What is co-employment and how can your business benefit from it?

Employees are the most important asset and the driving force behind a successful company. However, in some cases, companies often experience Human Resources (HR) Management related issues which may hinder business growth. There are companies that are moving towards co-employment to help them manage operations effectively and minimize risk while maximizing talent. Although co-employment is not a new concept, very few businesses are aware of it and the rewards that they can reap from it.

Here is an insight on what exactly is co-employment, its benefits, and how businesses can best leverage it for a successful employee management partnership.

What is Co-employment?

Co-employment is a contractual agreement between a company and a Professional Employer Organisation (PEO) that allocates and divides employee responsibilities amongst themselves. The contract is often called a Client Service Agreement and this is when an employer outsources personnel and shares the responsibility with the PEO.

What are the benefits of Co-employment?

The current economic uncertainty gyrated by the global pandemic has further proved the need for co-employment within the business space. This arrangement has proven to be cost-effective for businesses that want to focus on their core business and application of development strategies without the burden of HR-related tasks, affording them the time and resources to remain competitive and maximize growth.

The benefits of co-employment are enormous but there are a few that stand out;

  • Provide HR administration support

For businesses that don’t have a dedicated or do not want to source out an external human resource, co-employment is able to offer administration support to these businesses. Based on the arrangement, the PEO can offer their HR resources or one of their specialist to assist with HR administration strategies and offer guidance.

  • Offer talent attraction and management

A co-employment agreement also offers the benefit of assisting companies to attract and manage potential talent. POEs often assist with implementing employee training and management, conduct employee performance appraisals and provide strategies that help employers adapt to the changing working environment.

  • Receive compliance expertise

For every business to operate successfully and establish credibility, they require to be compliant in their respective industry. Although this can often be a challenge for most small businesses, POE’s have HR compliance experts that can assist the company to be regulated to ensure that they do not find themselves under any risk of being penalised for breaking rules and regulations.

  • Provides payroll management and administration services

Payroll management and administration are some of the most essential functions in any business yet, it is often overlooked. Employers who struggle with payroll administration are prone to errors which in the long run can negatively affect their businesses. A professional employer organization (PEO) that enters into a joint-employment relationship with an employer can be an effective solution to payroll management. This PEO is responsible for managing employee-related responsibilities and liabilities, allowing employers to outsource payroll administration services such as tax filing, keeping track of working hours, and employee benefits. This gives businesses the opportunity to focus on other key areas of their operations and enables the success of co-employment.

How has co-employment impacted businesses?

Small and medium-sized businesses have often been penalized for either not following labour laws outlined in the labour act and BCEA, or complying with tax obligations, finding themselves with tax penalties due to improper payroll administration. They are often stuck with unskilled workers who over-promise during the recruitment process because they could not afford to employ the services of an agency to conduct background checks and ascertain that the candidate is who they say they are, and well capable to deliver the position’s Key Performance Indicators. This has landed a lot of businesses in compromised positions, with high operational costs, staff turnover, and endless CCMA cases and lawsuits.

Co-employment has rendered relief for these businesses by ensuring that the HR-related regulations are adhered to without compromise. As the company grows the HR department finds it difficult to maintain set Employment Equity projections in terms of skills development, ensuring that the human resource is well equipped to deliver according to the increased need and responsibility of the evolving job requirements. Co-employment ensures that PEO’s work together with businesses to administer the business skills development plans for the appointed roles and that the personnel continuously add value to the business they are contracted to.

CEO of the Virgin Group Richard Branson once said that “Clients do not come first. Employees come first. If you take care of your employees, they will take care of your clients.” This simply signifies the importance and benefits of investing in impactful employee-focused strategies as in turn, it will help create satisfied clients. This can be achieved all through co-employment.


Accurate Agent Group 

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