Employee Staffing And Peo License

Businesses that conduct human resources responsibilities and act as co-employers with their clients are often required to hold a professional employer organization license. In some cases, these licenses are referred to as employee leasing company licenses. Although employee leasing companies provide slightly different services, most states use these license types interchangeably. In addition to needing a PEO license, there are other items you’ll need before you can start a business as a PEO.

These items will vary from state to state, so check with your licensing agency. First, you need workers’ compensation to cover every employee you have working for you, at every location. Because you’re working with so many employees that you staff to other companies, you can probably realize great cost savings for health insurance due to your numbers. The PEO client/business owner retains ownership of the company and control over its operations. As co-employers, the PEO and client will contractually share or allocate employer responsibilities and liabilities per a client service agreement . The PEO will generally only assume responsibilities associated with a “general” employer for purposes of administration of benefits and remittance of payroll and payroll taxes.

If a PEO relationship is terminated, the worksite employees’ co-employment arrangement with the PEO ceases, but they will continue as employees of the client. Unlike employee leasing companies, PEOs are contracted when an employer already has staff and does not want to handle human resources responsibilities. Professional employer organization licenses are required in 35 states.

For business registration forms visit business structures, or contact the Secretary of State. PEOs are required to be licensed through the Department of Labor & Industry. The application requests information from the PEO regarding ownership, financial stability, benefits packages provided, workers’ compensation and unemployment policies, and copies of the contracts they use. PEOs that are licensed are required to provide proof that all payroll related taxes for the quarter have been paid. They make it their business to be knowledgeable about all aspects of employing workers, keeping abreast on all federal and state requirements.

Colorado and Rhode Island have specific certification requirements with regard to benefits and taxes respectively. The 60th Legislative Assembly adopted the licensing requirement with Senate Bill Number 2036.

The client company in return pays the PEO employee costs plus an administrative fee. The client company is sometimes termed a coemployer. Once a client company contracts with a PEO, the PEO will then co-employ the client’s worksite employees.

Peo Resources

Employee Leasing Company – Enter into leasing contracts with other businesses that require labor. The leasing company loans its workers to the lessee while still providing specified responsibilities, such as workers compensation insurance, to the employees. This includes long term temporary arrangements but often excludes temporary help arrangements. Unlike professional employer organizations, employee leasing companies are contracted when an employer needs to hire staff and does not want to handle human resources responsibilities. A professional employer organization is an outsourcing firm that provides services to small and medium-sized businesses .

The exemptions are essentially the same for temporary workers, independent contractors, and for a client and PEO that have more than 33 % common ownership. Many states provide some form of specific licensing, registration, or regulation for PEOs. These states statutorily recognize PEOs as the employer or co-employer of worksite employees for many purposes, including workers’ compensation and state unemployment insurance taxes. The IRS has recognized the right of a PEO to withhold and remit federal income and unemployment taxes for worksite employees per section 3511 of the IRS Code. The IRS has promulgated specific guidance confirming the authority of PEOs to provide retirement benefits to workers.

A PEO manages the paperwork responsibilities associated with having employees. are to pay employee wages, workers’ compensation premiums, payroll-related taxes, and employee benefits from their own account without regard to payments by the client.

More Information

The 2012 licensing law was enacted in an effort to prevent such scenarios. In the wake of some catastrophic PEO collapses prior to regulation, there was a broad consensus that something had to be done to protect workers and businesses alike from underfunded, incompetent, or unscrupulous outsourcing firms. Companies that can’t or won’t meet the licensing standard undermine that protection. State Unemployment Tax arbitrage, commonly referred to as “SUTA dumping,” occurs when an employer with a high unemployment insurance rate transfers or “dumps” employees to purchased subsidiaries with lower unemployment insurance rates. In a PEO relationship, the client company takes the Professional Employer Organization’s SUTA rate by law, which often lowers their SUTA through SUTA Arbitrage.

• A professional employer organization is an outsourcing firm that provides services to small and medium-sized businesses .
• The leasing company loans its workers to the lessee while still providing specified responsibilities, such as workers compensation insurance, to the employees.
• This includes long term temporary arrangements but often excludes temporary help arrangements.
• Unlike professional employer organizations, employee leasing companies are contracted when an employer needs to hire staff and does not want to handle human resources responsibilities.
• Employee Leasing Company – Enter into leasing contracts with other businesses that require labor.

