Are PEOs recognized as employers?

PEOs operate in all fifty of the United States. Twenty-three states provide some form of specific licensing, registration, or regulation for PEOs. Many states statutorily recognize PEOs as the employer or co-employer of worksite employees for purposes of workers’ compensation and state unemployment insurance taxes. The IRS has long accepted the right of a PEO to withhold and remit federal income and unemployment taxes for worksite employees. The IRS has promulgated specific guidance confirming the authority of PEOs to provide retirement benefits to workers.