Insights into global expansion & employee retention

Published: August 8, 2023

Is Co-Employment Right For You?

Deciding between co-employment and an Employer of record? Learn how to make the right choice , considering factors like control, workforce size, expertise, compliance, and budget alignment for your business's success.

Key Takeaways

  • Co-Employment involves shared responsibilities and collaboration between businesses and third-party partners, fostering collaboration and resource efficiency.
  • Understanding the advantages of Co-Employment, such as enhanced HR management, specialized expertise, cost savings, risk reduction, and improved employee benefits, is crucial for effective implementation.
  • When choosing between Co-Employment and an Employer of Record, factors like control level, workforce size, HR expertise, compliance, and budget should be carefully evaluated to align with business goals.

Co-Employment has gained popularity in the modern business landscape, with an increasing number of companies looking to adopt this unique employment strategy. But what exactly is Co-Employment?

In a Co-Employment setup, two or more hiring companies join forces to oversee a shared group of employees, dividing employment-related obligations and liabilities. This approach enables businesses to form a partnership that promotes enhanced collaboration and productivity.  By leveraging Co-Employer arrangements, companies can foster a sense of partnership, leading to increased collaboration and improved productivity.  It can also be a beneficial employment strategy that enables businesses to stay laser-focused on their core operations, while still leveraging specialised skills through collaboration.

Professional Employer Organisations (PEOS) use the co-employment set up and that act as intermediaries, taking charge of critical HR functions like Payroll, benefits, administration and compliance. Businesses using this employment arrangement are reportedly 50% less prone to business closure, experience increased growth and experience 10-14% less staff turnover.   

Woman discussing a Co-Employment arrangement with a customers

Exploring the 5 Advantages of Co-Employment

Co-Employment is an innovative approach to employee management, that offers significance impact in modern business practices. Now, let’s delve into the various advantages this innovative approach offers to companies, elevating their HR management and overall business performance.

  1. Enhanced HR management: Co-Employment has the power to transform HR management. By partnering with companies like Professional Employer Organizations (PEO), that use this employment arrangement, businesses can hand over complex HR tasks and focus their attention on more strategic business objectives. 
  1. Access to Specialized HR Knowledge: One of the core benefits of Co-Employment is the ability to access specialized HR expertise. PEOs have access to in-depth knowledge regarding employment laws, compliance regulations, and HR best practices, which can help businesses seamlessly and compliantly navigate the complexities of HR and effectively resolve workforce-related challenges.
  1. Cost Savings and Increased Efficiency: Co-Employer relationships can help businesses increase operational efficiency and reduce cost because the nature of this setup means that businesses share resources and can benefit from economies of scale. PEOs simplify HR processes, payroll management, and benefits administration, reducing overhead costs and enhancing resource allocation to help companies to redirect their investments to expansion efforts and strategic ventures.
  1. Reduction of employment-related risks: Staying compliant with the ever-changing labor laws and regulations can be overwhelming for any business. Co-Employment helps safeguard businesses against employment-related risks by bearing joint responsibility for legal compliance and helping businesses navigate the legalities associated with employing staff. 
  1. Enhanced employee benefits and services: A content and satisfied workforce is the backbone of any successful business. Co-Employment enables companies to offer improved employee benefits and services, even on a smaller scale. This is because they benefit from economies of scale, by pooling resources, they can access enhanced benefits and perks that can give businesses a competitive edge.  

Key Considerations of Co-Employment You Didn’t Know

Co-Employment presents a transformative approach for businesses seeking to optimize their workforce and streamline HR operations. However, to ensure a successful and harmonious partnership, there are a number of considerations that companies must carefully navigate.If you are a business considering co-employment, here’s what you should know.

  • Legal and compliance requirements: An important consideration in Co-Employment is navigating employment laws and regulations and staying compliant. The client company and the Professional Employer Organization need to work together to ensure adherence to local, state, and federal laws. Open and consistent communication on any legal changes is critical for risk mitigation and maintaining a legally sound employment relationship.
  • Clear communication: Clear and transparent communication is the backbone of any successful Co-Employment arrangement. All parties involved must maintain open lines of communication, addressing any concerns promptly and effectively. Defining roles, responsibilities, and expectations from the outset is crucial to avoid misunderstandings and foster a strong partnership built on trust and collaboration.
  • Maintaining employer-employee relationships: While Co-Employment involves shared employment responsibilities, it is essential to strike a balance in maintaining employer-employee relationships. The client company retains control over day-to-day tasks and team management, nurturing a sense of ownership and camaraderie among employees. PEOs/EORs, on the other hand, support HR functions and ensure compliance, working collaboratively to create a positive work environment.
  • Confidentiality and data security: With Co-Employment, the exchange of sensitive employee data and confidential information is inevitable. Robust data security measures are imperative to safeguard this information and prevent any unauthorized access. Companies must conduct due diligence to ensure that their chosen PEO/EOR adheres to strict data protection protocols, protecting the privacy of their employees.
  • Understanding shared responsibilities: Successful Co-Employment hinges on a clear understanding of shared responsibilities. Both the client company and the PEO/EOR must be aligned on their roles in managing HR functions, payroll, benefits, and compliance. Defining these responsibilities in a written agreement or contract provides a comprehensive framework for a unified approach, avoiding any ambiguity or misunderstandings.

Co-Employment vs. EOR: A Comparative Analysis of

As businesses explore innovative HR solutions, two approaches stand out: Co-Employer set ups through a PEO or Employer of Record solutions. While both offer unique advantages, understanding the differences and evaluating their pros and cons is essential in making an informed decision for your business. Now, let’s explore the differences between Co Employment and an Employer of Record.

