Employer of record in Pennsylvania: PEO rules, UC accounts, local taxes and what the client still owns (2026)

Pennsylvania does not license or register PEOs or "employers of record" as of October 2026, as far as we found, and it repealed employment agency licensing in 2014. The rule that matters is in unemployment compensation: Section 4(j)(2.1) of the Unemployment Compensation Law makes the client in a professional employer arrangement the UC employer of the leased workers, so wages go on the client's own UC account at the client's rate, and Pennsylvania forbids common paymaster reporting. Add workers' compensation from the first employee, local earned income tax withholding by worksite, and Philadelphia's own wage tax registration, and a company using a PEO in Pennsylvania still needs several accounts in its own name.

This page is for a company outside Pennsylvania, or a staffing firm, deciding whether to employ someone in Pennsylvania through an employer of record (EOR) or PEO, or to register itself. How an EOR, a PEO, a staffing agency and payrolling differ is in what is an employer of record and payrolling services explained; the full state checklist, with myPATH registration and the local Residency Certification Form, is in hiring employees in Pennsylvania; and the 2014 repeal of agency licensing and the separate nurse and home care tracks are in staffing agency license in Pennsylvania. This page adds the UC rule, the accounts you keep and what stays with you.

Pennsylvania employer of record and PEO rules at a glance

Does Pennsylvania license or register employer of record companies or PEOs?

Not that we could find. Pennsylvania licensed employment agencies until a 2014 repeal, covered in our Pennsylvania licensing guide, and it still licenses nurse and home care staffing on separate tracks. We found no statute or agency program that licenses, registers or certifies PEOs, employee leasing companies or EOR providers as of October 2026. Pennsylvania law does not use the term "employer of record."

The state does define the arrangement where it counts. The Department of Labor and Industry's UC Employer's Handbook describes a professional employer arrangement as one "between a business, called the client, and a professional employer organization (PEO), where the client leases some or all of its workforce from the PEO," and its glossary describes a PEO as creating "a co-employment relationship with the client company." Note "some or all": unlike states that require a PEO to cover a majority of a client's workforce, Pennsylvania's UC rule applies even to a single leased worker.

Who pays Pennsylvania unemployment compensation on an EOR or PEO worker?

You do, through your own account. The handbook says: "Section 4(j)(2.1) of the PA UC Law specifies that the client in a professional employer arrangement is considered to be the UC employer of leased workers, rather than the PEO. Wages must be reported on the client's UC tax account, and contributions on those wages must be paid at the client's tax rate." The PEO can file and pay for you as a third-party administrator added to your UC accounts, which the handbook describes, but the account, the rate and the benefit charges are yours.

The handbook also closes the obvious workaround: "Common paymaster reporting is not permitted under the PA UC Law. Section 302 of the PA UC Law requires each legal entity providing employment to have its own, separate UC account." And it says that "If you have employees or plan to hire in Pennsylvania, you must register with L&I," using the Department of Revenue's myPATH system, which L&I uses to decide liability and assign an account number. So before a PEO worker's first Pennsylvania paycheck, your company needs a Pennsylvania UC account. The Unemployment Compensation Law itself is listed on the General Assembly's unconsolidated statutes page (1936 Second Special Session, Act 1).

A provider that is not in a professional employer arrangement, such as a staffing firm employing its own workers on assignment, falls outside that rule. Ask which the provider is and under whose UC account it will report, and get the answer and the account number in the contract.

Who carries workers' compensation in Pennsylvania?

Someone must from the first employee. Labor and Industry says "workers' compensation insurance coverage is mandatory for all employers who have one or more employees, whether they're part-time or full-time, including family members." We found no Pennsylvania statute or regulation that assigns the policy for leased workers to the PEO or to the client, unlike states such as Massachusetts or Arizona. So the contract has to: name whose policy covers the worker, the class code, and what happens to coverage if the agreement ends. Ask for the certificate showing Pennsylvania coverage before the start date, and if the answer is that your own policy covers the worker, make sure it does.

