Co-Employment

Co-employment is a shared employer relationship in which two separate organizations divide employer responsibilities and legal liabilities for the same worker, most commonly seen in arrangements involving a Professional Employer Organization. Under a co-employment structure, one entity, typically the client company, retains control over the employee's day-to-day work, projects, and performance management, while the other entity, the PEO, handles administrative employer responsibilities such as payroll processing, tax withholding, and benefits administration. This shared structure allows both parties to divide risk and responsibility in a way that can benefit each side, with the PEO bringing economies of scale for benefits and compliance expertise, while the client company maintains operational control over the workforce. However, co-employment requires clear contractual agreements defining exactly which responsibilities belong to each party to avoid confusion or gaps in compliance. It is important to note that true co-employment, as understood in the U.S. domestic PEO model, generally requires the client company to already have its own registered legal entity in the relevant location. This distinguishes it from an Employer of Record arrangement, where the EOR becomes the sole legal employer because the client has no local entity of its own in that jurisdiction.