The cost for a Professional Employer Organization bond will depend on the bond amount needed and the premium rate for the bond. The bond amount will differ in each state but is usually between $50,000 and $100,000. The bond amount is usually determined by the state’s labor department or department of licensing, so it’s best practice to confirm the amount needed for your bond before starting an application.
Various factors, such as your experience in the industry, the financial standing of the company, and your credit score, determine the premium rate for the bond. Your credit score has the most significant impact of these factors, and a soft credit check will be completed as part of the quote process. The premium rate is a percentage of the total bond amount, usually between 0.5% and 10%. Applicants with a lower credit score can expect to pay a higher premium than applicants with a higher credit score. Our $50,000 professional employer organization bond rates start at $500.
One way to lower the annual cost of the bond is by purchasing a multi-year bond. We can get at least a 15% annual discount when we purchase a multi-year bond. Our partnerships with over 10 insurance companies allow us to offer the most competitive prices on the market. We’re committed to getting our customers the best rate, but if you find a better rate, let us know, and we’ll do our best to beat it!
A professional employer organization is a business that provides outsourced employee/HR services. These services include handling employee benefits or payroll, training and developing new employees, and risk management. A professional employer organization's services can vary, and each state may have a different definition for a specific type of business. It is a best practice to check with your state’s department to determine what classification your business is and what kind of registration process is required. Generally speaking, if you provide HR-related services to other businesses for a fee, then you’re likely a professional employer organization.
A certified professional employer organization is a type of professional employer organization that has met the requirements set by the IRS. There is an extensive application process to confirm that the business is operating legally and ethically and a background check and audit to confirm that the business is operating with integrity. The main difference between a certified and non-certified professional employer organization is that a certified professional employer organization is liable for the employment taxes for the businesses that they partner with. A non-certified professional employer organization will pay their employees using their FEIN instead of the business they partner with. In addition, a certified professional employer organization has a “stamp of approval” from the IRS that they operate their business legally, ethically, and with integrity, making them a great business to partner with.
Becoming a certified professional employer organization is extensive but can be worth it for a business in the long run. All certified professional employer organizations will need to complete an application on the IRS website, complete a background check and financial audit, and will also need to purchase a bond that is between $50,000 and $1,000,000, depending on the liability that the IRS requires for your business.
To learn more about becoming a certified professional employer or how to apply as one, check out the IRS website and help articles.
A claim could be filed against your bond for any business practices that are illegal or unethical. For a professional employer, claims are most commonly due to a breach of contract or fraud and could be filed by the organization’s clients or employees. It’s always in your business’s best interest to operate legally and ethically to avoid any claims being filed against your bond.
When a claim is filed, the surety company will investigate the validity and gather any necessary information. If a claim is valid, the surety company will pay up to the bonded amount for the claim. Surety bonds also require that the bond’s principal, you, reimburse the surety for the amount paid for this claim. If you do not reimburse the surety, it can lead to your bond being canceled, your license being suspended, and more difficulty getting a bond in the future.
Renewing your professional employer organization bond is an easy process and has to happen annually when your license must be renewed. The state’s labor department determines the bonded amount for a professional employer organization bond, so each year, you will need to submit a financial audit so your bond amount can be calculated. Once you receive the bonded amount you’ll need, all you need to do is reach out to your surety agent, who can help complete an application and purchase the bond. At Suretynow, we’ll contact you about 30-60 days before your bond expires to get started on your renewal bond to prevent any lapses in your bond’s coverage.