Co-employment: what you keep, what shifts
The word sounds bigger than it is. Co-employment is a contractual split of employer responsibilities, and the split is written down.
The split
| Stays with you | Shifts to the PEO |
|---|---|
| Hiring and firing decisions | Payroll processing and tax filing |
| Day-to-day management and direction | Benefits sponsorship and administration |
| Compensation decisions | Workers' comp coverage and claims |
| Business operations and strategy | Defined HR compliance responsibilities |
| Your company culture | Employment administration and records |
Why the arrangement exists at all
Pooling many small companies under one employment infrastructure is what creates the leverage: large-group benefits pricing, professional HR at shared cost, and payroll infrastructure no ten-person company would build alone. Co-employment is the legal structure that makes the pooling possible.
The document that matters
Everything above is defined in the client service agreement. The responsibility split, the fees, the notice terms, and what happens when you leave are all in that document. We read these agreements for a living and will walk you through any PEO’s version, line by line, before you sign it.
Common questions
Do my employees work for the PEO now?
They work for you. The PEO is the employer of record for administrative purposes like payroll taxes and benefits. Direction, management, and culture stay entirely yours.
Can I leave a co-employment arrangement?
Yes. The service agreement defines notice terms. Employees transition back to your direct payroll or to another PEO. It is a process, not a trap, but read the exit terms before signing.