The client employer still has the liabilities of Social Security and payroll taxes. Another misconception is that only seasonal-type businesses make use of PEOs. This is definitely not true. PEOs are used by medical facilities, retailers, construction firms, mechanics and insurance agencies. According to the National Association of Professional Employer Organizations, the average size of a client is 16 to 18 employees and there are currently over three million employees in PEO arrangements.
Some states require a PEO to be licensed or registered.
Currently 15 states have licensing requirements. They are Arkansas, Florida, Illinois, Kentucky, Maine, Montana, New Hampshire, New Mexico, Nevada, Oregon, South Carolina, Tennessee, Texas, Utah, and Vermont. In Rhode Island a PEO must be registered only. Insurance companies have recognized the growth potential in PEOs and have structured policies to address exposures specific to this class of business. The program is open to all licensed agents and brokers.