Co-Employment

Co-employment is the legal relationship at the core of PEO arrangements. In a co-employment model, both the PEO and the client company are considered employers of the same workers — each with distinct responsibilities.

The PEO typically assumes responsibility for payroll processing, tax withholding and remittance, benefits administration, workers' compensation coverage, and HR compliance. The client company retains control over hiring, firing, day-to-day supervision, and business operations.

This shared employer relationship allows the PEO to pool employees from multiple client companies to negotiate better benefits rates and spread risk. It also means the PEO has skin in the game when it comes to employment law compliance.