General Information

Key Terms

Professional Employer Organization (PEO)

A Professional Employer Organization (PEO) is defined as a business entity that offers professional employer services. 

“Professional employer services” are services provided through coemployment relationships in which all or a majority of the employees providing services to a client or to a division or work unit of a client are covered employees. The term does not include temporary help; independent contractors; services for a client and a PEO that have more than 33% common ownership; or a temporary common worker employer.

Coemployment Relationship

A coemployment relationship is a contractual relationship between a PEO and a client company, entity, or business (client) that involves the sharing of employment responsibilities to covered employees in accordance with a professional employer services agreement and Labor Code, Chapter 91.

Covered Employee

A covered employee is an individual who has a coemployment relationship with a PEO and a client.

Assurance Organization

Assurance organization means an independent entity approved by the Texas Commission of Licensing and Regulation (Commission) that:

1. provides a national program of accreditation and financial assurance for PEO companies;
2. has documented, qualifications, standards, and procedures acceptable to the department; and
3. agrees to provide information, compliance monitoring services, and financial assurance useful to the department in accomplishing the provisions of this chapter.

For additional information, see Rule 72.25, Use of Assurance Organization by Applicant or License Holder.

Licensing Basics

License Requirement

Any person who performs or offers to perform “professional employment services,” as defined by Labor Code, Chapter 91, must be licensed with the Department. A person must be licensed if it has any covered employees in Texas (even just one covered employee).

License Types

There are two types of licenses: a PEO license (full license) and a PEO limited license. Both licenses entitle a PEO to offer professional employment services in Texas. Eligibility for a limited license is restricted to out-of-state companies who assign 50 or fewer employees in Texas.