Employer of record in Connecticut: PEO rules, payroll registration and what the client still owns (2026)

Connecticut does not license "employers of record" by that name. It registers professional employer organizations (PEOs): as of October 2026, Conn. Gen. Stat. § 31-221c bars anyone from providing, advertising or holding itself out as providing professional employer services unless it is registered with the Labor Department, whatever it calls itself. The Labor Department's forms list a $1,500 initial and $1,000 renewal fee, the PEO needs $150,000 in working capital or equivalent security, and the statute requires it to pay wages and remit payroll and unemployment taxes. Most other duties are split by the contract, and the client keeps the work, the workplace and Connecticut's demanding hiring rules, including pay ranges in every job posting from October 1, 2026.

This page is for a company outside Connecticut, or a staffing firm, deciding whether to employ someone in Connecticut through an employer of record (EOR) or PEO, or to register itself. The general difference between an EOR, a PEO, a staffing agency and payrolling is in what is an employer of record and payrolling services explained. The employment agency license and the penalties under the PEO law are in staffing agency license in Connecticut, and the state's hiring checklist is in hiring employees in Connecticut. This page adds the registration detail, who reports the wages, who insures the worker and what stays with you.

Connecticut employer of record and PEO rules at a glance

Does Connecticut license employer of record companies or PEOs?

It registers PEOs, and the definition reaches most EOR services. Section 31-221a(10) covers "any person engaged in the business of providing professional employer services, regardless of whether such person uses the term or conducts business as a professional employer organization, staff leasing company, registered staff leasing company, employee leasing company, administrative employer or any other name." The relationship is "an ongoing relationship, rather than a temporary or project-specific relationship," covering "all or a majority of the employees providing services to a client or to a division or work unit."

• Application. Form PEO-1 asks for every name used in the past five years, anyone owning or controlling 25 percent or more, the senior executives, and a list of client companies. It comes with an audit no older than 13 months, or a CPA-reviewed statement if the PEO has less than 12 months of history (§ 31-221c(a)). New PEOs must register "prior to commencement of operations within this state."
• Renewal. Every year, by filing an audit for the preceding fiscal year, without a going-concern qualification, and any changes, within 180 days after the fiscal year ends (§ 31-221c(c)).
• Working capital. At least $150,000, or a bond, irrevocable letter of credit or securities of that value held for unpaid "taxes, wages, benefits or other entitlement" of covered employees. A PEO that falls short at renewal has 180 days to fix it and files quarterly statements meanwhile (§ 31-221d).
• Groups. Commonly controlled PEOs may report on a combined basis if each guarantees the others' obligations (§ 31-221c(d)).
• Limited registration. For a PEO domiciled elsewhere and licensed or registered there, with no Connecticut office, no direct solicitation of Connecticut clients and no more than 50 covered employees in the state at any time. It renews yearly and skips the working capital rule (§§ 31-221c(e), 31-221d(c)).

The fees in the statute are caps, $1,500 initial and $1,000 renewal, and the department's online Form PEO-1 charges exactly those amounts, with Form PEO-4 listing $1,000 for a limited registration. To check a provider, start with the department's posted list of registered PEOs, but it is dated September 12, 2023, so ask the provider for its current registration and confirm it with the Wage and Workplace Standards Division through the PEO page.

What if the provider calls itself an employer of record but is not registered?

Ask which exclusion it relies on. Section 31-221a(10) leaves out three arrangements: companies sharing employees within a commonly owned group, where PEO work is not the principal business; independent contractor arrangements in which the provider "assumes responsibility for the product produced or service performed" and "retains and exercises primary direction and control over the work"; and temporary help services. A temporary help service is defined in § 31-129 as a business "employing individuals directly for the purpose of furnishing part-time or temporary help to others," and it is also outside the employment agency license.

An EOR that employs one person you recruited, for an open-ended role you direct, fits none of those easily. Note too that the act's "covered employee" is someone who has "received written notice of the coemployment" and "a written summary of the obligations and responsibilities" of the client and the PEO. If the worker never got those, the arrangement may not be running under the act at all. Get the provider's position in writing before the start date.

Who pays Connecticut unemployment tax on an EOR or PEO worker?

The PEO handles the payments; the statute is less clear on whose account they go under. Section 31-221e(b)(2) says every professional employer agreement must "Require the professional employer organization (A) to pay wages to covered employees, (B) to withhold, collect, report and remit payroll-related and unemployment taxes." It does not say whether the PEO reports under its own Connecticut employer account or each client's, and chapter 567, the Unemployment Compensation Act, does not mention PEOs at all.

The registration forms point one way: both PEO-1 and PEO-4 ask, for each client company, for its "Connecticut Unemployment Insurance Employer Registration Number." Treat that as a reason to ask, not as a rule: get the provider to say in writing whose account and rate it will use, and confirm it with the Labor Department's Employer Tax Accounting Unit, which handles employer and third-party agent questions for the Unemployment Insurance Tax Division. If you keep an account, you will also see your own experience rating, which matters if you later bring the worker onto your payroll.

Who carries workers' compensation in Connecticut?

