When it comes to how businesses hire, there are a whole raft of different methods and service types to choose from. It can often become overwhelming, especially when the terms “co-employment” and “employee leasing” get thrown around.

One common misconception about co-employment relationships is that the client company will lose a great deal of control and regulation over their business, particularly when it comes to employing staff. In essence, co-employment is essentially just a term that describes an agreement made between a Professional Employment Organisation (PEO) and a business owner.

Employee leasing vs Co-employment | What is employee leasing? 

At Australia PEO, our potential clients might approach us with the impression we’re to source and supply existing employees to their business. In actual fact, this method of employment is called “employee leasing”. While Australia PEO can help you hire and onboard the staff you’ve sourced, we do not lease our existing employees out to client companies.

In an employee leasing agreement, a staff member is employed by the leasing agency, who is their actual employer. After contracts are completed, the staff member will return back to the leasing company.  

Employee leasing vs Co-employment | What is co-employment? 

A co-employment relationship is one where Professional Employment Organisation (such as Australia PEO) and a client company share some employment responsibilities. The PEO takes on the role as employer of record for the client companies’ staff members and undertakes payroll and other essential HR duties. The employee, although technically legally hired by the PEO, carries out daily working responsibilities on behalf of the client company. 

For businesses who wish to expand into or simply employ in another country, partnering with a PEO in that country means they’ll employ your staff on your behalf which eliminates the need for you to set up a physical entity in the country to do so. For example, let’s say a company in the United Kingdom wished to hire workers in Australia. When a company partners with Australia PEO, we onboard and become the legal employer of your staff based here in Australia, whilst you and your existing teams in the UK can go about your daily business. 

A co-employment scenario exists to enhance the business’s efficiency and alleviate some of the stress and obligations associated with employing overseas. For smaller local businesses without the need or resources to form an entire payroll department in-house, a PEO can assist in operating on their behalf, until they have a need for one. In both scenarios, the client company maintains complete control over the day-to-day duties of the business, who they wish to employ, wage amounts, how they wish to form teams and so on. 

Administrative functions usually taken care of by a PEO: 

• Onboarding staff
• Employment compliance 
• Strategic HR consulting 
• Payroll 
• Tax administration
• Employees’ entitlements
• Superannuation entitlements

Which employee solution do you need? 

When you run a business, hiring and managing staff can chew up a significant amount of your time and resources, from training, payroll, entitlements and more. Finding the right partner in employment to help your business scale is crucial. We hope this guide to the difference between co-employment and employee leasing has answered some of the questions. 

If you’re looking for a co-employment partner that will ensure your staff are hired and managed compliantly, speak to someone from Australia PEO today.