What is a Shared-Liability Model or Co-Employment?
Co-employment often referred to as the shared liability model, is a business model wherein the PEO acts as the administrative employer and the client acts as the Worksite employer. According to IRS regulations, it is these clearly structured employer roles that define the co-employment relationship.
ASO vs PEO? What is the Difference?
The co-employment services model is differentiated by a joint liability model that the PEO company has entered into with the worksite employer and therefore shares employment-related risk with clients, thereby reducing legal risk and financial exposure for clients. Administrative Services Organizations (ASO) do not act as the employer of record and therefore cannot share the employment-related risk, which leaves clients open to increased legal risk and financial exposure.
What is PEO Workers' Compensation?
Co-employment allows for worksite employees to be included in the PEOs workers’ compensation insurance program. In many cases, it can be more difficult for a small or medium-sized business to access the most cost-effective workers’ compensation insurance without the buying power of a well-managed larger group, which spreads the risk over a larger pool. Think of it this way, it's like paying retail vs. wholesale rates. The smaller the organization, the less leverage they have with the insurance markets they have access to.
Furthermore, the co-employment arrangement requires the PEO to share responsibility for this risk in partnership with the client. The ASO model is unable to share this risk due to the fact that there isn't a joint employment relationship and therefore no legal basis for extending coverage to the worksite employees. Most PEOs also provide support to reduce financial and legal exposure, including back-to-work and employee safety training programs.
Clients and PEO Protect Each Other From Employment Lawsuits?
The co-employment relationship allows for worksite employees to be included in a PEO sponsored Employment Practices Liability Insurance Policy (EPLI). This policy provides a veil of protection for clients from worksite employee lawsuits including discrimination, wrongful termination, and harassment. In partnership with The Mission, this coverage is included with the PEO services that are provided.
Under the ASO model, a client must obtain/retain this coverage on their own, which makes the cost of coverage (including policy premium costs and deductibles) much more expensive.
PEO and Healthcare Reform 101
Navigating the Affordable Care Act (ACA) is a very complex and labor-intensive process. Not to mention the penalties that exist if it is not handled properly. A PEO, as the administrative employer, can assist with many of these regulations and provide expert guidance, and administrative relief, while you focus on running your company.
Specifically, The Mission can partner with your company with the following:
A payroll solution that complies with W-2 and mandated benefits provisions
Compliance with providing ACA compliant healthcare plan designs
Required enrollment/re-enrollment disclosures for clients in PEO sponsored medical plans;
Support in calculating large employer status under the ACA, including measurement of the 12 month look-back period.
Is PEO Right for My Company?
The PEO model is an extremely popular choice for owners of small and medium-sized businesses who want to focus more time on their key business initiatives and less on administrative and compliance-related tasks. If you think a PEO partnership might be right for your business, you can review: