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

As of November 2026, Vermont requires any business "engaged in the business of employee leasing" to hold a license from the Commissioner of Labor under 21 V.S.A. chapter 12, so an employer of record (EOR) or professional employer organization (PEO) that supplies a worker to your company for ongoing, open-ended work generally needs one. The license costs a one-time $100 application fee plus $1,000 a year, and the company must show at least $100,000 in adjusted net worth, post an equal bond and keep a place of business in Vermont. Vermont is also unusual on unemployment insurance: the leasing company files and pays under the client's own Vermont employer account and experience rating, so you still need an account with the Department of Labor.

This page is for a company outside Vermont, or a staffing firm, deciding whether to employ a Vermont 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 state's hiring checklist is in hiring employees in Vermont, and the absence of any Vermont staffing agency license, with the separate-entity rule for temporary help, is in staffing agency license in Vermont. This page adds what those leave out: how the leasing license, the client's unemployment account, workers' compensation and Vermont's payroll taxes fit together when someone else is the employer on paper.

Vermont employer of record and PEO rules at a glance

Does Vermont license employer of record companies or PEOs?

Yes, under the name "employee leasing company." Section 1033(a) says "No person shall engage in the business of employee leasing in Vermont unless the person is granted a license by the Commissioner." The definition in § 1031(5) turns on the kind of work, not the label: a leasing company provides individuals "to perform ongoing services for an indefinite time period for client companies" under leasing agreements, and a leasing agreement can cover "one or more individuals." Unlike some states, there is no test about a majority of the client's workforce, so an EOR that employs a single permanent Vermont worker for you fits the words.

• Fees and term. "A one-time, nonrefundable application fee of $100.00 and a licensing fee of $1,000.00." The license "shall expire one year from the date shown on the license," and the renewal, with the licensing fee, is due at least 60 days before (§ 1033(b), (c)).
• Financial responsibility. An audited GAAP statement, prepared within six months of the application by an independent CPA licensed in Vermont, showing "an adjusted net worth of at least $100,000.00 or five percent of liabilities, whichever is greater" (§ 1035(a)).
• Bond or securities. At least the minimum net worth, which the commissioner may liquidate if the company defaults on wages, benefits, workers' compensation or unemployment premiums. The leasing company "shall not require a client company to contribute in any manner" to it, and the commissioner may waive it for a company accredited by an approved national accrediting entity (§ 1033(b)(7), (8)).
• Vermont presence. "Documentation that the applicant maintains a place of business in this State" (§ 1033(b)(2)). An EOR that runs Vermont payroll from another state with no Vermont office does not meet this condition as written.
• Joint liability acknowledged. The applicant acknowledges "joint and several liability with its client companies" under laws protecting the health, safety or welfare of leased workers (§ 1033(b)(5)).
• Applying. The Department of Labor's e-Services guide (August 2026) says "only TPAs can apply for an Employee Leasing Company (ELC) license," so an applicant first registers as a third-party administrator and then uploads, for each Vermont client, proof of workers' compensation and the leasing agreement.

The most recent list of licensees we found on the Department of Labor's site is dated May 2018, so it cannot tell you who is licensed today. Ask the provider for its Vermont license number and expiration date, then confirm it with the Department of Labor's Employer Services Unit before you sign.

What if the provider says it is a temporary help company instead?

Vermont draws the line by duration. A "temporary help company" hires its own employees and provides them "for a finite period of time in special or unusual situations such as employee absences, temporary skill shortages, seasonal workloads, and special work assignments and projects" (§ 1031(8)). A temporary help company needs no license, but a leasing applicant must certify that it "does not conduct a temporary help business through the same entity as the employee leasing business" (§ 1033(b)(3)). A worker you recruited, who reports to your manager with no end date, sounds like leasing rather than a temporary assignment. If a provider says otherwise, ask what the finite period and the special situation are, in writing.

Operating unlicensed is costly for the provider: anyone who "conducts the business of employee leasing or holds themselves out as an employee leasing company without being licensed" can be fined up to $15,000 (§ 1041). Vermont has no separate employment agency license to fall back on, as staffing agency license in Vermont explains.

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

The leasing company pays, but on your account. Section 1038(a) says the department charges benefits "against the experience rating record of the client company," and "Quarterly unemployment reports shall be filed and unemployment contributions shall be paid based on the client company's experience rating and under the client company's State employer account number." The Department of Labor's form EL-5 tells leasing companies to file "a separate quarterly Contribution Report (Form C-101) for each client company," using the client's account number, name and federal employer identification number, and to pay at the client's rate. In practice:

• You need a Vermont employer account. The Department of Labor treats as an employer anyone who employs one or more people in each of 20 weeks or pays at least $1,500 in gross wages in a calendar quarter, per its employer coverage page. Ask whether the leasing company opens the account for you under its power of attorney or expects you to.
• Layoffs land on your rating. Because benefits are charged to the client's record, a Vermont layoff raises your future rate, not the leasing company's.
• Filings follow each agreement. The leasing company sends the department each new leasing agreement and each termination within 10 days, payroll records for each client and, by December 31, a list of clients with their account numbers and FEINs (§ 1038(b)).

Who carries workers' compensation in Vermont?

Vermont's workers' compensation law says "Employers, not including State, county, or municipal bodies, shall secure compensation for their employees" through an authorized insurer or approved self-insurance (21 V.S.A. § 687). For leased workers, chapter 12 adds three rules:

• Your experience, not the PEO's. Premiums "shall be determined and paid based on the experience rating of the client company," or at the rate for an employer that cannot be experience rated if the client's premium volume is too small (§ 1037(a)).
• Exclusive remedy for both. The leasing company and the client are both entitled to the exclusive remedy protection "provided that workers' compensation coverage is in effect" (§ 1037(b)).
• Thirty days' warning. The insurer must notify the commissioner and the client "not later than 30 days prior to any lapse or cancellation" (§ 1037(c)). Ask for the certificate naming your company.

The leasing company is deemed the employer "for the payment of wages and other employment benefits," but it and the client remain "jointly and severally liable" under laws protecting the health, safety and welfare of an employee (§§ 1036(b), 1039(c)).

Which Vermont registrations, reports and notices still apply?

• Income tax withholding. Employees complete Form W-4VT. The Department of Taxes says "out-of-state employers are not required to begin withholding Vermont Income Tax until an employee has been working from a Vermont location for thirty days," and that for an employee who "lives and works remotely in Vermont," income earned during the entire period they live in Vermont is subject to Vermont tax. A licensed leasing company registers with the Department of Taxes within 10 days of licensure (§ 1036(a)(1)).
• Child Care Contribution. Since July 1, 2024, employers "are required to pay a 0.44% payroll tax on all employee wages earned in Vermont," may withhold up to 0.11% from the employee, and report it on Form WHT-436 with withholding, per the Department of Taxes. It applies to every employer that must withhold Vermont income tax, including out-of-state employers of remote Vermont workers.
• Health Care Fund Contribution. A quarterly assessment, also reported on Form WHT-436, for employees without qualifying health coverage. The department's decision tree starts with one question, whether the employer had five or more employees in the previous quarter; if not, nothing is due. Ask whose headcount the leasing company uses.
• New-hire reporting. "Reports of a new hire must be filed within 10 days of the first day work is performed," per the Department of Labor, a shorter window than many states allow. Agree in writing who files it.
• Notice to the worker. The leasing company must notify each leased employee of the arrangement within 10 days after signing the agreement, run a grievance system and give each leased employee a manual of the terms and conditions of employment (§ 1036(a)(5), (b)).
• Posters and leave. The Department of Labor publishes the mandatory workplace posters. Vermont's paid family and medical leave insurance is a voluntary program employers may opt into, not a mandatory payroll contribution. Earned sick time (see 21 V.S.A. § 483) is a benefit the leasing company, as the deemed employer for benefits, should administer; ask it to show you how.

What does the client company still own in Vermont?

The leasing law moves payroll, not hiring. Nothing in chapter 12 relieves "a client company of its obligations under any applicable law" (§ 1040(b)). In practice:

• Job ads and pay. Vermont requires a pay range in job ads at employers with five or more employees and bans salary history questions; see Vermont pay transparency law and Vermont salary history ban. Ask whose employee count the provider believes applies, and assume the ad is yours.
• Screening. No criminal history question on an initial application (see ban the box in Vermont), strict credit and drug testing rules (see Vermont background check laws and Vermont drug testing laws).
• Interviews and covenants. Recording rules are in Vermont recording consent law for interviews, and restrictive covenants in Vermont non-compete law.
• Collective bargaining. The leasing company is bound by any collective bargaining agreement covering its leased employees and may not reassign them to interfere with it (§ 1040(a)).
• Co-employment liability. Joint and several liability for health, safety and welfare laws is in the statute itself (§ 1039(c)); for wage and discrimination claims generally, see joint employer liability for staffing agencies.
• Federal payroll taxes. The IRS says that when a company outsources payroll it "generally remains responsible for paying taxes and filing returns," unless the PEO is certified; see the IRS's CPEO public listings.

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

Because Vermont already makes you hold an unemployment account and carry your own experience rating, a leasing company saves you less here than in states where the PEO reports under its own account. Registering yourself means a Department of Labor account, a Department of Taxes withholding account (which also carries the Child Care Contribution), W-4VT forms, 10-day new-hire reports and a workers' compensation policy. That route tends to win when you expect more than one or two Vermont hires or already run multi-state payroll. A licensed leasing company still fits a small team whose benefits and payroll you want run together, and a temporary help company fits a genuinely finite assignment.

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

1. Do you hold a Vermont employee leasing license? What is the number and expiration date?
2. Where is your place of business in Vermont?
3. If you say our worker is a temporary help placement, what is the finite period and the special situation?
4. Will you open our Vermont unemployment account, or must we, and will you file Form C-101 under it each quarter?
5. Who is the workers' compensation insurer, and will the certificate name us so that we get the 30-day lapse notice?
6. Will you withhold Vermont income tax and the Child Care Contribution from the first day, and how much of the 0.11% employee share will you deduct?
7. Who files the Health Care Fund Contribution, and whose headcount do you use?
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: Massachusetts, New Hampshire, New York, Connecticut, Rhode Island, West Virginia, Wisconsin, Wyoming and the District of Columbia.