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

Indiana does not license "employers of record" as such (the term does not appear in its labor or insurance titles), but it does regulate the professional employer organization (PEO): as of November 2026, IC 27-16 bars anyone from providing professional employer services, advertising them or holding itself out as a PEO in Indiana unless it is registered with the Indiana Department of Insurance (IDOI), whatever it calls itself. In July 2026 the department issued an emergency cease and desist order against an out-of-state PEO that had never registered in Indiana and had run payroll for a client's single Indiana resident employee. For unemployment insurance the PEO is the employer and reports under the client's account and rate unless it elected its own, and the agreement must say whether the client or the PEO buys workers' compensation; both count as the employer.

This page is for a company outside Indiana, or a staffing firm, deciding whether to employ someone in Indiana 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 2023 repeal of Indiana's employment agency license, the health care staffing registry and the outline of PEO registration are in staffing agency license in Indiana, and the full state checklist is in hiring employees in Indiana. This page adds how the unemployment account works, who insures the worker, what the agreement must say and what stays with you.

Indiana employer of record and PEO rules at a glance

Does Indiana license employer of record companies or PEOs?

It registers PEOs, and the rule is broad. IC 27-16-4-1 says a person "shall not: (1) provide professional employer services; (2) advertise that the person: (A) is a professional employer organization; or (B) provides professional employer services; or (3) otherwise hold the person out as a professional employer organization; in Indiana unless the person is registered under this article." The requirement applies whatever the provider calls itself, and the statute lists "Staff leasing company," "Employee leasing company," "Administrative employer" and "Any other name." A PEO new to Indiana must register "before commencement of operations in Indiana" (IC 27-16-4-3).

• Full registration. The application lists every name used in the past five years, anyone owning or controlling 25% or more, the senior executive, and a GAAP financial statement dated within 180 days and audited by an independent CPA; a PEO with under 12 months of history may file a reviewed statement instead (IC 27-16-4-2).
• Limited registration. For a PEO not domiciled in Indiana that is licensed or registered in a state with requirements "substantially the same as" or "more restrictive than" Indiana's, does not keep an Indiana office or directly solicit Indiana clients, and "does not have more than fifty (50) covered employees who are employed or domiciled in Indiana on any day." It lasts one year and the financial requirements do not apply (IC 27-16-4-6). IDOI's page lists the states it accepts, among them Arkansas, Colorado, Florida, New York, North Carolina, South Carolina, Texas and Utah.
• Certified registration. Through an affidavit or certification from a bonded assurance organization the commissioner has approved (IC 27-16-4-7); IDOI names the Employer Services Assurance Corporation (ESAC).
• Fees. The statute caps the initial fee at $500, the annual renewal at $250, and the limited and certified registrations at $250 each (IC 27-16-5).
• Money behind the payroll. A full registrant must keep positive working capital or, if it cannot, a surety bond, irrevocable letter of credit or cash worth enough "to eliminate the PEO's or PEO group's negative working capital plus one hundred thousand dollars ($100,000)," held to secure taxes, wages and benefits owed to covered employees (IC 27-16-6-1).

Applications go through Sircon, according to IDOI's PEO registration page: "Resident" for full and certified registrations, "Non-Resident" for limited ones. The statute requires IDOI to maintain and publish a list of registered PEOs (IC 27-16-4-8); when we checked, its lists page said PEOs must register and pointed readers to the Financial Services Division at (317) 232-1994, so ask the provider for its registration and confirm it by phone.

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

The test is what the provider does, not its label. A "professional employer agreement" is a written contract "under which all or a majority of the person's employees become covered employees," that allocates employer rights and obligations, and that lists the services (IC 27-16-2-12). Three arrangements fall outside the PEO definition in IC 27-16-2-13: a temporary help service, which recruits its own employees, assigns them to support or supplement a client's workforce or to cover absences, skill shortages, seasonal workloads or projects, and "customarily attempts to reassign" them afterwards; staff sharing among commonly owned companies; and an independent contractor arrangement where the provider controls the work.

