Professional Employment Organization (PEO) Bond

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Bonded PEO working from home

What is a PEO bond?

A PEO is a “professional employer organization” that performs outsourced employee management tasks. Also known as an “employee leasing company,” a PEO acts as an outsourced HR department, covering tasks such as risk and safety management, benefits and payroll, and training for client companies. PEOs charge a fee in exchange for providing services to clients.

A PEO bond is a license and permit bond the government often requires for professional employer organizations to become licensed to operate. The bond guarantees the organization fulfills its contractual obligations and complies with state rules and regulations.

What is the purpose of a professional employment organization bond?

A PEO bond can help reduce fraud and malpractice in the industry by holding businesses accountable. Government agencies in most states require bonds to regulate PEOs more closely. These surety bonds provide clients financial security, ensuring that professional service organizations operate legally and ethically. In addition to guaranteeing client work performance, the bond also acts as collateral for workers’ compensation policies.

Get Your PEO Bond:

Quick Takeaways

  • A PEO is a “professional employer organization” that performs outsourced employee management tasks for businesses.
  • The government often requires a PEO to become bonded before issuing a license.
  • The bond requirement is 5% of the PEO’s federal tax liabilities for April 1 to March 31 of the following year.

Does every PEO need a bond to become certified?

To qualify as a CPEO (Certified Professional Employer Organization), the IRS requires an organization to post a surety bond. Most of the United States has a surety bond requirement for PEOs to become certified and to operate legally.

How much does a PEO bond cost?

The bond requirement, according to 26 U.S.C. Section 3511, is 5% of the PEO’s federal tax liabilities for April 1 to March 31 of the following year. The minimum requirement is $50,000, and the maximum is $1 million.

For example, if your federal tax liability is $1 million, you may need a $50,000 bond (5%). You would then pay a small percentage of this bond as your premium – as little as 0.5% ($250) if to have excellent credit and good business financials.

How to Get a PEO Bond in Your State

Bond requirements in various states often range from $50,000 and $100,000. Contact us to learn if you qualify for the standard bonding market. We offer the fastest and most secure option for getting bonded. Our all-digital platform is straightforward and intuitive. Apply online or call us at 888.435.4191 to speak with an agent directly.



Founders Ryan Swalve and Zach Mefferd formed the vision for when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.