The Human Resources Outsourcing industry has been growing in leaps and bounds. Contrary to what you may think, the weak economy can take much of the credit. Small businesses have been struggling to find new ways to cut costs and trim their excess operating fat. The HR Outsourcing industry has been there, ready to help, by offering discounted insurance programs, implementing more efficient HR systems, and training staff to be more productive.
Leading the HRO field is the Professional Employer Organization (PEO). Last week we provided an in-depth look into the PEO industry. To catch that archive, click this link: PEO.
Today we want to look at the mechanism through which the PEO can provide its valuable services and cost effective programs. That mechanism is called “Co-Employment”.
What is Co-Employment?
Co-Employment is the relationship created between a PEO and its clients, wherein the PEO shares in the risks and responsibilities of being an employer. Co-Employment is defined as, “the contractual allocation and sharing of employer responsibilities between the PEO and the client”. The PEO assumes the role of the Administrative Employer and is recognized as the legal Employer-of-Record. The PEO takes on numerous administrative, and strategic, functions for their clients. These functions include:
- Paying the Employees and Filing Payroll Taxes
- Issuing Workers’ Compensation Insurance Coverage
- Providing Employee Health Insurance Coverages
- Training Management and Staff
- Implementing Risk Management and Safety Plans
- Providing Employment Consulting and Compliance
- Managing Administrative Human Resource Functions
The client maintains the role as the On-site Employer and continues to manage and oversee all day-to-day activities relating to their internal operations. They provide worksite employees with the tools, instruments and place to work, and continue to oversee the hiring, firing, establishment of wages, and direction of the workforce. The PEO assists in ensuring that worksite employees are provided with a worksite that is safe, conducive to productivity, and operated in compliance with employment laws and regulations. In addition, the PEO provides worksite employees with workers’ compensation insurance, unemployment insurance, and a broad range of employee benefits programs.
Tangible savings.
Organizations that form a co-employment relationship with a PEO typically experience savings in both hard, and soft, costs. Hard costs can relate to workers’ compensation insurance premiums, health and voluntary insurance costs, Employment Practices Liability Insurance (EPLI) premiums, and a reduction in headcount or duplicated staff activities. In the arena of soft costs, savings can be experienced in more productive staff, more efficient operating systems, less turnover, improved employee morale and a more educated management team.
Whether or not you are ready to create a co-employment relationship with a PEO or not, now is the time to investigate the benefits of outsourcing for your company.
