What Is Co-Employment and How Can It Benefit Your Business?

Posted on March 12, 2017 By

Employers encounter a wide range of business jargon and terms throughout their day. Some are less common than the next. “Co-employment” is one such term. What exactly is co-employment, and how can it benefit your business?

The term co-employment loosely refers to any relationship in which an employee is employed by more than one employer. While this may sound strange or uncommon, it in fact happens more than one might expect. This relationship typically falls into one of three categories:

  1. Joint-Employer
  2. Employer-of-Record
  3. Professional Employer Outsourcing (or Organization)

1) Joint-Employer

When an employee works for two employers simultaneously, and in the best of interest of both employers, these businesses are known as joint-employers.

An example of this type of relationship made the news recently when a manager for two small regional airlines sued one of his employers for FMLA violations. This employer only had 30 employees and therefor fell below the minimum FMLA threshold of 50 employees. The employer denied the claim on these grounds. However, the litigant simultaneously worked for another airline, which employed over 300 employees – well over the FMLA limit. The courts determined that the employee was co-employed equally by both businesses – both logos appeared on his business card, he represented both companies in negotiations, and his name appeared on both business directories. The court found the employee’s FMLA rights were indeed violated as the co-employer relationship between the businesses pushed their total over the 50 employee limit.

This type of relationship may in fact pose more of a risk to one employer or the other, as their combined employee size may expose them certain employment regulations that only apply to higher employee thresholds. Employers who co-employ workers should weigh the benefits of this type of relationship against some of the increased risks they may face.

2) Employer-of-Record

Another co-employment relationship can found with temporary staffing or contingent workforce relationships. This is also known as Employer-of-Record (EOR).

In these relationships, the staffing or contingent workforce firm acts as the EOR which legally employs their clients’ temporary or contingent workforce. The EOR hires and provides temporary staff to their clients, usually for short-term projects or seasonal work. In so doing, the EOR assumes all the core employment responsibilities typically shouldered by the business. This includes administering much of the IRS and HR regulatory compliance related to employees. The EOR issues their pay-checks, pays the associated payroll taxes, files the relevant quarterly and year-end taxes, covers the employees with workers’ compensation insurance, manages the employee benefits and administers unemployment claims and insurance.

Through this type employment relationship, the EOR protects its clients from a wide range of employment regulations and risks. The EOR manages workers’ compensation claims, hires, on-boards and terminates employees, performs background checks, and handles general employee relations activities for the contingent workforce.

For employers who need short-term staff but don’t want the hassle of recruiting, hiring and managing these employees, the Employer-of-Record route may be the perfect solution.

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