Professional Employer Organizations (PEO) - Guide to State-Specific Requirements


Industry InformationProfessional Employer Organizations (PEO)

Using the services of a vendor to provide all or some of their employees for a fee has become an increasingly popular option for employers. These arrangements serve to provide employers an alternative to the traditional management and administration of the employee workforce.

Information is available for clickable states below. Information for some states is unavailable where existing laws and rules do not specify treatment of these arrangements.

Employee leasing arrangements (also known as Professional Employer Organization arrangements) can cause problems related to the proper determination of workers compensation premium. This occurs when confusion exists as to which party, client, or vendor is the employer. Other issues include:
  • Proper classification
  • Payroll determination
  • Experience modification application
In 1991, the National Association of Insurance Commissioners issued the Model Employee Leasing Act. It supported the concept of multiple coordinated policies, whereby separate policies, classifications, and experience modifications are maintained for each client employer. In recent years, the growth of this industry and the enactment of state laws have changed the way these arrangements operate.

The state charts provide a current picture of the employee leasing issue at the state level. The charts include specific requirements related to:
  • Policy issuance
  • Data reporting
  • Experience rating
  • Endorsement requirements
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