The department's own enforcement shows how it reads the law. Its emergency cease and desist order, filed July 2, 2026, found that an Oklahoma PEO with an Oklahoma registration "has at no time held" an Indiana registration, provided PEO services in Indiana "by processing payroll on behalf of its client" for an Indiana resident employee, and advertised itself as a PEO on its website. The commissioner ordered it to stop acting as a PEO in Indiana immediately. So an EOR that employs your one remote Indiana worker should either hold an Indiana registration or explain in writing why it is not a PEO, for example because it is a temporary help service on a genuine assignment. Whatever the answer, the IRS says a business that outsources payroll "generally remains responsible" for federal employment taxes unless the provider is a certified PEO; see the CPEO public listings.

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

The PEO, under one of two reporting methods. IC 22-4-6.5-7 says "a covered employee of a PEO is an employee of the PEO," and the PEO is responsible for contributions, surcharges, penalties and interest on the wages it pays during the agreement. How it reports decides whose account and rate carry your workers:

• Client level, the default. A PEO uses the client level method unless it elected otherwise (IC 22-4-6.5-8(a)), which "uses the state employer account number and contribution rate of the client." You keep your experience balance, liabilities and wage credits. The Department of Workforce Development's PEO FAQ says the account's legal name, address and FEIN change to the PEO's, with your name as the DBA, and go back to yours once any debts are paid after the agreement ends. If you had no Indiana account, one is created in the PEO's name with yours as the DBA.
• PEO level, if elected. This method "uses the state employer account number and contribution rate of the PEO" (IC 22-4-6.5-9). DWD treats joining as a full acquisition: your experience balance, good or bad, moves to the PEO and your old account cannot be revived. When you leave, a partial acquisition gives you a new account number and, for that year, the PEO's merit rate, and you receive benefit charge statements and separation notices for the PEO's workforce as a successor.
• Switching. A PEO using client level "may not change its reporting method"; a PEO level PEO may move to client level by notice no later than December 1, effective the next January 1, and a PEO must use the same method for all its clients (IC 22-4-6.5-8, 6.5-11).
• Notices. The PEO tells DWD about each new or ended agreement within 15 days after the end of the quarter (IC 22-4-6.5-10, 6.5-12); DWD's FAQ says it uses State Form 52099 for additions and deletions, and you file nothing yourself.
• Liability stays shared. DWD's FAQ says the client and the PEO are jointly and severally liable until unpaid taxes are paid, and that a client joining a PEO level PEO takes on a share of debts owed by the PEO and its other clients. Before signing, ask the PEO to get a letter of good standing from DWD's PEO liaison at [email protected].

Who carries workers' compensation in Indiana?

Whoever the agreement names, but both of you are the employer. Under IC 27-16-7-2(b)(3), the agreement must allocate, "to either the client or the PEO," the duty to buy coverage from an insurer authorized in Indiana. If the PEO takes it, it must keep and give you, on request when the agreement ends, the loss records for that coverage (IC 27-16-7-2(b)(4)), which you will need to price your own policy later. Three more rules apply:

• Both are employers. Under IC 27-16-9-1, "a client and a PEO are both considered the employer of a covered employee" for coverage under the Worker's Compensation Act.
• Shared exclusive remedy. The exclusive remedy protection applies to the PEO, the client and their employees "regardless of whether the PEO or the client is responsible to obtain the worker's compensation coverage" (IC 27-16-9-2).
• Leasing outside a PEO. Even where IC 27-16 does not apply, IC 22-3-6-1 says "Both a lessor and a lessee of employees shall each be considered joint employers" for the Act's exclusive remedy sections.

Indiana has no headcount minimum for coverage; the penalties are summarized in staffing agency license in Indiana. The Worker's Compensation Board links a tool to confirm an employer's coverage, and its posters page has the notice to post in English and Spanish; ask how a remote worker will receive it.

Which Indiana registrations, reports and notices still apply?

