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

Iowa does not license or register employers of record or professional employer organizations (PEOs), as of November 2026: we found no PEO or employee leasing statute in the Iowa Code, and the workers' compensation and unemployment chapters (Iowa Code chapters 85, 87 and 96) have no leasing provisions. What Iowa has instead is an unemployment rule. Under Iowa Workforce Development's rule 871 IAC 22.3(4)"c", workers leased from an employee leasing company "shall be considered to be employed by the client" and reported at the client's contribution rate, unless the leasing company proves it has exclusive direction and control of them, by contract and in fact. Workers' compensation is required of every covered employer, and the statute does not say whether the provider or the client must buy it.

This page is for a company outside Iowa, or a staffing firm, deciding whether to employ someone in Iowa 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. Iowa's chapter 84I license for agencies that charge workers, the chapter 135Q health care registration and the three-working-day reassignment notice for temp firms are in staffing agency license in Iowa, and the full state checklist is in hiring employees in Iowa. This page adds whose account carries the wages, who insures the worker and what stays with you.

Iowa employer of record and PEO rules at a glance

Does Iowa license employer of record companies or PEOs?

No. Our Iowa staffing license guide found no PEO registration statute, and the 2026 text of the unemployment chapter (chapter 96) and the workers' compensation chapters (85 and 87) has no provisions on employee leasing or professional employer organizations. So there is no Iowa registration number to ask for and no state list of PEOs. Two state licensing rules can still reach a provider:

• Agencies that charge workers. Iowa's chapter 84I license, with its $30,000 surety bond and a fee cap of 15% of the worker's earnings, is for agencies that charge the worker a fee, which an EOR billing the client does not.
• Health care staffing. A provider that contracts with an Iowa health care entity "to provide agency workers for temporary or temporary-to-hire employee placements" is a health care employment agency under Iowa Code § 135Q.1 and registers under that chapter.

Like any out-of-state company, a provider must register before doing business in Iowa: "A foreign corporation shall not do business in this state until it registers with the secretary of state" (Iowa Code § 490.1502).

What if the provider says it is the employer of record?

For unemployment insurance, Iowa looks past the label to the contract and the facts. The starting point in 871 IAC 22.3(4)"c"(1) is that leased individuals "shall be considered to be employed by the client and shall be reported on the quarterly reports of the client, at the contribution rate of the client, unless and until it is shown to the satisfaction of the department that the individuals are and will continue to be under the exclusive direction and control of the employee leasing company, both under a written contract and in fact." For the contract to count, it must:

1. specify the service the individuals perform, on behalf of the leasing company, for the client;
2. specify the fee, which "must be large enough to cover the actual cost of the individuals' wages and fringe benefits plus provide a reasonable profit";
3. give the leasing company "the exclusive right to determine the number of individuals needed" and to direct and control them; and
4. give the leasing company "the exclusive right to hire, fire, discipline, and reassign any of the individuals to another position or to another client without the consent of the client."

A typical EOR arrangement fails that test, because you choose the worker, direct the work and decide whether the job continues. The rule's other parts set the exceptions: a worker leased "to fill a temporary need" from a company whose business is primarily supplying temporary workers is the leasing company's employee if a written contract is in place; a leased corporate officer of the client "shall always be considered the employee of the client"; and a worker in an exempt relationship with the client is covered by neither unless an election is approved. Federal payroll taxes follow their own rule: the IRS says a business that outsources payroll "generally remains responsible" for employment taxes unless the provider is a certified PEO; see the IRS's CPEO public listings.

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

In most EOR arrangements, you do, under your own account and rate. Iowa's definition of employer is broad: Iowa Code § 96.1A(14) covers "any employing unit which in any calendar quarter in either the current or preceding calendar year paid wages for service in employment," so there is no minimum payroll. In practice:

• Account. Iowa Workforce Development says to register at myIowaUI.org "within 30 days of the first date wages are paid." If the leasing rule puts your worker on your quarterly reports, plan for your own Iowa account, and get the provider's position and IWD's answer in writing before the first payroll.
• Who files. A provider can file for you as your agent. IWD says that if a third party is used, the agent must be assigned as a power of attorney or authorized representative, preferably through an employer user on your myIowaUI account.
• Rate. For 2026, IWD's tax page says "The taxable wage base in 2026 is $20,400.00" and the new employer rate is 1.000% (5.400% for construction). Because the wages are reported at the client's rate, your own claims history sets what you pay.
• Exception. If the provider is a genuine temporary staffing company filling a temporary need under a written contract, the worker is the staffing company's employee and its account carries the wages. Iowa Code § 96.5(1)(j) then lets it rely on the three-working-day reassignment notice, explained in the staffing guide.

