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What could co-employment do for your organization?

A slowly growing employment and business trend known as "co-employment" could make more inroads into Central Pennsylvania in years to come. But at the moment, few businesspeople even know what it is and how it could benefit companies.

Simply put, co-employment is not staffing. Instead, it is an agreement whereby your company hires, fires and manages your employees, like telling Joe Dude what job he's working on today or how to deal with a client or that he's underperformed and it's time to go elsewhere.

In a co-employment business deal, what you won't be doing is managing your employees' benefits, taxes, payroll and even your compliance with workforce-related regulations.

That's the job of your co-employment consulting firm, often called a "professional employment organization" or PEO, which is like having a benefits administrator, payroll company, accountant and general business consultant all rolled into one, according to a national PEO trade group.

"I always compare it to having someone do my taxes," said Pat Cleary, CEO of the National Association of Professional Employment Organizations. "What he does is minimize my risk."

Essentially, that's what a PEO does: minimizes the risks associated with a small business getting its taxes, payroll or regulatory compliance wrong and paying huge fines or worse, he said.

The employees are full-time members of your company, and the liability is shared by the employer and the PEO, distinct differences from staffing firms.

Client companies use staffing workers on a project basis, said Thomas Readdy, president and CEO of Performance Group Inc., a Lancaster County-based staffing firm. When the job is done, the client has no obligation to keep those workers. Performance Group will find jobs elsewhere for the workers, he said. It also manages the back-end paperwork.

"The liability is clear-cut," Readdy said. "It's all ours. They're our employees."

PEO arrangements allow small-business owners to focus on growing their companies instead of worrying about the back-end nuts and bolts, Cleary said.

"They went into business because they had a passion about something, whether it was fixing old cars or manufacturing, and PEOs allow them to focus on that passion," he said.

Usually, companies using co-employment have between 20 and 500 employees, he said. The largest he's ever seen was 1,500 employees.

Co-employment is helping small businesses around the country, but the reach of the trend is difficult to calculate, he said.

PEO-using companies are growing about 12 percent faster than your average company, Cleary said. In 2010, the PEO industry grew by 14 percent to $81 billion in gross revenue, defined by total client payroll and fees paid to PEOs, according to the association. It based the numbers on its membership.

There are about 700 PEOs operating across the country, according to the association. But finding one near you could be difficult.

A search of the association's PEO directory for Pennsylvania lists several in New Jersey and New York. Three PEOs were listed in Pennsylvania, one each in Pittsburgh, Montoursville and Weatherly. Cleary said the database is built on association membership and lists from states that require PEO registration.

Pennsylvania does not require PEO registration, according to the state Department of Labor & Industry.

Performance Group's Readdy was largely unfamiliar with PEOs and co-employment, and he couldn't name any midstate companies providing such services or using them.

The Business Journal called about 10 staffing and benefits companies as well as groups helping small businesses. Most groups either did not return phone calls or, if they did, were unfamiliar with co-employment and PEOs. Others often confused co-employment with staffing.

"I don't know of any of my members who are using that," said Mike Mitchell, executive director of the High Center for Family Business at Elizabethtown College.

About 30 percent of PEOs also own staffing companies, so they can provide diverse services to client companies, Cleary said. In those cases, they might not be advertising the PEO service as heavily as their staffing, he said. Either way, it's not surprising that others are unfamiliar with PEOs even though they've been around for more than 30 years.

"We don't have that big of a footprint in Pennsylvania," Cleary said.

Source: Central Penn Business Journal - Jim T. Ryan


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