The benefits of co-employment

14 Mar 2019 By Simon Whitehead

Simon Whitehead looks at the latest employment trend to come over from the USA, and whether it will gain traction this side of the pond

Employee engagement is likely to remain high up the list of priorities for HR teams as the skills gap continues to grow and the impact of disengagement is better understood. Unfortunately, HR teams don’t have a bottomless pit of money to throw at the problem and also recognise that in most cases money alone won’t boost engagement. Some employers are now looking to the US for a way to improve engagement at a reduced cost.

In the US, a concept known as co-employment is popular. This is where a number of smaller employers come together to ensure that they have the same buying power as a large employer. Primarily this has been most useful when buying medical insurance, meaning that many small employers can offer the most important of benefits which would otherwise be unaffordable. 

In the UK there are a number of models that have come to the market which provide benefits such as discounts at retailers, restaurants and insurance at a cost to the employer per employee. Now there are also models coming to the market where there’s no cost to the employer, but a requirement that they ‘co-employ’ the employees.

The benefits offered can vary from health services, fitness, insurances, retail discounts, pensions and financial advice. There is no rigid format as to how this can work in practice. Whether you are paying for them or getting them for free, it’s important to understand what you are getting, whether they offer value for money and if they come with any other strings attached.

What this means in most cases is that the employees are intended to have two employers. One employer would manage the employee’s day-to-day work, and the other would pay the employee and provide the benefits package. In circumstances where the benefits package on offer is attractive to employees, this will be an option that some employers will consider, helping them to attract, retain and engage employees at no extra cost.

While the US system is set up to recognise two employers, the UK isn’t. There is a lot to think about if you are considering one of these co-employment or free benefit models. In some cases, there would be a Transfer of Undertakings (Protection of Employment) Regulations (TUPE) transfer, which needs to be properly dealt with. There are data protection issues to consider and address, as well as a need to look at what would happen upon the termination of employment both in respect of the employees and whether the benefits that have been on offer are contractual and whether they can be replicated.

The commercial terms also need to be considered carefully – especially if there’s a commitment that the benefits will always be free or whether a charge can be introduced, and if so, how much might that be.

With so much to consider, before progressing any kind of co-employment agreement, it’s important to truly grapple with what your employees are saying is important to them. Only then can you really determine if it would be a viable and successful initiative. Don’t be swayed by the offer of a free benefits package if your employees don’t think it will be beneficial to them. And if they do like the sound of the benefits on offer, make sure that you know exactly what you’re signing up to.

Simon Whitehead is a partner and employment solicitor at HRC Law

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