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

As of October 2026, Maryland has no statute that licenses or registers professional employer organizations (PEOs) or employers of record, so a provider can co-employ a Maryland worker without a state PEO license. Maryland regulates the arrangement in other places instead: the unemployment insurance regulation, COMAR 09.32.01.26, makes the PEO an employing unit that must report each new client within 30 days, and the Family and Medical Leave Insurance (FAMLI) program lets the client decide whether it or the PEO registers as the employer before contributions start on January 1, 2027. State and county income tax withholding, workers' compensation for every employee and Maryland's hiring rules all still apply.

This page is for a company outside Maryland, or a staffing firm, deciding whether to employ a Maryland worker through an EOR or PEO or to register itself. The general differences between an EOR, a PEO and payrolling are in what is an employer of record and payrolling services explained. The full state checklist is in hiring employees in Maryland, agency licensing is in staffing agency license in Maryland, and the 2027 changes are in new hiring laws in Maryland for 2027.

Maryland employer of record and PEO rules at a glance

Does Maryland license PEOs or employer of record companies?

No. We found no Maryland statute that licenses, registers or certifies PEOs, employee leasing companies or employers of record, and the Maryland staffing license page reaches the same conclusion; Maryland also repealed its general employment agency license. Maryland law does recognize PEOs, but only for specific purposes:

• Unemployment insurance. COMAR 09.32.01.26 defines a PEO as "an employing unit which places all or part of a client company's workers on its payroll or payrolls and, by written agreement, assigns or leases the workers to the client company," and says it "does not mean a temporary help firm."
• Paid family and medical leave. FAMLI's policy guidance E-26-003, effective October 7, 2026, uses nearly the same definition and sets out how PEOs and their clients register.
• Health insurance. The small-employer health rules count a plan issued through "a professional employer organization, coemployer, or other organization ... that engages in employee leasing" as a health benefit plan (Ins. § 15-1201), so PEO health plans covering Maryland residents fall under the Insurance Article.

Note how wide the unemployment definition is: "all or part" of a client's workers. A provider that puts a single Maryland employee on its payroll and leases that person to you is a PEO for unemployment purposes, whatever its contract calls it. Because there is no license to look up, the checks that matter are the provider's Maryland unemployment account, its workers' compensation certificate and its FAMLI registration.

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

The PEO, as an employer in its own right. Maryland's unemployment law reaches any employer that "employs at least one individual within the State," per the Division of Unemployment Insurance's new employer page, and COMAR 09.32.01.26 says a PEO "is subject to all of the rights and obligations of employing units under the Unemployment Insurance Law." The regulation adds three duties:

• Successor treatment. When a PEO takes on all or part of a client's workers, it "is initially classified as a successor employer for purposes of assigning a contribution rate, assessing administrative fees and tax liability, and transferring the taxable wage base of the workers," and the client "is initially classified as a predecessor employer." If you already have Maryland employees and a rate, your experience can move with them.
• Notice within 30 days. The PEO notifies the Secretary of Labor in writing within 30 days of putting a client's workers on its payroll, with the client's name, address and phone number, the date and the number of workers.
• Annual client report. By December 31 each year, the PEO files a written list of the clients to which it leases or assigns workers.

Ask the provider for its Maryland unemployment account number and confirm it filed the 30-day notice for your account. If you later leave the PEO and hire the worker yourself, you open your own account through the Division's BEACON portal.

Who registers for Maryland FAMLI paid leave?

This is the decision a client most often misses. FAMLI says "All employers with at least one employee localized in Maryland are now required to register" and that "There are no exceptions under state law," per its employer page. Its contributions page sets the 2027 rate at "0.9% of wages up to the Social Security wage cap," split "equally between employers and employees (0.45% each)," with quarterly wage and hour reports and payments starting in April 2027 and benefits from January 1, 2028.