Which Pennsylvania registrations, reports and notices still apply?

• State income tax withholding. Registered through the same myPATH registration; the Department of Revenue's employer withholding page covers it. Pennsylvania withholds at a flat rate, so there is no state allowance certificate; residents of reciprocal states file Form REV-419, as our Pennsylvania hiring checklist explains. Agree whose withholding account the provider uses.
• Local earned income tax and Local Services Tax. Withheld based on each employee's worksite and residence, with a Residency Certification Form from every new hire, under DCED's instructions for employers. For a remote worker, confirm which worksite the provider uses.
• Philadelphia Wage Tax. The City says "All employers located in Pennsylvania are required to register with the City of Philadelphia within 30 days" of employing a Philadelphia resident or a non-resident who performs services for an employer in Philadelphia, and "Employers are required to withhold the Wage Tax" from those employees.
• New-hire reporting. Within 20 days of the date of hire through the PA New Hire Reporting Program; agree which party files.
• E-Verify. Only for contractors and subcontractors on public works projects over $25,000; see E-Verify requirements in Pennsylvania.
• Paid leave programs. We found no Pennsylvania state paid family leave or disability insurance program that requires a separate employer registration as of October 2026; check city ordinances where the worker is based.

What does the client company still own in Pennsylvania?

The UC account and rate, as above, and the hiring rules that follow the business that recruits and decides:

• Interviews. Pennsylvania requires every party's prior consent to record a call or private conversation; see Pennsylvania recording consent law for interviews and the Wiretap Act and interviews.
• Criminal history and background checks. CHRIA section 9125, Clean Slate and Philadelphia's fair chance law; see ban the box in Pennsylvania and Pennsylvania background check rules.
• Pay and credit questions. No statewide salary history ban or pay range law that we found, but Philadelphia bars salary history questions and most credit checks, per the Pennsylvania hiring checklist.
• Drug testing. Medical marijuana protections and Philadelphia's pre-hire THC test ban; see Pennsylvania drug testing rules.
• Non-competes. Court-made rules, new consideration for current employees and Act 74 of 2024 for health care practitioners; see Pennsylvania non-compete law.
• Co-employment exposure. Wage and discrimination claims can name both parties; see joint employer liability for staffing agencies.
• Federal payroll taxes. The IRS says a client using a PEO "generally remains responsible" for employment taxes unless the PEO is IRS-certified; see the CPEO public listings.

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

Sooner than in most states. Because a PEO arrangement already requires your own myPATH registration and UC account and puts the UC rate on you, the extra steps to employ directly are state withholding, local tax withholding by worksite, workers' compensation, the new-hire report and, in Philadelphia, the City registration. Registering yourself tends to win when you expect more than one or two Pennsylvania hires or already run multi-state payroll. A PEO fits a company that wants benefits, payroll and workers' compensation administered together and accepts that the UC account stays its own. A staffing firm employing its own workers on assignment may fit a defined project; confirm under whose UC account it reports.

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

1. Are you acting as a PEO, so that Section 4(j)(2.1) makes us the UC employer, or as a staffing firm employing the worker on assignment?
2. If a PEO, will you register us through myPATH, report on our UC account at our rate, and give us access to the filings?
3. Whose workers' compensation policy covers the worker, in which class, and can we see the Pennsylvania certificate?
4. Whose state withholding account will you use, and who collects the Residency Certification Form?
5. Which worksite will you use for local earned income tax and Local Services Tax, especially for a remote worker?
6. If the worker lives or works in Philadelphia, who registers with the City and withholds the Wage Tax?
7. Who files the new-hire report within 20 days?
8. Are you an IRS-certified PEO, and who is liable for federal employment taxes if you miss a deposit?
9. How do we move the worker to our own payroll if we register later?

Employer of record rules in other states: Arizona, Arkansas, California, Colorado, Florida, Hawaii, Massachusetts, Mississippi, Nebraska, New Jersey, New York, Rhode Island, South Carolina, Texas, Virginia and Washington.