Co-employment is a collaborative partnership where a Professional Employer Organization (PEO) and a business owner share employer responsibilities. In this model, the PEO acts as the employer of record for administrative purposes, while the business owner retains full control over day-to-day operations and employee management.
The division of responsibilities typically works as follows:
Client Responsibilities:
- Directing daily work and employee tasks
- Making decisions regarding hiring and firing
- Conducting performance evaluations and disciplinary actions
- Managing workplace safety
PEO Responsibilities:
- Processing payroll and managing tax withholdings
- Administering employee benefits and negotiating with insurance carriers
- Managing workers compensation filings and claims
- Providing HR policy templates and training resources
- Ensuring compliance with federal and state regulations, such as IRS and DOL guidelines
This arrangement allows small businesses to access high-level HR resources and benefits packages usually reserved for larger corporations. By sharing liability and administrative burdens, businesses can reduce compliance risks and administrative overhead by up to 30 percent, allowing leadership to focus on core growth strategies.
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