Co-employment definition

Co-employment occurs when a client company enters into an agreement with a professional employer organization (PEO) to establish a three-way relationship between it, its employees and the PEO. The client business and the PEO become co-employers or the client's employees.

The PEO takes responsibility for human resources (HR) administration, payroll and compliance tasks, for which it charges a service fee. Client employees continue to work at client company which continues to exercise control over the business and all employee activity.

Typically, a co-employment relationship provides increased HR professionalism and efficiencies for the client business.

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