Co-employment definition

Designed to free up time in HR departments, co-employment is a division of responsibilities for human capital management between an HR department and a professional employer organisation (PEO).

The PEO will typically handle administrative and personnel-related activities while the employer will oversee their role in the business, including daily job responsibilities. In many cases the PEO will assume some proportion of legal risk and technically the employee will be employed by both the original organisation and the PEO. PEOs are often used because they provide expertise in time-consuming areas, such as payroll management.

In the UK, a common form of PEO is the umbrella company, with similar arrangements. They are often used to better align the needs of HR departments to work with contractors with the employment needs of the contractor.

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