Professional employer organizations

What is a professional employer organization?

A professional employer organization (PEO) is a business that manages other companies' human resource issues, such as:

• Workers' compensation.
• Payroll.
• Unemployment benefits.

PEOs don't include:

• Independent contractors.
• Temporary staffing companies.
• Service referral agencies.
• Third-party payers.
• Labor organizations.
• Common-pay agents.

Registration requirements

If a client company does business in Washington, both the PEO and the client company need to register in this state. This includes if:

• The PEO is located in another state.
• The PEO has no employees in Washington.
• The client company has no employees in Washington.

Apply for a state business license on the Department of Revenue's website.

How to report a new relationship with a client company

To report when a PEO starts working with a client company in Washington, complete the steps below within 30 days of the new relationship.

1. Fill out a PEO form

   Complete a PEO form with the following information about the client company:

   • Company name.
   • Company address.
   • Unified Business Identifier (UBI) number from the Business Licensing Service.
   • Employment Security Department (ESD) number.
   • Names and Social Security numbers of corporate officers, owners and limited liability company members.
   • Washington address where we can inspect payroll records.

   Companies without Washington addresses

   If the PEO and the client company have employees in Washington but do not have locations in this state, we can review records at 1 of our offices. In this case, write the following sentence on the PEO form:

   "The client company and PEO will make all requested records available within 7 days at the office requested by the Employment Security Department."

   Branch accounts

   If the PEO files more than 1 quarterly report for a client company's employees (such as hourly workers but not salaried workers), set up a branch account with us. Write on the PEO form that the PEO wants to set up a branch account.

2. Sign a power of attorney form

   Complete and sign a power of attorney form for each client company. Contact the tax account management center if you need help completing this form. Call 855-829-9243 or email OlympiaAMC@esd.wa.gov.

   Third-party administrators

   If a third-party administrator represents a client company, add the third-party administrator's information in the representative sections of the power of attorney form. Check the boxes on the form to have us send mail to the representative.

   If a third-party administrator represents the PEO, the third-party administrator does not need to send anything additional if it has a form on file showing that it represents the PEO.

3. Submit the forms

   Send us the completed forms by mail or fax. Choose the method that works best for you.

   Mail the forms

   Mail the PEO and power of attorney forms to:

   Employment Security Department
   Registration Unit
   PO Box 9046
   Olympia, WA 98507-9046

   Fax the forms

   Fax the PEO and power of attorney forms to 800-794-7657.

Ending a relationship with a client company

If the PEO stops working with a client company, notify us by submitting a PEO form within 30 days. Check the box on the form that says the PEO is ending a relationship.

How to file quarterly reports

PEOs need to file quarterly tax and wage reports for each client company. Choose the method that works best for you.

File quarterly reports online

We recommend filing quarterly reports online through the Employer Account Management System (EAMS). You can either:

• File a separate report for each client company.
• Use bulk filing (formerly Washington ICESA format) to send a single file that contains separate reports for each client company.

Learn more about how to file your quarterly reports.

File quarterly reports by mail

You can also file a separate paper quarterly report for each client company (forms 5208A and 5208B). To request these forms:

• Email us at taxforms@esd.wa.gov.
• Call us at 855-829-9243, option 2.

You need to submit paper reports using the forms we provide. We don't accept copies.

Penalties for late, incorrect, or unpaid tax payments

The client company is responsible for all their taxes, including penalties and interest. However, we'll try to collect from the PEO first if there's a problem with the client company's tax report. To avoid paying tax penalties:

• Make sure reports are correct.
• File reports on time.
• Submit proper payment.
• Tell us if the client company hasn't paid its taxes.

The PEO may also provide a bond to cover payments. If neither the PEO nor the client company has paid all taxes due or made payment arrangements by September 30, the client company will receive a delinquent tax rate for the next year.

Relevant laws and rules

• Definition of professional employer organization (PEO) (WAC 192-300-200).
• Requirements for professional employer organizations (WAC 192-300-210).
• Unemployment taxes for professional employer organizations (WAC 192-300-220).
• Enforcement, collection, and penalty procedures for professional employer organizations (WAC 192-300-230).
• PEO regulations.
• Engrossed Substitute Senate Bill 5373.

Legal definition of "co-employer"

The term 'co-employer' refers to both professional employer organizations and their client companies. It means that both must register with us. The legal definition of 'co-employer' is in section 8(3) and (6) of the law.

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