Employment Services Industry Licensing Guide
Like many professional industries, employment service agencies must comply with all laws and regulations applicable to their business. Whether you operate an employment agency, a professional employer organization (PEO), or a talent agency, you will face certification and licensing requirements at every level of your career.
Adhering to professional licensing requirements is key to maintaining your legal authority to practice employment services. Beyond that, full compliance sets a successful precedent for dealings with employees, clients, and competitors. Failing to observe employment service license requirements can result in state imposed penalties and even denial, revocation, or suspension of your license.
The good news? An experienced, dedicated compliance partner can help you take a proactive approach to maintaining employment service licensure and certification. Contact Harbor Compliance today to help you simplify the professional licensing process.
The following guide contains an overview of employment practice licensing and specific board requirements in each state.
Overview of Requirements
A business entity offering employment services to the public typically must register with the Department of Labor and receive an employment services license. Licenses are required to practice in all but nine states: Delaware, Georgia, Idaho, Maryland, Mississippi, Missouri, Ohio, Pennsylvania, and South Dakota.
Licensure for employment services firms usually follows incorporation or foreign qualification of the business entity with the Secretary of State. Common legal structures for firms are corporations or professional corporations (PC), and limited liability companies (LLC) or professional LLCs. Incorporation refers to formation of the business entity, whereas foreign qualification refers to applying for a Certificate of Authority to transact business in another state.
After registration with the Secretary of State, firms must apply for an employment services company license through the Department of Labor or the relevant licensing agency. Employment services licenses are typically split into three categories: employment agency, staffing agency, and talent agency.
- Employment agencies are businesses that seek employment opportunities for a jobseeker and sometimes charge a fee for their services. Read more
- Professional employer organization (PEO) and staffing agency licenses are often rolled into a single registration despite having different purposes. Professional employer organizations handle human resources services for businesses by acting as a co-employer, while staffing agencies also act as co-employers but differ from PEOs in that they recruit employees to fill roles for companies facing staffing shortages. Read more
- Talent agencies operate in a manner similar to employment agencies, but they sometimes have their own license category. Talent agency typically refers to agencies that match those in the fine arts with job opportunities. Broadly stated, an employment agent is generally a person, copartnership, association or corporation engaged for the purpose of attempting to procure help or employment. Read more
Licenses for employment services companies vary greatly by state, so it is important to be aware of the differences between jurisdictions. For example, employment agencies that do not charge a fee for their services are not required to register in some states. Also, only California and Florida have designated talent agency licenses, however, the employment agency requirements in other states may apply to talent agencies operating in these states. A dedicated compliance expert can help you keep track of varying jurisdiction requirements and updated laws.
Initial Registration Fees
Fees for initial employment service licensing range from $0 to $3,054. Kentucky, New York, Virginia, and West Virginia charge nothing to register for some license types, while Michigan licenses can cost up to $3,054 depending on when you register. The average license fee is $550 while the most common filing fee is $500.
Firm registration renewal varies by state. The majority of states require employment service firms to renew licenses annually, but 9 states have biennial renewal periods. Kentucky requires renewal every six months while Minnesota and Washington do not require renewal at all for some license types.
Like initial application fees, renewal fees also vary by state. Fees range from $0 for several license types to $3,054 in Michigan. Firms can expect to pay closer to the national average of $500 when renewing, however, the most commonly applied fee is $250.
Employee Leasing Company - Enter into leasing contracts with other businesses that require labor. The leasing company loans its workers to the lessee while still providing specified responsibilities, such as workers compensation insurance, to the employees. This includes long term (6 months or more) temporary arrangements but often excludes temporary help arrangements. Unlike professional employer organizations, employee leasing companies are contracted when an employer needs to hire staff and does not want to handle human resources responsibilities.
Employment Agency - An entity that, for compensation, procures or attempts to procure employment for a person.
Professional Employer Organization - PEOs take on the human resources role for businesses and act as a co-employer in the sense that the client company's workers are administratively employees of the PEO but functionally these employees are controlled by the client company. Unlike employee leasing companies, PEOs are contracted when an employer already has staff and does not want to handle human resources responsibilities.
Staffing Agency - An entity that procures temporary or part-time employment for a person who then works under the supervision of a worksite employer.
Talent Agency - An entity that, for compensation, procures or attempts to procure employment or placement for an artist. (Certain art forms are excluded)
American Staffing Association
Staffing, recruiting, and workforce solution industry advocacy group.
National Association of Personnel Services (NAPS)
Education and training oriented association for personnel services providers.
National Association of Professional Employer Organizations
Provides advocacy efforts, information, and other services to members of the employment industry.