Explain the co-employment model.

• A. The PEO, as a co-employer, is the employer of record for tax purposes and is responsible for collecting and remitting payroll taxes for employees on its platforms.
• B. The client company is the sole employer of record for tax purposes.
• C. Payroll taxes are handled by the government.
• D. Employees are independent contractors.

Answer: (A)

In a co-employment setup, responsibilities are shared between the client company and the professional employer organization (PEO). The crucial point is that the PEO is the employer of record for tax purposes, meaning they handle payroll processing, withholding, and the remittance of payroll taxes (like Social Security, Medicare, and federal/state unemployment taxes) for the employees. The client company still directs the daily work, assigns tasks, and manages performance and supervision. This arrangement lets the client focus on business operations while the PEO takes care of HR compliance, payroll administration, and benefits.

This is why the correct choice fits best: it accurately describes the PEO as the co-employer and the employer of record for tax purposes, with responsibility for collecting and remitting payroll taxes for employees. The other options don’t align with how co-employment operates—payroll taxes aren’t handled by the government, the client isn’t the sole employer of record, and employees in this model are not simply independent contractors.