• What the PEO must take on. The agreement must make the PEO responsible for paying wages and for "withholding, collection, reporting, and remittance of payroll related and unemployment taxes" (IC 27-16-7-2(b)(2)). It is not responsible for bonuses, commissions, severance, deferred compensation, profit sharing or paid time off "unless the PEO has expressly agreed" (IC 27-16-7-2(c)), so those stay with you by default.
• Notice to the worker. The PEO must give each covered employee written notice of "the general nature of the co-employment relationship" (IC 27-16-7-3).
• State and county withholding. The Department of Revenue's Departmental Notice #1 (effective October 1, 2026) gives a 2026 state rate of 2.95% and the county rates, and says withholding agents "should withhold county tax based on the employee's Indiana county of residence as of Jan. 1 of the tax year," or the county of principal work for someone living out of state. The employee completes the WH-4.
• New-hire reporting. Electronically within 20 days, with the job's occupational code and starting pay; see hiring employees in Indiana.
• Benefits. A client and a PEO "are each considered to be an employer" for sponsoring retirement and welfare plans (IC 27-16-8-1). A PEO health plan that is not fully insured must meet trust, reserve and audit conditions and tell participants in writing that it is self-insured (IC 27-16-8-4).
• Unauthorized workers and E-Verify. Since July 1, 2026, IC 22-5-9 applies to "a person, including an agent, that employs employees in Indiana" and makes it unlawful to "knowingly or intentionally recruit, hire, or continue to employ" an unauthorized worker; E-Verify counts as reasonable diligence. Agree who runs it; see E-Verify requirements in Indiana.

What does the client company still own in Indiana?

By statute, more than many clients assume. Unless the agreement says otherwise, the client "retains the exclusive right to direct and control the covered employees" (IC 27-16-7-1), is "solely responsible" for directing, supervising, training and controlling their work and for their acts in doing it (IC 27-16-7-4), and carries every employer duty the agreement does not give the PEO. Hiring rules follow whoever recruits and decides, which is usually you:

• Pay questions. No salary history ban and no pay range posting law, and state law limits local ones; Illinois rules reach some postings. See Indiana salary history ban and Indiana pay transparency law.
• Screening. No private-employer ban-the-box law and a state bar on local ones (see ban the box in Indiana), plus expungement and screening company rules in Indiana background check laws.
• Non-competes. Existing covenants between you and the worker are untouched by the PEO agreement, and the PEO is not liable for disputes over them unless it agreed in writing (IC 27-16-3-2); the enforceability rules and physician bans are in Indiana non-compete law.
• Licensed workers. A covered employee who must be licensed is "considered solely an employee of the client" for that license (IC 27-16-3-3).
• Interviews and testing. See Indiana recording consent law for interviews and Indiana drug testing laws.
• Co-employment liability. See joint employer liability for staffing agencies.

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

Registering yourself means a Secretary of State filing if you are doing business in Indiana, a withholding account through INBiz, an unemployment account with DWD, a workers' compensation policy from the first employee, county tax withholding and new-hire reports. That route tends to win when you expect several Indiana hires or already run multi-state payroll, and it avoids sharing liability for a PEO's other clients. A registered PEO fits a small team that wants payroll, benefits and comp handled together; check whether its registration is limited, because a limited registrant may not have more than 50 Indiana covered employees on any day. A temporary help service fits a genuinely temporary assignment.

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

1. Are you registered with the Indiana Department of Insurance? Is the registration full, limited or certified, and when does it renew?
2. If you are not registered, why are you not a PEO under IC 27-16, and will you put that in the contract?
3. Do you report Indiana unemployment at client level or PEO level, and can you get a DWD letter of good standing?
4. Whose workers' compensation policy covers our worker, is the insurer authorized in Indiana, and will you give us the loss records when we leave?
5. Which pay items have you expressly agreed to cover: bonuses, commissions, severance, paid time off?
6. How do you set the worker's county for withholding, and who files the new-hire report?
7. Who runs E-Verify or other work eligibility checks under IC 22-5-9?
8. Do you meet Indiana's working capital rule, or hold a bond, letter of credit or cash instead?
9. Are you an IRS-certified PEO, and who is liable for federal employment taxes if a deposit is missed?

Employer of record rules in other states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.