  • Co-Employment refers to a strategic partnership where two or more employers share responsibility for a group of employees. They collaborate to manage HR functions, payroll, benefits, and compliance, while the client company retains control over day-to-day tasks and team management.
  • An Employer of Record (EOR) is a third-party company that takes on the role of legal employer for a specified employee. The EOR shoulders full responsibility for HR critical tasks, such as payroll, benefits administration, and maintaining compliance with employment regulations. In this set up, business can shift focus to core operations while the EOR handles day-to-day HR tasks and regulatory requirements.

The Pros and Cons of a Co-Employer Relationship and an Employer of Record

Co-employer RelationshipsEmployer of Record
ProsEnvironment of collaboration:
Encourages teamwork and partnership-based dynamics between the business and the third-party provider.

Expert knowledge:
Third-party’s HR expertise and compliance support enhances HR-management.

Cost savings:
Shared overhead costs and administrative burdens can result in cost savings.

Versatile workforce management:
Offers flexibility by accessing a broader benefits pool and tailoring benefits to employees’ needs.
Enhanced HR Management:
Outsourcing HR functions and payroll management reduces administrative burdens on the business.

Comprehensive HR Services:
Access to a comprehensive suite of HR services, including benefits administration and compliance support.

Competitive Benefits:
Ability to provide competitive benefits to employees by drawing from a larger pool of participants.

Seamless Market Expansion:
Simplifies entry into new markets by handling local employment regulations and compliance matters.
ConsCommunication Complexity:
Requires strong communication and coordination between the business and the third-party partner for effective operations.

Administrative Complications:
May introduce additional administrative complexities beyond traditional employment arrangements.

Shared Control:
Limited control over certain HR aspects as the third-party partner becomes the co-employer of record.
Control Balance:
Reduced control over day-to-day HR operations as the EOR assumes responsibility for these functions.

Complexity in Expansion:
May entail complexities when dealing with cross-border employment regulations and tax implications.

Partner Reliability:
Requires careful selection of a trustworthy EOR partner to avoid non-compliance or financial instability.

4 Factors You Need to Know to When Choosing Between Co-Employment and an Employer of Record

Selecting between a co-employer relationship through a PEO and an Employer of Record solution depends on number factors unique to your business. When choosing the right option for your business, Consider the following 4 factors:

  • The level of control and involvement you desire in HR management. Deliberate on the level of control you wish to retain over HR functions. Co-Employment offers shared responsibilities, promoting collaborative decision-making, while an Employer of Record solution allows you to delegate day-to-day tasks to a specialized partner. Consider how hands-on you want to be in shaping your workforce management strategy.
  • The size and complexity of your workforce. Evaluate the size and complexity of your workforce. Are you dealing with a large number of employees spread across diverse locations? Consider the scope of HR tasks you want to outsource, such as payroll management, benefits administration, and compliance handling. The right solution should seamlessly align with the intricacies of your workforce.
  • The need for specialized HR expertise and compliance support. Assess whether your business demands specialized HR knowledge and compliance support. Co-Employer arrangements grant access to the expertise of the third-party partner, aiding in navigating complex HR regulations. Conversely, an Employer of Record solution can provide a comprehensive suite of HR services, including expert compliance management.
  • The budget and cost-effectiveness. Financial considerations are pivotal for any business. Analyze the budget implications of both Co-Employment and an Employer of Record solution. Factor in the cost savings from shared overheads that come from co-employer arrangements and the value derived from streamlined HR operations with an Employer of Record. Compare these against your business’s financial capabilities and strategic goals.

Carefully evaluate your business’s requirements and long-term objectives to determine the most suitable option that aligns with your goals.

Managing a Global Workforce With Playroll: Cardiomatics’s Global Expansion Success

Cardiomatics, a cloud-based AI ECG analysis technology firm, in the throes of global expansion, was eager to onboard word-class global talent. However, with the absence of local entities, compliantly hiring international talent became a challenge. Cardiomatics also faced the challenge of global talent sourcing and attraction- accessing fit-for-purpose talent proved a hurdle without on the ground expertise. Playroll’s partnership with Cardiomatics was pinnacle to their Global hiring success. Playroll provided Cardiomatics with an effortless and efficient way to tackle these complexities head-on with its user-friendly platform and dedicated customer support. Managing payroll become seamless and SAPRO was able to successfully onboard international employees from Canada, while maintaining the simplicity and transparency of their global payroll processes.

Interested in learning how Playroll can help your business overcome the challenge of managing a global workforce?

Schedule a demo to learn more or sign up for a free account.

Co-Employment FAQs

Is Co-Employment Suitable for Small Businesses?

Yes, Co-Employment is suitable for small businesses. It offers cost-effective HR solutions, access to specialized expertise, and streamlined processes, making it an attractive option for optimizing workforce management regardless of business size.

Are There Any Legal Risks Associated with Co-Employment?

In Co-Employment arrangement responsibilities are shared, which can lead to legal risks if not managed properly. Partnering with a reputable Co-Employment provider can mitigate these risks by ensuring compliance and expert guidance.

Can Co-Employment Lead to Misclassification Issues?

Misclassification issues can arise if roles and responsibilities are not clearly defined in the Co-Employment arrangement. By establishing transparent communication and a unified approach, businesses can avoid misclassification pitfalls and ensure a successful partnership.

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