Full-Service HR

How the Co-Employment Model Really Works

Ella Baker
Find out how a PEO can help you today
Reading time 6 Mins
Published on Jun 11
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A partnership that helps your business grow

Most small and mid-size business owners spend an inordinate amount of time on payroll and human resources tasks that distract them from what they do best – growing their business. Through the co-employment relationship, a professional employer organization (PEO) can help provide the HR support you need, while making your business more competitive, compliant, and better able to manage risk.

What is a PEO?

PEOs partner with small and mid-size businesses to provide outsourced HR management, including employee benefits administration, risk management, compliance with regulatory issues, and training. PEOs work through a co-employment arrangement with a client company, meaning that the PEO shares the costs and risks of employment with the company. Through this arrangement, PEOs are able to provide:

• Human Resources (HR) Management
• Benefits Administration
• Payroll Processing
• Time and Labor Management
• Tax Administration
• Better rates on Worker’s Compensation
• Safety and Risk Management
• Employee Relations Support
• Ensure ACA Compliance
• Ensure Labor Law Compliance

Accredited by Employer Services Assurance Corporation (ESAC), Certification Institute, and backed by a $3 million Employment Practices Liability Insurance policy, Sheakley’s 120 years of combined PEO team experience and expertise are unrivaled in the industry. As your company continues to grow and become subject to more stringent labor laws, Sheakley’s PEO services allow you to remain compliant and focused on the daily demands of your business.

Your free consultation with Sheakley’s PEO team is just a click away. For more in-depth information about PEOs, check out our What is a PEO blog post today.

What is co-employment and how does it work?

The National Association of Professional Employer Organizations states that co-employment is the contractual allocation and sharing of employer responsibilities between a PEO and its client. Under a co-employment agreement, employees are technically employed by both you, the business owner, and the PEO, or co-employer.

You handle all daily duties and core job functions of your employees and you make all decisions about which applicants to hire and which employees to dismiss. The PEO does not supply or make decisions about your workforce; instead the co-employer supplies services and benefits to you and your workforce. You maintain control of all of your business decisions and operations, while the PEO manages employee-related responsibilities like payroll, benefits, and HR administration.

Business owners who align with a PEO in a co-employment relationship transfer a substantial portion of the risk and responsibilities associated with employees to the co-employer. The structure of the relationship allows your PEO to offer better benefits and benefit options, handling of wage and employment tax responsibility, freedom from the responsibility of reporting, collecting and depositing the taxes with state and federal authorities, and assistance with workers’ compensation coverage and claim management.

The co-employment model is all about protecting what makes a business successful – people. You and your employees are more likely to succeed when you are able to focus on the daily running of your business and on growing, rather than paperwork. Your employees get access to better quality benefits and you get more time to focus on being the leader of your business.

Co-employer responsibilities in the co-employment model

Your co-employer will administer payroll functions, including automated deposits, payroll tax filings, and even vendor and contractor payments. You decide the pay rate and classification of your employees and the co-employer will make sure that you stay compliant with all federal, state, and local payroll filings and pay rates. When there are changes to regulations regarding filing requirements or rates of pay, your co-employer will notify you and help you make the necessary changes to remain compliant.

In addition, your PEO will also offer compliance support for government tax and reporting forms. These include employer payroll tax filings, W-2s and 1099s, COBRA forms, EEO-1, and others. Removing these types of time-consuming tasks from your hands allows you to focus on the overall management of your business.

Your co-employer will also manage employment-related risks. Unemployment and workers’ compensation claims are a fact of life in business, but your co-employer will take on the burden of administering these tasks for you. When an unemployment claim is made, your PEO will handle the paperwork and follow-up. If a worker is injured on the job, your PEO will manage the entire process from reporting to return-to-work, even staying in contact with the medical provider to ensure that employees are assigned duties that fit with their current fitness for work level. In the event of an employee lawsuit, the co-employers EPLI coverage extends to you, providing additional safeguards for your business.

Finally, and perhaps most important to your employees and potential job candidates, your PEO will provide benefits administration for your company. By harnessing the buying power of their entire client pool, PEOs are able to offer you access to high-quality benefits packages that may otherwise be unaffordable to many small or mid-size businesses. Your PEO will help with every aspect of the benefits administration, such as benefits onboarding, withholdings, claims management, and other related paperwork.

Employer responsibilities in the co-employment model

By alleviating the stress and time needed to perform the functions listed above, the co-employment model allows you to focus all of your attention on finding ways to grow your business and expand your profit margin. While your co-employer will take on many employee-related tasks, you will still be responsible for the day-to-day business operations and activities of all employees.

Additionally, you are responsible for providing the workspace and resources necessary for your employees to perform their duties on a daily basis. Ultimately, you as the business owner are also responsible for the delivery of services or products provided by your business – and working with a PEO makes that easier. Businesses that partner with a PEO grow seven to nine percent faster, have 10 to 14 percent lower employee turnover, and are 50 percent less likely to go out of business than other companies.

Co-employment misconceptions

The co-employment arrangement between you and your PEO leaves you in charge of your staff. While pre-employment services help you to stay compliant and navigate talent acquisition and management, you maintain control of your staff, their assignments, and pay rates. Your PEO can offer assistance with recruiting, onboarding, and termination, but you make the final decision about which employees to hire and terminate.

You do not have to cut your existing HR staff. PEOs often work with existing HR staff to build on existing services offered by the company. Since most small and mid-size businesses do not have the personnel to run a fully functional HR department, your existing staff can benefit greatly from working with your PEO partner.

Contact Sheakley today

Sheakley’s PEO services remove the daily worries of HR and risk management, allowing you to focus on the continued growth of your business.

Get your free consultation and learn more about how your business can benefit from a co-employment partnership with Sheakley’s PEO professionals. Stay up-to-date on all things Sheakley by subscribing to our blog and following us on social media. Join in the discussion by commenting below.


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