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

As of October 2026, Oregon requires any business that provides workers to a client by contract and for a fee, other than on a temporary basis, to hold a worker leasing company license from the Department of Consumer and Business Services under ORS 656.850, so an employer of record that employs a permanent Oregon worker for you generally needs one. The license costs $2,050 and lasts two years, and on July 1, 2027 it becomes a professional employer organization (PEO) license under HB 2800 (2025). Workers' compensation must cover all of the client's workers, through either the PEO's policy or the client's, and since September 26, 2025 a PEO chooses whether to report Oregon unemployment tax as the employer or under the client.

This page is for a company outside Oregon, or a staffing firm, deciding whether to employ an Oregon 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 Oregon, and the line between a temporary staffing firm and a leasing company, with the records that keep a temp firm on the right side, is in staffing agency license in Oregon.

Oregon employer of record and PEO rules at a glance

Does Oregon license PEOs or employer of record companies?

Yes, under the name "worker leasing company" until July 1, 2027. ORS 656.850 defines a worker leasing company as "a person who provides workers, by contract and for a fee, to work for a client but does not include a person who provides workers to a client on a temporary basis," and says "No person shall perform services as a worker leasing company in this state without first having obtained a license" from the director of DCBS. Unlike many states, there is no "majority of the workforce" test: providing one permanent worker for a fee is enough.

• What "temporary" means. Workers provided "for special situations such as to cover employee absences, employee leaves, professional skill shortages, seasonal workloads and special assignments and projects with the expectation that the position or positions will be terminated," or as probationary new hires where the client uses a preestablished probationary period (ORS 656.850(1)(b)).
• The burden is on the provider. The Workers' Compensation Division says "Oregon considers all staffing arrangements to be leasing, unless the staffing company can provide written documentation or other evidence that each worker is provided on a temporary basis," and a temporary firm that misclassifies a leased worker faces civil penalties for leasing without a license.
• Fee and term. "There are two types of license: full and limited. The fee for both is $2,050, and the license is valid for two years," per WCD's licensing page. A full license needs evidence of workers' compensation insurance, Secretary of State registration, tax compliance, disclosures, a notarized affidavit, a list of Oregon clients and a written Oregon OSHA procedure.
• Limited license. For an out-of-state PEO licensed in a state Oregon treats as substantially similar, with no Oregon location, no direct solicitation of Oregon clients, "no more than two Oregon clients" and "no more than five Oregon employees, total." It must apply for a full license within 30 days of no longer qualifying.
• Assurance organizations. WCD accepts applications from PEOs certified by the Employer Services Assurance Corporation (ESAC) through ESAC's portal.

To check a provider, use WCD's list of active worker leasing companies, which shows license numbers and issue dates and was dated October 1, 2026 when we checked.

What changes on July 1, 2027?

HB 2800 (Chapter 78, Oregon Laws 2025) rewrites the licensing statutes for professional employer organizations, operative July 1, 2027. Under the new ORS 656.849, a PEO is "a person that enters into a PEO relationship with a client employer," and a PEO relationship is an agreement allocating "certain employer responsibilities for some or all of the client employer's workers." The definition excludes "a person that solely provides workers to a client on a temporary basis" and "a person that provides payroll processing or similar administrative services without assuming employer responsibilities." The amended ORS 656.850 then says "A person may not provide services as a professional employer organization (PEO) in this state without first having obtained a license." For a client, the practical effect is the same test with clearer words: an EOR that takes on employer responsibilities for even part of your Oregon workforce needs the Oregon license. Contracts signed now will run into the new rules, so ask the provider how it is preparing.

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

It depends on the PEO's election. HB 2236 (Chapter 280, Oregon Laws 2025), effective September 26, 2025, added ORS 657.426: "during the term of a PEO relationship, the professional employer organization shall elect to treat covered employees as either employees of" the PEO or the client employer. In practice:

• If the PEO reports them as its own, that treatment is "limited to the payroll tax reporting provisions," and benefits paid on those wages are charged to the PEO's experience, not yours.
• If the PEO reports them under the client, benefits are charged to each client employer. A PEO choosing this method must give the Employment Department the documents it asks for within 60 days, or it falls back to reporting the workers as its own.
• Changing the election. After the first election, a change takes effect the next calendar year and cannot be changed again for two years.
• Wage base. For the taxable wage base, wages paid by the client and the PEO in the same year count toward both.

