Understanding Co-Employment: What it Is and Why It Matters

Co-Employment Agreement Being Signed

Written by Brandon Wright

Applied Business Solutions

May 12, 2023

As a business owner, you’re probably always looking for ways to streamline your operations and reduce your liability exposure. One way to accomplish both goals is through co-employment agreements. Essentially, co-employment involves sharing certain employment-related responsibilities and risks with another company. This can provide significant benefits, such as cost savings and increased efficiency, but it also requires careful planning and execution. In this article, we’ll provide a practical guide to co-employment agreements, including what they are, how they work, and how Applied Business Solutions can help.

What is a Co-Employment Agreement?

A co-employment agreement is a legally binding contract between two or more employers that outlines the terms of a shared employment relationship. Typically, one employer (the primary employer) retains control over the day-to-day duties and management of the employee, while the other employer (the co-employer) assumes certain responsibilities, such as payroll processing, benefits administration, and regulatory compliance.

One common type of co-employment agreement is a professional employer organization (PEO) arrangement. In a PEO relationship, the PEO provides HR services to the client company, including payroll, benefits, and compliance support. However, the client company remains the primary employer, retaining control over the employee’s job duties and performance management.

Another type of co-employment agreement is a joint employment arrangement. In a joint employment relationship, two or more employers share control over the employee’s duties and management. This can be useful in situations where multiple employers are involved in a project or where an employee works for multiple companies at once.

How Does Co-Employment Work?

The specifics of a co-employment agreement will vary depending on the needs of the participating employers and the nature of the shared employment relationship. However, there are a few key elements that are typically included in any co-employment agreement.

First, the agreement will outline the roles and responsibilities of each employer. This includes a description of the employee’s job duties, as well as a clear delineation of which employer is responsible for which employment-related tasks. For example, the primary employer may be responsible for day-to-day management and supervision of the employee, while the co-employer may be responsible for payroll processing and benefits administration.

Second, the agreement will specify the terms of the relationship, including the length of the agreement, the compensation arrangements, and any termination provisions. This is an important aspect of the agreement, as it helps ensure that both parties are clear on their obligations and expectations.

Finally, the agreement will address any legal and regulatory compliance issues. This can include provisions related to wage and hour laws, anti-discrimination laws, and workplace safety regulations. It’s important to ensure that the co-employment agreement complies with all applicable laws and regulations to avoid costly legal disputes down the line.

Benefits of Co-Employment Agreements

There are several benefits to co-employment agreements, including:

  • Cost savings: By sharing employment-related responsibilities, both employers can save money on HR administration and other employment-related costs.
  • Reduced liability exposure: By sharing employment-related risks, such as workers’ compensation claims or wrongful termination lawsuits, both employers can reduce their exposure to costly legal disputes.
  • Increased efficiency: By outsourcing certain HR tasks to a co-employer or PEO, the primary employer can focus on their core business functions and increase their overall efficiency.
  • Access to expertise: A co-employer like Applied Business Solutions will provide specialized expertise in HR, payroll, and benefits administration, which can be a valuable resource for small and mid-sized businesses that may not have the resources to hire in-house HR staff.
  • Better benefits: With Applied Business Solutions, businesses have access to a wider range of benefits options than individual businesses, including healthcare, retirement, and other employee benefits. This can be particularly valuable for small and mid-sized businesses that may not have the resources to negotiate favorable benefits packages on their own.

Applied Business Solutions and Co-Employment Agreements

If you’re interested in exploring co-employment agreements for your business, ABS can help. We offer a range of HR services including co-employment and PEO services, as well as customized HR solutions tailored to your unique business needs. Our team of experienced HR professionals can help you navigate the complexities of co-employment, from drafting and negotiating the agreement to managing the day-to-day administration and compliance.

One of the key advantages of working with Applied Business Solutions is our focus on personalized service. We understand that every business is unique, and we take the time to get to know your business and your specific HR needs. Whether you need help with payroll processing, benefits administration, or regulatory compliance, we can provide customized solutions that meet your needs and fit your budget.

In addition to our co-employment and PEO services, we also offer a range of other HR solutions, including employee handbook development, performance management, and HR consulting. Our goal is to provide you with comprehensive HR support that allows you to focus on your core business functions and achieve your growth objectives.


Co-employment agreements can be a powerful tool for businesses looking to streamline their HR operations, reduce liability exposure, and increase efficiency. However, these agreements require careful planning and execution to ensure that they comply with all applicable laws and regulations. By working with a trusted HR partner like Applied Business Solutions, you can gain access to the expertise and resources you need to navigate the complexities of co-employment and achieve your HR goals. Contact us today to learn more about our co-employment and PEO services, and how we can help you take your business to the next level.

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