7 Essential Pros and Cons of Co-Employment

An Essential Guide to Co-Employment

An Essential Guide to Co-Employment

January 9, 2023


Picture of INS Global



Picture of INS Global



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Key Takeaways

  1. Co-employment relationship is a contractual connection between three parties: Client, employee, and a PEO
  2. It is not the same as employee leasing or joint employment. 
  3. By letting the PEO be the primary employer, they will take care of all the paperwork and manage every aspect of salary, HR issues, termination, insurance, etc.


Temporary workers and independent contractors can fill essential roles in your workforce. Their diverse talents and schedule flexibility make them an attractive option for short-term projects and positions. However, it is vital to your company’s operations to manage temporary workers correctly and in full legal compliance with labor laws. Co-employment is one option that can be beneficial in this regard.

Co-employment reduces employer responsibilities on your end while still giving you control over the day-to-day operations of the employee who works directly toward your goals. At the same time, there are also risks involved with co-employment. If not managed properly, you could face lawsuits, expensive fees, and fines.

This article defines co-employment and how to bypass any potential risks. Finally, we also summarize the pros and cons of co-employment so that you can decide if it’s the best match for your situation.


Co-Employment: What Is It?


Co-employment occurs when two or more parties share legal responsibility for an employee. It is a kind of agreement between a third-party staffing agency like a PEO (Professional Employer Organization) and a client company.

In general, a co-employment relationship is a contractual connection between three parties.

In a co-employment agreement, the client company will handle the daily management of the employee or contractor. The client will direct them, assess their performance, and address any other functions of the co-employed employee performance like effective employee management and encouraging employees day-to-day.

Then, the PEO takes care of payroll, HR services, tax withholding, workers compensation, etc.

In a co-employment relationship, both parties are liable for the actions of the other. Importantly, clearly stating the responsibilities of each party at the beginning is crucial to maintaining a smooth relationship.

Finally, co-employment is not the same as employee leasing or joint employment.


Co-Employment: Pros and Cons




Employee Payroll and Insurance Covered


A PEO handles every aspect of employee payroll, benefits, insurance, and tax deduction. So, this can save you time and give you more clarity and energy to focus on company goals.


Specialized Talent Available Quickly


Instead of hiring and onboarding a new full-time employee for a specific task, you can hire a temporary worker or contractor. This is someone who is already proficient and can get to work immediately on the project. As a result, you save time on training and upskilling.


Affordable and Reliable Services


A PEO ensures that your co-employed employees are correctly cared for and managed. Furthermore, the PEO partner will also ensure that the temporary workers are operating in full legal compliance and that you remain up-to-date with relevant employment law changes.


Scaling Up Opportunities


Being in a co-employment relationship allows you to scale up without having to expand the size of your full-time workforce drastically. It enables you to progress faster towards your market goals while not having to spend a lot of time and resources on recruiting new staff for your team.




Co-Employed Employees are Only Temporary


You may need a long-term employee for that position, but changing the status of a temporary worker to a full-time one can be complicated, with associated legal risks. See our article here for more on how to make that transition smooth.


The Culture of Your Workforce May Be Impacted


Having short-term workers who don’t necessarily share the same vision and culture as your long-term employees could cause friction. Creating a positive workspace requires effective managers and management skills. With a well-managed company culture, both new and current employees can feel valued and appreciated.


Misclassification Errors


If a worker is classified as a co-employed employee but then onboarded as a regular employee, it can result in lawsuits, damage to reputation,  and having to pay penalties. A co-employed employee cannot perform the same responsibilities and hours worked or be treated the same as a full-time employee.

Next, we outline how to deal effectively with the risks of co-employment.


Co-Employment Risks and How to Avoid Them


The best way to avoid the hassle of lawsuits and the unnecessary expenses of fees and fines for misclassification errors is to:


Make sure that you partner with a reputable company


If you partner with a services PEO in the US, the PEO must be IRS certified. Always check that the PEO you want to co-employ with is up to standard. Additionally, this means checking if they operate in complete legal security with national regulations.


Create specific and detailed contracts


Work with a legal expert or a legal advisor who can counsel you on what a safe and compliant co-employment contract should look like.

Discuss with the PEO precisely what responsibilities you will handle and what they are expected to manage. Communicate clearly – leave no room for misunderstanding. On the part of the employee, this could mean set hours a week or not depending on the type of arrangement you want.


Assign the PEO to be the primary employer


By letting the PEO be the primary employer, they will take care of all the paperwork and manage every aspect of salary, HR issues, termination, insurance, etc. Then, you can focus on management style and overseeing the day-to-day operations of the co-employed employee.




Hire and Manage Employees Safely with INS Global


Successfully managing temporary workers can be challenging. This is especially true if you have branches in different countries and must comply with several legal systems and regulations. Because of this, the chance of errors is high. Dealing with lawsuits is expensive and can damage your company’s reputation.

INS Global offers PEO services that are both legally sound and beneficial for you. Our legal adviser team has the experience and knowledge you need to follow every local labor and tax law correctly. We partner with more than 600 companies worldwide. This gives us unique insight into industries and best business practices.

Our PEO and EOR services are available in 80+ countries. This way, we can help manage your employees no matter what continent you’re on.

With INS Global, you can co-employ workers safely and efficiently in a working environment that benefits everyone and builds trust.

So, contact us here today to learn more.


Contact Us Today

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