Who carries workers' compensation in Iowa?

The employer must insure, and Iowa's statute does not divide that duty between a leasing company and its client. Iowa Code § 87.1 says every employer subject to the workers' compensation chapters, unless relieved as a self-insurer, "shall insure the employer's liability" with an organization "approved by the commissioner of insurance." An employer that refuses or neglects to comply is "liable in case of injury to any worker in the employer's employ under the common law as modified by statute," and must post a notice of its failure to insure (§ 87.2). Under § 87.14A, an employer "shall not engage in business without first obtaining insurance," and "A person who willfully and knowingly violates this section is guilty of a class 'D' felony."

• Name the policy in the contract. With no PEO statute, nothing in Iowa law gives a PEO and its client the shared exclusive remedy that PEO acts in states such as Indiana and Alabama grant. Ask counsel how an Iowa court would treat your arrangement, and whether your own policy should also cover the worker.
• Check coverage. The Division of Workers' Compensation's verification page links the NCCI Employers' Workers' Compensation Coverage Verification Database and notes that the division does not maintain it and that reporting delays can cause discrepancies.
• Who must insure. The division's compliance page says Iowa law requires most employers to carry workers' compensation insurance or register as self-insured, with limited exemptions; see hiring employees in Iowa.

Which Iowa registrations, reports and notices still apply?

• Withholding. The Department of Revenue says "Every employer who maintains an office or transacts business in Iowa" withholds Iowa income tax on wages for work in Iowa. Registration is with the Iowa Department of Revenue, and each new hire completes the Iowa W-4 (44-019) within 15 days; without one, the employer withholds at zero allowances. Ask whose withholding account the provider uses.
• New-hire reporting. Within 15 days of hire or rehire to the Centralized Employee Registry under Iowa Code § 252G.3, shorter than the 20 days most states allow, so check that a national provider's process meets it.
• Unemployment. Quarterly reports under whichever account the leasing rule points to, and the state posters; see the hiring checklist.
• Drug testing. An employer that tests under Iowa Code § 730.5 needs a written policy and "shall pay all actual costs" of the tests it requires of employees and prospective employees, so decide whether you or the provider tests; see Iowa drug testing laws.
• E-Verify. No private-employer mandate; see E-Verify requirements in Iowa.

What does the client company still own in Iowa?

More than in states with a PEO act, because Iowa's leasing rule usually leaves the unemployment account with you. Hiring rules follow whoever recruits and decides, which is usually you:

• Pay questions. No salary history ban and no pay range posting law, and Iowa Code § 364.3(12) bars city rules, but Minnesota and Illinois rules can reach remote postings; see Iowa salary history ban and Iowa pay transparency law.
• Screening. No statewide ban-the-box law for private employers (see ban the box in Iowa), and DCI record checks, deferred judgments and expungement rules in Iowa background check laws.
• Interviews. Iowa has both a wiretap act and an eavesdropping statute; see Iowa recording consent law for interviews.
• Non-competes. Courts apply a three-part reasonableness test and may enforce part of a covenant; see Iowa non-compete law.
• Co-employment liability. See joint employer liability for staffing agencies.

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

The gap is narrower in Iowa than in PEO-act states. If the leasing rule puts your worker's wages on your unemployment account anyway, registering yourself adds a withholding account, a workers' compensation policy, the Iowa W-4 and 15-day new-hire reports. That tends to win when you expect more than one Iowa hire or already run multi-state payroll. An EOR still fits when you want payroll, benefits and onboarding handled for a single remote hire, as long as the contract reflects Iowa's rule on whose account carries the wages. A temporary staffing firm fits a genuinely temporary need under a written contract.

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

1. Under whose Iowa unemployment account will our worker's wages be reported, and has Iowa Workforce Development accepted that position for arrangements like ours?
2. If you say the worker is yours, does our contract meet the four terms of 871 IAC 22.3(4)"c", and do you in fact have the exclusive right to hire, fire and reassign without our consent?
3. If the wages go under our account, will you file as our agent through myIowaUI, and who answers IWD notices?
4. Whose workers' compensation policy covers our worker, is the insurer approved in Iowa, and does it appear in the NCCI coverage database?
5. Whose withholding account do you use, and who files the 15-day new-hire report?
6. If you drug test, do you have an Iowa Code § 730.5 written policy, and who pays for the tests?
7. Are you registered with the Iowa Secretary of State, and, if you place health care workers, under chapter 135Q?
8. 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, Indiana, 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.