Whoever the agreement says, but someone must. The Workers' Compensation Commission says "With few exceptions, all employers in the State of Connecticut are required to have workers' compensation insurance," and "Out-of-state employers operating in Connecticut must provide coverage for employees working in the state." There is no small-employer threshold to rely on. The PEO law does not assign coverage to either party: § 31-221e(a) leaves "the allocation of rights, duties and obligations" to the professional employer agreement.

One clause matters when you read that agreement. Under § 31-221e(c)(5), a covered employee is not, just by being a covered employee, the PEO's employee for its general liability insurance, fidelity or surety bonds, or "employer's liability which is not covered by workers' compensation," unless the agreement and the policy name them. Ask for the workers' compensation certificate, check that it names your worksite and the right class code, and ask whether the PEO's employer's liability and other policies include your covered employees by specific reference.

Which Connecticut registrations, reports and notices still apply?

• Income tax withholding. Registration with the Department of Revenue Services through myconneCT and Form CT-W4 from each employee; without a CT-W4, the employer withholds at the highest marginal rate, 6.99 percent, per the Connecticut hiring checklist and the DRS withholding forms.
• CT Paid Leave. "Each employer making payment of any wages to an employee shall deduct and withhold" the employee's contribution, at a rate the Paid Leave Authority sets but that may not exceed one-half of one percent (§ 31-49g(b)). The written Paid Leave notice at hire comes from § 31-49q. Agree who registers with the authority and remits.
• Paid sick leave. Coverage widened to employers with 25 or more employees in Connecticut from January 1, 2025, 11 or more from January 1, 2026, and one or more from January 1, 2027, counted on the payroll for the week containing January 1 (§ 31-57r). Ask the PEO whose headcount it uses; by 2027 the answer stops mattering.
• Pay notice. A written notice of pay rate, hours and payday at hire under § 31-71f.
• New-hire reporting. To the Labor Department within 20 days of the date of employment (§ 31-254).
• Co-employment notice. The act defines a covered employee as one who received written notice of the co-employment and a written summary of each party's obligations, so the PEO should deliver both.
• E-Verify. No Connecticut requirement; see E-Verify requirements in Connecticut.

What does the client company still own in Connecticut?

Unless the agreement says otherwise, "A client shall be solely responsible for directing, supervising, training and controlling the work of covered employees" and for the quality, adequacy and safety of its goods and services (§ 31-221e(c)(1)-(2)). Section 31-221g adds that nothing in the PEO law diminishes "an employee protection or employer responsibility" under the labor title. In practice:

• Job postings. From October 1, 2026, every internal and public posting needs the wage or wage range and a general description of benefits; see Connecticut's pay transparency law. Whoever writes the ad, your job is the one being advertised.
• Interview questions. No salary history questions (see Connecticut's salary history ban), no age or school dates on an initial application, and no arrest or conviction questions on an initial application (see ban the box in Connecticut). Background checks and credit limits are in Connecticut background check laws.
• Recording and testing. Recording a phone interview needs every party's consent, a recorded notice or a warning tone (see Connecticut recording consent law for interviews); applicant drug tests need written notice at application (see Connecticut drug testing laws).
• Licensed staff, tax credits and certifications. A covered employee who needs a license "shall be deemed to be solely an employee of the client" for it; covered employees count as the client's for state tax credits; and a small, minority-owned or woman-owned business keeps its certification (§ 31-221b(b)-(d)).
• Restrictive covenants and joint liability. See Connecticut non-compete law and joint employer liability for staffing agencies.
• Federal payroll taxes. The IRS says the client "generally remains responsible" for employment taxes unless the PEO is IRS-certified; see the CPEO public listings.

When is registering your own company in Connecticut the better route?

• You will hire more than a handful of people there. Your own setup is a DRS withholding account, an unemployment account, CT Paid Leave registration, workers' compensation from the first employee and 20-day new-hire reports, which most multi-state payroll systems already handle.
• The provider cannot say whose unemployment account it uses. If wages run under your number anyway, the PEO's main tax advantage is gone.
• The work is a short project. A temporary help service may fit better than a co-employment relationship the statute defines as ongoing.
• The provider is neither registered nor clearly excluded. Then you may be the employer anyway, without any of the accounts.

Questions to ask an employer of record or PEO before signing for Connecticut

1. Are you registered with the Labor Department, under a full or limited registration, and when is your next renewal audit due?
2. If you are not registered, which exclusion in § 31-221a(10) do you rely on?
3. Do you meet the $150,000 working capital rule, or have you posted a bond or letter of credit?
4. Whose Connecticut unemployment account and rate will our employees' wages be reported under?
5. Who holds the workers' compensation policy, and are our covered employees named in your employer's liability coverage?
6. Who registers with CT Paid Leave, deducts the contribution and gives the § 31-49q notice?
7. Whose headcount decides paid sick leave coverage before 2027, and who tracks accrual?
8. Who gives the worker the written co-employment notice and summary of obligations the act requires?
9. Who writes the job posting, and will it carry the pay range and benefits description?
10. Are you an IRS-certified PEO, and what happens to our records and the worker if we end the contract?

Employer of record rules in other states: Alabama, Arkansas, California, Florida, Georgia, Hawaii, Illinois, Mississippi, Nebraska, New Hampshire, New York, North Carolina, Ohio, Rhode Island, South Carolina and Texas.