What Is a Co-Employer Relationship?

When a business contracts with a Professional Employer Organization (PEO), the employer and the PEO enter a co-employer relationship. Both the PEO and the business share responsibilities and liabilities along specific lines. At the most basic level, the co-employment relationship divides the responsibilities with the following goals in mind:

  • The PEO is the employer of record for tax purposes and pays and remits wages and all withholding taxes. The PEO manages the administrative tasks related to human resources. The PEO does not receive the benefits of the employees’ efforts.
  • The client business directs and manages employees in day-to-day operations, sets schedules, supervises employees, and is responsible for all the functions necessary to deliver goods and services to the customers. The client receives the benefits of the employees’ efforts.

The co-employer relationship allows small and medium businesses to harness world-class talent, processes, benefits, and platforms. Because the PEO supports many small and medium-sized enterprises, they are the employer of record on the scale of a large business. This arrangement gives PEOs and their clients more buying power in the benefits marketplace. Because a PEO focuses on human resources, they can hire highly knowledgeable human resources professionals, bringing a depth of knowledge to their clients.

Removing the administrative burden frees up the client’s time so they can focus on delivering high-quality goods and services, marketing, and innovation.

A Relationship Tailored to Your Business Needs

Each co-employment relationship aims to meet the unique needs of the client. These needs are identified collaboratively through conversations between the PEO and the business to allocate and share employer responsibilities to maximize the value to the client. The PEO and business develop a client services agreement through these conversations. Clarity is vital to the success of the co-employer relationship, with roles and responsibilities often allocated along the following lines.

  • The PEO provides the human resources platform for tracking time, enrollment, etc.
  • The PEO assumes responsibility for compliance with regulatory requirements.
  • The PEO provides employees with required pieces of training such as harassment and discrimination.
  • The PEO offers benefits to employees and oversees benefit administration.
  • The client company provides employees with everything they need to get the job done, including technology, equipment, and a place to work.
  • The client company assesses candidates and makes hiring decisions.
  • The client company evaluates employee performance and makes decisions about professional development, training needs, career advancement, and termination.
  • The client company trains employees on topics related to delivering goods and services.
  • The client retains control of strategy, sets the culture, sets standards for engaging with customers, and has the decision-making authority for hires and termination.
  • The PEO is invested in workplace safety and may consult with the client business on best practices and compliance with rules and regulations.
  • The PEO ensures that hiring, protected leaves, termination, and workers’ compensation claims meet all requirements. This oversight reduces liability and risk.
  • The PEO may serve as a consultant on strategic human resources initiatives, including growth and expansion, recruitment and retention, and performance management processes.
  • The PEO may support the design of benefits and ensure the quality of policies and handbooks.
  • The PEO monitors new employment trends, legislation, and regulatory requirements and consults with the client business to ensure that practices and policies are up to date.

Co-employment, A Competitive Advantage

A well-managed co-employer relationship will be seamless for your employees. They will turn to the PEO for all administrative and tax-related purposes, but they will engage with your business for training, professional development, and day-to-day operations. Employee satisfaction is high in companies contracting with a PEO. According to a 2017 NAPEO whitepaper, employees are more engaged, intend to stay with their employer, and have confidence in the future of their company and the role they play.

With time to focus on operations and a team of engaged employees, it’s no surprise that PEO clients outpace comparable sized businesses in growth and longevity. Business owners who are in a co-employment relationship have a high level of satisfaction as well. In fact, 98% of business owners would recommend contracting with a PEO.

Contact Us Today

Contact us today to explore whether the co-employer relationship is right for your business. TANDIUM is the cost-effective answer for “total business support” with innovative technology, a knowledgeable staff, and personalized attention.