Co-employment is a way to expand a business abroad that is used more and more by all types of companies.
It is a solution that allows you to hire staff for your company without the hassle of managing all HR and payroll tasks, leaving you time and resources to use to grow your business.
In the article, we analyze in more detail what a co-employment agreement is and the benefits of using it when expanding abroad.
What is a Co-Employment Agreement?
Many people may not understand what co-employment is all about. Co-employment refers to the legal contract between a company and a PEO (Professional Employer Organization) to share the duties and responsibilities of an employee. If you are thinking about starting a business or if you already have one, you will need to learn about what is a co-employment agreement.
A typical agreement between two companies will outline all of the responsibilities and financial consequences between them. Typically, these agreements will also outline how the employees will be paid, how they will be disciplined, and what is the process for worker compensation in the case of an injury.
A good agreement should also set forth the general terms of how the companies will be related to each other such as what types of information and data the employees will be expected to keep, the kinds of reports that they must create and submit to the employer, and the conditions under which these reports are kept. Some agreements also stipulate what is a fair notice period in which the employee will be terminated.
Basically, with a co-employment agreement, your company’s employees are employed by two entities:
- Your company
- The PEO
While the PEO offers the management of HR and payroll, your company will be only responsible for the daily communication with your employees, operation, and in general, decisions to grow your business.
Benefits of Using a Co-Employment Agreement
This kind of agreement is highly beneficial for companies interested to expand their business abroad.
With co-employment, the PEO becomes your partner because it will assume certain responsibilities while your company will get access to numerous benefits:
1) Compliance guaranteed
This is one of the most important benefits for companies. Especially when expanding a business abroad, what entrepreneurs are most concerned about is how to be compliant with local laws. Regarding employment and all aspects of salary, taxes, and benefits, each country has its own rules, which are often not easy to understand due to the language. With a PEO and co-employment, the PEO brings all of its knowledge of the local laws to ensure that the employment relationships are compliant with all regulations.
2) Full-service payroll
Employers who are struggling to find time to run payroll or are being penalized for mistakes often find welcomed respite in co-employment. This is because, similar to the compliance of the employment relationships, also for payroll, the employer must guarantee that everything is compliant with local laws and regulations, in order to avoid business risks. A PEO, through a co-employment agreement, takes care of everything about payroll, including the monthly salary calculation, taxes, social benefits.
3) Full hR support
A PEO can help in two ways in this situation. The first one is when a company doesn’t have the resources to manage HR internally. Hiring an employee to manage HR can become expensive in the long term, especially if you have more employees or if you plan to expand in different countries. In this situation, you should hire an employee for every country where you are in, to guarantee that you will be compliant with local laws. To solve this problem, a PEO can help to manage HR and administration for your business. Another situation is when you have the internal resources, but you can choose to use the PEO’s expertise for advice and suggestions on HR-related issues.
Risks Related to Co-Employment
As we mentioned the benefits, we also have to clarify some of the risks related to the co-employment agreement.
Because co-employment and joint employment are easily interchangeable, hazards may arise as a result. Because the responsibilities of these two setups are almost identical, both the client and the staffing firm may face legal consequences if their agreements are not clear.
A customer may execute duties or obligations that they should not be performing because the staffing agency can and should cover them. If the government discovers this, they risk being accused of misclassifying the worker’s job as joint employment rather than co-employment.
These problems can happen with every kind of employee, but it is more typical for independent contractors.
If an independent contractor is hired by a staffing agency to fill an unfilled job at a client company and onboarded by the client rather than the staffing firm, the client is treating the person as a permanent employee. This can result in a lawsuit.
How can these co-employment risks be minimized?
Positioning the staffing agency as the primary employer for temporary employees is the simplest strategy to reduce the risks of co-employment.
This implies they are responsible for all aspects of employment, including salary negotiations, healthcare coverage, HR difficulties, and terminations. Client companies’ primary tasks include determining the length of the assignment and supervising and directing their day-to-day work.
We now have a better understanding of co-employment and the risks it entails. Knowing how co-employment works, on the other hand, allows you to minimize the risks while reaping the rewards.
NNRoad is a global PEO provider that can easily help your company to hire and pay employees when expanding abroad. We are operating in more than 50 countries around the world and we will help with everything related to HR, employment, and payroll, while you will focus only on the growth of your business.
Contact us today to know more about us!