allocates certain responsibilities between the PEO and the client company. This means that the PEO with assume certain employer rights, responsibilities, and risks.
This does not mean the PEO is taking any form of ownership of the client company. Some responsibilities a PEO may take over include:
With so many areas where the PEO offers assistance, each co-employment agreement is different and depends on the needs of the client organization.
In a co-employment agreement, the client company still reserves its rights when making any final decisions regarding the business., such as:
Benefits of Co-employment
Right now, you’re probably still thinking, “What is co-employment?” or “What does co-employment do for me?” There are many benefits to the co-employment that can have a positive impact on the business and its employees.
To start, a PEO operating under the co-employment model will provide your business and your employees enterprise-level benefits, meaning your business gets benefit options typically only available for large-scale, enterprises with hundreds of employees, at incredibly low rates that would otherwise be unattainable without the partnership.
However, great benefits just scratch the surface in terms of what you can get out of a co-employment partnership with a PEO.
Most PEOs will assume the responsibility of your workforce’s time management – more times than not, just tracking each employee’s clock-in/out. PEOs will help track and manage things like PTO, sick days, and vacations. Agreeing to a co-employment partnership with VensureHR means you won’t need to pay for these additional services, which you should already be given access to anyway.
Through the co-employment partnership with your PEO, you can also receive some incredible, customizable retirement plan options for you and your employees.
If you didn’t think offering your employees a 401(k) option is important, it is – very important – especially for recruiting and retaining top talent. In fact, that according to MetLife’s 2021 U.S. Employee Benefit Trends study, 78% of employees say some form of a retirement plan is a must. Your co-employment partner can help you navigate through the confusing jargon that comes with 401(k) planning and even offer expertise as to which plans make the most sense for the client company.
Another perk to co-employment – which seems to be the big winner – is the PEO will take care of any and all tax-related items. Because of the co-employment model that PEOs operate on, they will help with:
- Calculate and pay required payroll tax liability in relation to the client.
- Optimize tax bills to be sure all relevant deductions that are allowed in the country of establishment are made.
- SUTA compliance
- SUI tax
Now, these are just a few ways a PEO like VensureHR can help in a co-employment agreement, but they’re some of the most important HR aspects that you simply don’t have the time for.
What are the risks of co-employment?
This section is going to be relatively short and sweet. Why? Because there are no real risks to co-employment with a PEO.
As mentioned previously, the business owner doesn’t relinquish any ownership of their business whatsoever. The owner of the client company still calls all of the shots.
While there aren’t risks to highlight, we can still offer advice: Pick a PEO to partner with that best suits the needs of your business. Not all PEOs are the same and you may not pair well with many of them. Be sure to find a PEO partner that is transparent, provides intuitive technology, and provides the necessary services to help your business grow quickly (hint hint: VensureHR).
Co-employment Myths Debunked
There are many assumptions about co-employment that simply aren’t true. And when you find yourself asking – What is co-employment? – you don’t want to be bombarded with misinformation.
Here are a few debunked myths about co-employment:
- Co-employment Replaces My HR staff
If you enter a co-employment agreement, your HR staff isn’t going anywhere. All a PEO would do is help enhance your current HR staff and provide expertise when developing new HR programs. The PEO often brings seasoned, experienced subject matter experts to the table to further improve upon the well-oiled machine you already have.
- Using Freelancers Puts you at Risk
Utilizing independent contractors (ICs) like freelancers can be great for your business. If they’re properly classified, then they present no risk. If they are properly classified, it shows they have no employer or co-employer. A freelance “employee” acts as its own business.
- Co-employers and Joint Employers are the Same Thing
In a joint employment agreement, both the business and the HR company have joint control and supervise the duties and daily processes if the employees.
- Co-employment is Bad
Co-employment can be great for your business and has a number of invaluable benefits that allows you to get back to running your business. With only 40% of small businesses turning a profit annually, the remaining 60% are either breaking even or losing money. If your business could join the 40% by simply partnering with a PEO like VensureHR, how could that be bad?
Don’t let misinformation trip you up when it comes to getting answers to the question, “What is co-employment?”
If you want to learn more about how co-employment and a PEO can help your, schedule a free HR diagnostic with an HR specialist today.
Small Business Trends: Startup Statistics for Small Business (2019)