The PEO guidance gives the client two pathways and says "It is the client employer's decision" which to use:

Source: FAMLI policy guidance E-26-003, as of October 2026. Two consequences follow. A small company that would qualify for the discount on its own usually loses it if a large PEO registers, because the PEO's headcount counts. And if the PEO was registered and you leave it, "the client employer is responsible for ensuring continued reporting of their employees to FAMLI," through your own registration or a new PEO's.

Who carries workers' compensation in Maryland?

Every employer. Lab. & Empl. § 9-402 says "each employer shall secure compensation for all covered employees of the employer" by insurance with an authorized insurer or approved self-insurance; there is no minimum number of employees. We found no PEO-specific workers' compensation provision in the Labor and Employment Article, so whose policy covers the worker is set by the PEO agreement. Get a certificate that names Maryland and your worksite, and keep it.

Which Maryland registrations, reports and notices still apply?

• Withholding. Maryland withholding includes county income tax. Form MW507 asks for the employee's county of residence, and nonresidents enter the Maryland county where they work; residents of some neighboring states can claim exemptions on it. The Division of Unemployment Insurance notes that employers may need the Combined Registration Application to open other state tax accounts. Ask who opens the Comptroller account.
• New-hire reporting. "Employers are required by law to report newly hired or rehired employees within 20 days," per the Department of Human Services.
• Pay notice at hire. Written notice of the rate of pay, regular paydays and leave benefits at the time of hiring, and a pay statement each pay period showing "the employer's name registered with the State" (Lab. & Empl. § 3-504). Agree which entity's name appears.
• FAMLI notices. Notice when an employee is hired, once a year and from July 2027, per the FAMLI employer page.
• Posters. Unemployment insurance and health insurance posters, sent when the account opens, per the Division of Unemployment Insurance.
• E-Verify. No state mandate; see E-Verify requirements in Maryland.

What does the client company still own in Maryland?

With no PEO statute allocating duties, the contract does all the allocating, and Maryland's hiring laws apply to whoever does the hiring. In practice that is usually you:

• Job postings. Every Maryland employer must include a wage range and a general benefits description in job postings; see Maryland pay transparency law. Maryland also bans seeking a candidate's wage history; see Maryland salary history ban.
• Screening. Criminal history timing for employers with 15 or more full-time employees is in ban the box in Maryland, and credit history limits and the federal steps are in Maryland background check laws.
• Interviews. Maryland requires all-party consent to record, which matters for recorded or transcribed video interviews; see Maryland recording consent law for interviews.
• Non-competes. Maryland limits non-competes for lower-wage workers; see Maryland non-compete law.
• Co-employment liability. Both businesses can face wage and discrimination claims; see joint employer liability for staffing agencies.
• Federal payroll taxes. The IRS says the client "generally remains responsible" for employment taxes unless the PEO is certified; see the IRS's CPEO public listings.

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

Registering yourself means a BEACON unemployment account, a Comptroller withholding account with county tax, your own FAMLI registration, workers' compensation from the first employee and new-hire reports. That route tends to win when you expect several Maryland hires or want the FAMLI small employer discount on your own headcount. A PEO fits a small team whose payroll, benefits and comp you want handled together, as long as you settle the FAMLI pathway in writing; a temporary help firm, which the unemployment regulation treats separately, fits a defined assignment.

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

1. What is your Maryland unemployment account number, and will you file the 30-day client notice for us?
2. Will you register as our FAMLI employer, or should we register and give you a power of attorney? What does each option do to our small employer discount and plan?
3. Who is the workers' compensation carrier, and can we have the certificate for our Maryland worksite?
4. Who opens the Comptroller withholding account, and how do you handle county tax and MW507 exemptions?
5. Whose name goes on the pay notice at hire and the pay statements?
6. Who writes and posts the job ad with the wage range?
7. Are you an IRS-certified PEO, and who is liable for federal employment taxes if a deposit is missed?
8. If we leave, how will FAMLI reporting and our unemployment experience move back to us?

Employer of record rules in other states: Arkansas, California, Florida, Hawaii, Michigan, Minnesota, Mississippi, Nebraska, New York, Oregon, Rhode Island, South Carolina, Tennessee, Texas and Utah.