Understanding PEOs: Co-Employment Vs. Employee Leasing

When a business owner hears the words “co-employment”, there can be many questions and misconceptions associated. It may be assumed a co-employment relationship will involve the loss of some control and regulation the business owner has over his or her business, especially when it comes to hiring employees. However, co-employment is actually a word to describe the relationship between a business owner and a Professional Employer Organization (PEO).  It has little to do with the owner’s control over his or her business and employees.

What is Employee Leasing?

A common misunderstanding of a PEO is that they supply employees to their clients. This is not true; that practice is called employee leasing and has nothing to do with co-employment. While a PEO can help a business hire an employee by providing recruiting tools, onboarding technology and HR support, there is no employee leasing involved. Employee leasing companies (also known as staffing firms) differ from PEOs as they usually supply employees on a temporary, contractual basis. These employees will return to the leasing company, who is their actual employer, after their contract is over. While a PEO may be able to help your company attract, hire and retain employees, they do not supply employees to your business.

Related: Employee Classification: Independent Contractor or Employee?

What is Co-Employment and how does it relate to a PEO?

National Association of Professional Employer Organization’s (NAPEO) describes the co-employment relationship as:

“A contractual allocation and sharing of certain employer responsibilities between the PEO and the client, as delineated in a contract typically called a client service agreement (CSA).”

The co-employment relationship is set up to enhance the business and not to control it. When your business partners with a PEO, you maintain complete control over the day-to-day practices of your business, who you decide to employ, pay rates, and other basic functions. The PEO’s role is to take on back-end administrative tasks which may include:

  • Employee Onboarding
  • HR & Compliance
  • Strategic HR Consulting
  • Payroll & Tax Administration
  • Time & Labor Management
  • Employee Benefits
  • 401(k) or 403(b) Administration
  • Performance Management

 

Aliat specializes in helping you do what you love. To learn how Aliat can assist you in your hiring processes and other aspects of Human Resources, visit our HR and Compliance page or contact us at discover@myaliat.com