With Professional Employer Organizations (PEOs), PEOs and their client employers contractually share responsibilities regarding the client employer’s business. This shared employment relationship is called co-employment.
As co-employers, PEOs contractually assume certain client employer rights, responsibilities and risks through the client employer’s relationships with the client employer’s workers.
For workers’ compensation purposes, PEOs assume the responsibility of reporting payroll, managing claims, and paying workers’ compensation premiums for the client employer’s entire work force or a portion of the client employer’s work force.
When a workers’ compensation claim occurs, PEOs are also recognized as the Employer of Record (EOR). EOR is the employer when the workplace injury occurred.
A PEO that wants to report their client employer’s payroll to BWC and make premium payments for their client employer’s policy online must become an authorized representative of the client employer. This is referred to as the AC-2 Process. For more information on the AC-2 Process, refer to the:
For additional PEO information, refer to the:
A PEO that enters into a PEO agreement with a client employer assumes the responsibility of Employer of Record (EOR) and shares any liabilities with the client employer.
When the two organizations have a PEO agreement, it is also the PEO’s responsibility to ensure that the client employer maintains active workers’ compensation coverage with BWC. A PEO must perform all the following functions:
- Provide written notice to each shared employee it assigns to a client employer
- Pay wages and payroll taxes associated with shared employees as established within the PEO agreement
- Maintain adequate employment-related records for employees
- Maintain complete records, separately listing the payroll and claims of its client employers for each payroll-reporting period
- Maintain workers’ compensation coverage
- Pay all workers’ compensation premiums
- Manage all workers’ compensation claims, filings, and related procedures associated with a shared employee
BWC may deny or revoke a PEO’s registration if it finds the PEO failed to comply with the requirements of the laws or rules.
Registering a PEO
A Professional Employer Organizations (PEO) is one of the following business types:
- Sole proprietor
- Association (group of people organized for a joint purpose, like a business)
- Limited Liability Company (LLC)
That enters into an agreement with one (or more) client employers to co-employ all (or part) of the client employer’s workforce at the client employer’s work site
Ohio law mandates that PEOs operating in Ohio must:
- Register with BWC within 30 days of commencing operations in Ohio. To register:
- Submit a completed Professional Employer Organization Registration Application (UA-1) form.
- Pay an initial $1,000 registration fee
- Notify BWC about the PEO agreement. Refer to PEO agreements for more information.
- Submit the following to BWC annually:
- A GAAP-audited (Generally Accepted Accounting Principles) financial statement within 180 days of the close of the PEO’s fiscal year. Refer to PEO financial statements for more information.
- Pay a yearly $250 renewal fee (due BWC by Dec. 31) for each PEO policy
Handling payroll and claims reporting
Under a PEO agreement, the PEO may choose to:
- Report all claims and payroll on either the PEO or client employer’s policy, or
- Enter into a partial agreement with a client employer and report a portion of the payroll and claims under the PEO’s policy
PEOs engaging in a partial agreement (lease) must report the shared employees’ wages under the PEO’s Federal Tax ID Number (FEIN) and under the PEO’s BWC policy number.
Any payroll reported on the PEO policy must be completed monthly on BWC’s website using an e-account. Refer to the Monthly PEO Reporting Guide for more information.
If the PEO selects the option of reporting client employer payroll and claims under its policy, BWC transfers the appropriate experience period payroll and claims to the PEO’s policy. When this happens, BWC also re-calculates its experience modifier to reflect the true nature of the historical exposure (financial risk).
Online monthly reporting
BWC requires PEOs to pay premiums monthly and report actual payroll online by the 15th of each month. Failure to do so will cause a lapse in coverage and possible revocation of the PEO registration.
BWC has a designated website option (service offering) for PEOs to report payroll and pay premium monthly. For more information, refer to the Online Monthly Reporting for PEOs.
When client employers and PEOs contract together, they must notify BWC about the contractual PEO agreement.
To register a PEO, refer to Registering a PEO discussed above.
To notify BWC about a PEO agreement, the PEO must complete and submit the Professional Employer Organization Client Relationship Notification (UA-3) form for all new PEO agreements (or for a change in reporting) within 30 days of the agreement’s effective date.
If the contractual agreement between a PEO and a client employer terminates, the PEO must notify BWC and each client associated with it within 14 days from the effective date of termination. The PEO must complete and submit the Professional Employer Organization Client Relationship Notification (UA-3) form.
Effective as of January 1, 2016, a PEO can only enter into a new PEO agreement, or modify an existing agreement, and begin reporting claims and payroll for the client employer on either January 1st or July 1st.
Client employers who enter into a PEO agreement in the middle of a payroll period must be reported on the client employer’s workers’ compensation policy until the beginning of the next payroll reporting period. Refer to Reporting payroll for more information.
PEO financial statements
PEOs must submit GAAP-audited (Generally Accepted Accounting Principles) financial statements to BWC within 180 days of the close of the PEO’s fiscal year and then annually. Email financial statements to: BWCPEOFinancials@ohio.gov
BWC requires Professional Employer Organizations (PEOs) to report their actual payroll monthly.
However, if the PEO wants to report payroll and make payments online under their client employer’s policy, and submit their client employer’s Payroll True-Up Report, the PEO must become a Third-Party Administrator (TPA), also called an authorized representative, for the client employer by submitting an AC-2 form.
There are two ways (methods) to submit the AC-2 form as discussed below.
Note: For additional information about experience transfer requirements for a PEO lease (agreement), see the PEO Agreement Experience Transfer Table. This table provides information about topics such as what happens to the claims experience when a client employer chooses to use a PEO and other PEO activities.
The first method
The PEO can become a Third-Party Administrator (TPA), or authorized representative, by completing an Application for Representative Identification Number (R-4) and submitting it to BWC to receive a representative ID number.
After receiving the representative ID number, the PEO must have each client employer complete a Permanent Authorization (AC-2) form and submit it to BWC. The completed AC-2 form grants the PEO permission to become the client employer’s third-party representative.
A PEO must then establish an authorized representative BWC e-account to gain access to all its client employer’s online accounts who have submitted AC-2s. Refer to Create an employer e-account for more information.
After receiving the AC-2 form, BWC will attach the PEOs representative ID number to the client employers’ policies allowing the PEO to view all policies with a valid AC-2 under their login.
To report the client employer’s payroll or to make payments, PEO personnel will click on Employers, then select Payroll/Premium from the left menu. A dropdown menu will appear with the available options. There are also options under Financial Information on the Employers page.
The second method
A second way that the PEO can become a Third-Party Administrator (TPA), or authorized representative, is when the client employer logs into their own BWC e-account, selects:
- Employers, then
- Forms from the left menu, then
- AC-2 and uses the online version of the AC-2 form to make the PEO its third-party representative
However, the client employer can only do this if the PEO has completed the Application for Representative Identification Number (R-4), and BWC has assigned the PEO a representative ID number.
The client employer can use the search option to find the PEOs representative ID number, or have the PEO provide it and complete the online form. However, the PEO must still obtain a client-signed hard copy of the Permanent Authorization (AC-2) to provide to BWC if requested.
The below links will assist a PEO in maintaining its client policies: