Those looking for employment have a lot to worry about when it comes to finding a way to pay the bills. The Massachusetts Department of Labor Standards is attempting to cut back on any organization taking advantage of the unemployed. Enacted on Aug. 10, 2018, Massachusetts HB 4723 requires all professional employer organizations—also called PEOs—to register and post a $250,000 surety bond. Roughly 40 other states have passed legislation similar to Massachusetts’ new bill.

A larger bond may be required of PEOs with insufficient working capital. In these cases, the amount of the surety bond is based on the deficiency plus $250,000 and is intended to cover the payment of all taxes, wages, benefits, or other entitlement due to or taking into account the number of employees working at the organization.

What is a professional employer organization (PEO)?

The state of Massachusetts defines a PEO as “any person engaged in the business of providing professional employer services.” Terms that could be synonymous with this type of organization could refer to a professional employer organization, PEO, staff leasing company, employee leasing company, administrative employer or other related names.

How do I register as a PEO in Massachusetts?

The Massachusetts Department of Labor requires all PEOs to register with the state to ensure the organizations are adequately financed, bonded and inspected in accordance with state regulations. Additionally, PEOs will need to pay the required $500 annual registration fee and maintain business records to submit to the Department of Labor.

Why do I need a surety bond as a PEO?

All PEOs need to post a $250,000 surety bond in order to legally work in the state of Massachusetts. A surety bond works to cover the consumer by creating a three-party agreement between the principal, the obligee and the surety. In this specific case, the principal is the PEO taking out a surety bond, the obligee is the state of Massachusetts requiring the bond and the surety would be an insurance company backing the bond.

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