Staffing Solutions - Professional Employer Organization Licensing

In today’s economy, employers are in need of staffing solutions to fulfill business demands across a wide array of industries and practices.  Short term staffing needs have historically been fulfilled by staffing agencies; however, businesses are now looking to more long term staffing assistance fulfilled by professional employer organizations.  A professional employer organization, also known as a PEO or staff leasing company, is an enterprise that provides outsourced employee management services, payroll, workers’ compensation insurance, employee benefits, and staffing and recruiting assistance.  PEOs also often provide information resources such as skilled human resources, employee training and development, and access to group discounts.  According to NAPEO, between 14-16 percent of small businesses with 10-99 employees utilize a PEO[1]

PEOs can offer companies access to bulk discount rates for insurance benefits and health care premiums that would otherwise be unavailable to small companies.  PEOs can also offer many more resources than having to hire in house human resources professionals. 

With many companies shifting to PEO relationships, states are adding new license or registration requirements specifically for PEOs.  For example, in 2014 Texas overhauled its regulation of PEOs by amending existing state law, modernizing the statute to bring business terms and language in line with the state of the industry [2].  The Texas Department of Licensing and Regulation now requires full PEO licensure with proof of working capital based on the number of employees under their control.  To meet this requirement, PEOs in Texas must submit an audited financial statement that shows positive working capital in the following amounts: (1) $50,000 if the applicant employs fewer than 250 covered employees; (2) $75,000 if the applicant employs at least 250 but not more than 750 covered employees; and (3) $100,000 if the applicant employs more than 750 covered employees[3].

States such as Florida will allow employee leasing companies to submit a letter of credit if they cannot demonstrate the threshold net worth requirements.  Florida also requires each employee leasing company to have at least one properly licensed controlling person.

Other states have less onerous requirements, requiring PEOs to register that they are doing business within these states.  Illinois requires PEOs to register with the Department of Insurance, providing address information and a $1,000 registration fee [4].  Illinois registered PEOs must also nominate at least one designated individual who will be responsible for the company’s compliance with the laws, rules, and regulations of the State of Illinois.

Inc. Magazine recognized the importance of PEO license compliance and adherence to regulatory requirements, noting that many states are now regulating and licensing PEOs in addition to third party certification through organizations such as the Employer Services Assurance Corporation (ESAC) [5].  This industry is under the watchful eye of businesses both small and large.  PEO licensing in this space continues to increase as more and more states move towards the creation of full license requirements. 

Let LicenseLogix assist with all your PEO licensure needs.  We have the knowledge and tools to get your PEO operation licensed or registered in all requisite states.  Our Vendor Verification Plus can also assist businesses seeking to engage a PEO by verifying whether the PEO is appropriately licensed.  We also help our clients stay licensed through our ongoing license compliance solutions.  Visit us online and request a quote! 

[1] NAPEO White Papers

[2] Texas Legislature Overhauls PEO Laws

[3] 2017 data utilized.

[4] 2017 data utilized.

[5] Inc. Magazine: Power From Your People