The PEO enters into a contractual co-employment agreement with its clientele. Through co-employment, the PEO becomes the employer of record for tax purposes through filing payroll taxes under its own tax identification numbers. As the legal employer, the PEO is responsible for withholding proper taxes, paying unemployment insurance taxes and providing workers’ compensation coverage. A Professional Employer Organization is a business that leases employees to other businesses.

Limited License

The department issues licenses, regulates compliance with the law, and has authority to sanction a licensee for proven violations. A PEO is defined as a business entity that offers professional employer services. Professional employer services are services provided through coemployment relationships in which all or a majority of the employees providing services to a client or to a division or work unit of a client are covered employees. The new definition is similar to the “staff leasing” definition.

In addition, many PEOs also provide workers with access to 401 plans, health, dental and life insurance, dependent care, and other benefits not typically provided by small businesses. In doing so, they enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation. PEO clients can thus focus on their core competencies to maintain and grow their bottom line. A Professional Employer Organization is the new term for “staff leasing company” and is regulated by the department through Chapter 91 of the Texas Labor Code.

Welcome To The Department Of Business And Professional Regulation’s Application Center

Because the PEO also may be responsible for providing access to workers’ compensation coverage, many PEOs also focus on and provide assistance with safety and compliance. In general terms, the PEO will focus on employment-related issues, and the client will be responsible for the actual business operations. The applicant for a professional employer organization must continuously have its business entity properly registered with the Secretary of State to obtain and maintain a license. An applicant that is a sole proprietor using a trade name must file a Trade Name Registration with the Secretary of State. A general partnership using a fictitious name must file a Partnership Fictitious Name Certificate with the Secretary of State.

Like other employers, a PEO may sponsor employee benefit plans for its worksite employees. PEOs might sponsor or acquire access to programs for worksite employees. As such, PEOs are consumers of insurance and procure access to these benefits from licensed insurance agents and authorized insurers.

PEOs can provide benefits and insurances for less money than a smaller business because of their size. Providing benefits is an advantage employers need today; it assists them in keeping good employees. Another advantage to leasing employees is that business owners and managers can spend their time focusing on their business rather than employee related tasks. PEOs supply services and benefits to a business client and its existing workforce. PEOs enter into a co-employment arrangement typically involving all of the client’s existing worksite employees and sponsor benefit plans for the workers and provide human resources services to the client. In most cases, the PEO provides access to health insurance, retirement savings plans, and other critical employee benefits for the worksite employees of the business client.

Entities should register with the secretary of state prior to applying for a license. Along with the application, entities are often required to meet a bonding requirement, provide proof of worker’s compensation insurance, and usually a financial statement. A dedicated compliance expert can help you keep track of varying jurisdiction requirements and updated laws. No license is required if an organization that provides payroll services only to one or more entities not considered to be providing PEO. A company providing PEO must be licensed if the company’s employees are assigned to work for the company’s client companies and employment responsibilities are in fact shared by the company and its client companies. The following chart includes only the more comprehensive registration and licensing acts that are applicable to the PEO industry. In addition, state unemployment codes, workers’ compensation acts, and other statutes may have PEO specific references.

The client will continue to have responsibility for worksite safety and compliance. The PEO will be responsible for remittance of payroll and employment taxes, may maintain employee records and may retain a limited or general right to hire and fire, as delineated in the CSA.

The PEO typically remits wages and withholdings of the worksite employees and reports, collects and deposits employment taxes with local, state and federal authorities. The PEO also issues the Form W-2 for the compensation paid by it under its EIN. The client company retains responsibility for and manages product development and production, business operations, marketing, sales, and service. The PEO and the client will share certain responsibilities, as determined in the CSA. As a co-employer, the PEO will often provide a complete human resource and benefit package for worksite employees. Professional employer organizations provide human resource services for their small business clients—paying wages and taxes and often assisting with compliance with myriad state and federal rules and regulations.