The Oregon definition of PEO in the unemployment chapter already uses the 2027 language: "a person required to be licensed under ORS 656.855 that enters into a PEO relationship," excluding temp-only firms and payroll processors (ORS 657.010). Ask the provider which election it has filed, because it decides whose experience rating your Oregon layoffs will affect.

Who carries workers' compensation in Oregon?

Oregon is strict here. Under ORS 656.850(3), a leasing company must provide workers' compensation coverage "for those workers and any subject workers employed by the client unless during the term of the lease arrangement the client has proof of coverage on file with the director." WCD's insurance page spells it out:

• "Whether the PEO or client provides the coverage, the policy must cover all employees of the client, both leased and non-leased."
• If the PEO provides it, "a single policy must be written that covers both the PEO and the client," priced on the client's own experience rating.
• If the client has its own policy or is self-insured, coverage "automatically defaults to the client's coverage, regardless of any coverage the PEO may provide."
• The PEO must keep coverage for itself even if all its clients carry their own.

A leasing company that ends coverage for a client must give the client and the director written notice, effective no sooner than 30 days after the director receives it (ORS 656.850(5)). The client posts the Notice of Compliance (Form 1188) at its premises, and gets the posters from the PEO when the PEO provides coverage, per WCD's posting page. The leasing company must also make sure the client provides "adequate training, supervision and instruction" for Oregon OSHA purposes (ORS 656.850(4)).

Which Oregon registrations, reports and notices still apply?

• Combined payroll taxes. Oregon's 2026 Combined Payroll Tax Report instructions cover state income tax withholding, the statewide transit tax (0.1% of wages), the TriMet and Lane transit district taxes where they apply, unemployment insurance (2026 taxable wage base $56,700), Paid Leave Oregon and the Workers' Benefit Fund assessment (1.8 cents per hour worked, half paid by the employer). Reports are filed through Frances Online. Employees complete Form OR-W-4.
• Paid Leave Oregon. The 2026 rate "is 1% of gross wages up to $184,500"; employers with 25 or more employees on average pay 40% and employees 60%, and smaller employers still withhold the employee share, per Paid Leave Oregon. Employers post the model notice and give a copy to remote employees. Ask whose headcount sets the 25-employee line.
• New-hire reporting. Within 20 days of the hire date, per the Oregon Child Support Program.
• E-Verify. No state mandate; see E-Verify requirements in Oregon.

What does the client company still own in Oregon?

Oregon's leasing law allocates workers' compensation and safety training, not hiring. Hiring rules follow whoever recruits and decides, which is usually you:

• Pay questions. Oregon bars seeking or using pay history; see Oregon salary history ban. It has no pay range posting law as of October 2026; see Oregon pay transparency law.
• Screening. No conviction questions on the application or before the initial interview (see ban the box in Oregon), plus credit check limits in Oregon background check laws.
• Interviews. A participant may record a phone call, but video and in-person interviews need every participant specifically informed; see Oregon recording consent law for interviews.
• Non-competes. Void unless disclosed in a written offer two weeks before the first day and other conditions are met; see Oregon non-compete law.
• Co-employment liability. 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 Oregon the better route?

Registering yourself means an Oregon Business Identification Number, the combined payroll tax account, Paid Leave contributions, transit taxes, new-hire reports and a workers' compensation policy from the first worker. That route tends to win when you expect several Oregon hires or already run multi-state payroll. A licensed leasing company fits a small team whose payroll and comp you want handled together. A temporary staffing firm fits only a genuinely temporary need it can document; for a permanent remote hire, Oregon will usually treat the arrangement as leasing.

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

1. Are you on WCD's list of active worker leasing companies? What is your license number, and is it full or limited?
2. If you say our worker is temporary, what written records show that, and what is the special situation?
3. Who provides workers' compensation, and does the policy cover all of our Oregon workers, leased and not?
4. Which unemployment reporting method under ORS 657.426 have you elected, and whose experience will our claims affect?
5. Whose headcount decides whether the Paid Leave employer share applies?
6. Who files the combined payroll report and the transit taxes, and who gives us the Form 1188 posters?
7. How will you move to a PEO license on July 1, 2027?
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: Arkansas, California, Florida, Hawaii, Maryland, Michigan, Minnesota, Mississippi, Nebraska, New York, Rhode Island, South Carolina, Tennessee, Texas and Utah.