Co-Employment Model: How Does It Work?

Co-employment which may also be referred to as joint employment is currently one of the most common workforce strategies that are employed in organizations. 

This also provides an excellent solution for firms in terms of dealing with their employees as well as utilizing the services of a PEO. 

Here, we explain what exactly co-employment means and why it may prove to be a valuable option for practically any business.

What is Co-Employment?

Co-employment refers to a legal relationship whereby two parties are jointly entrusted with employer obligations for an individual employee. In this case, the business owner and the PEO have legal responsibilities towards the employees as specified by the employees’ bargaining system. It also means that while many responsibilities of employment are taken care of by the PEO, businesses can concentrate on their main key functions.

How Does Co-Employment Work?

The co-employment model usually begins with a legal contract between the company or business and the PEO. This should include the aspects of working conditions, the responsibilities of each partner, and the performance agreed in the partnership. Here’s a step-by-step look at how co-employment works:

  • Assessment and Agreement: The business and PEO first evaluate the need and the objective of the establishment. They do so by creating a co-employment agreement which outlines the relationship, duties and accountabilities between the two parties.
  • Employee Onboarding: After the co-employment agreement has been reached, the company’s employees are transitioned into the co-employment structure. They become dual employees of the business and the PEO in most cases. This, in turn, means that while the employees are employed by the business and execute its operations and instructions, they are paid and gain access to their benefits through the PEO.
  • Payroll and Benefits Administration: Another administrative responsibility that the PEO takes care of is payroll services, where employees are paid the right amount at the right time. They also oversee matters to do with benefits, providing employees with an opportunity to access different benefit packages that a small business might not be in a position to afford individually.
  • Compliance and Risk Management: The employment-related law means that PEO is responsible for ensuring that the business meets all the legal requirements. This involves the handling of worker compensation issues within the company, safety issues and training of workers, and the keeping of employee files. By manning these activities, the PEO minimizes the likelihood of facing litigations or incurring penalties.
  • Ongoing Support and HR Services: Basically, the PEO continually offers support involving employee relations, performance appraisal, and training of employees among others. Such support assists in keeping productivity levels high for various organizations through the active involvement of employees.

Benefits of Co-Employment

There are several key benefits to adopting a co-employment model:

Cost Savings

When hiring the services of the best PEO for startups, companies are able to minimize on the expenditures required to accomplish administrative work in human resource, payroll, and other employee benefits. Since PEOs usually buy benefits in bulk and join large groups, benefit packages cost less than they do if a company were to purchase them independently.

Improved Compliance

It is noteworthy that employment laws and regulations are rather intricate and undergo constant evolution. A PEO works to be aware of these changes and guarantees that the business is compliant and thus shields the business from entailing legal complications or penalties.

Access to Expertise

PEOs offer staff who can offer important advice and assistance to the organization on human resource issues. It is this expertise that assists organizations in staffing and dealing with any complications within HR.

Focus on Core Business

Due to the involvement of a PEO in the handling of various administrative issues, the business owner is able to concentrate on aspects such as production, pricing strategies among others. This in a way enables them to focus more concentration and effort on expanding their business.

Enhanced Employee Benefits

A PEO allows business needs to provide employees with various benefits and privileges like medical and dental insurance, pensions, and other incentives. It can also help to improve morale and reduce turnover because employees will have incentive to stay with the company.


Co-employment is a tactical form of managing a workforce through multi-pronged partnerships, which has advantages to the organizations it is applied to. For this reason, employing a PEO can cut costs, allow for HR tasks to become more efficient as well as conform with employment regulations. 

This empowers the business owners to concentrate on what they know best, which is managing the business and expanding it while at the same time making sure that their employees are well taken care of as well as being provided with adequate incentives. 

It is quite likely that if you are interested in improving your workforce management and the benefits that come with it, the option of co-employment is perfect for you.  

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