Co-employment
Co-employment is the PEO industry’s term for a contract that divides specified employer functions between a PEO and its client; the label does not settle legal responsibility for every issue.
In a typical PEO arrangement, the PEO pays wages, administers filings, and may provide benefit and workers compensation programs. The client continues to hire, direct, evaluate, compensate, and terminate its workforce. The client service agreement allocates tasks and contractual responsibility between the parties.
The term "co-employment" does not answer a specific wage, discrimination, tax, benefits, or workers compensation question. The applicable law, the contract, and each party's conduct determine responsibility. The IRS also notes that federal tax law does not recognize the co-employer label.