Surety Bond Encyclopedia

Staff Leasing Service ($100,000.00) Bond - Statewide in Texas

Brief Summary

In Texas this bond is a working capital tool. When a professional employer organization's audited balance sheet falls short of its tier, a surety bond on the TDLR form can close the gap for an annual premium, which keeps cash in the business instead of tied up proving a number to the state.

Texas now calls staff leasing companies professional employer organizations (PEOs), licensed by the Texas Department of Licensing and Regulation under Labor Code Chapter 91. Section 91.014 requires positive working capital of $50,000, $75,000 or $100,000 depending on the number of covered employees, and lets a PEO cover any shortfall with a surety bond, letter of credit, guaranty or other security. This $100,000 bond matches the top tier, for PEOs with more than 750 covered employees.

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How to Apply for a Staff Leasing Service ($100,000.00) Bond:

Count your covered employees to find your working capital tier: under 250, 250 to 750, or more than 750.
Get your audited GAAP financial statement, or CPA reviewed statements if you have less than 12 months of operations.
Measure the working capital shortfall, if any, against your tier.
Obtain a surety bond on TDLR form PEO016 in an amount that brings you into compliance with your tier.
File the bond with your original or renewal PEO license application to TDLR.
Keep the bond in force while licensed and for two years after you stop doing business in Texas or the license expires.

Detailed Information About the Texas Staff Leasing Service ($100,000.00) Bond:

Staff leasing is now PEO licensing

Texas used to call these businesses staff leasing services companies. Senate Bill 1286, passed in the 2013 regular session of the 83rd Legislature, replaced that term with professional employer organization throughout Labor Code Chapter 91. The license, the rules and the forms at TDLR all use the PEO name today, so search for PEO, not staff leasing, when you look for the application.

The amount depends on your tier

Labor Code 91.014(a) requires an applicant for an original or renewal license to show positive working capital of $50,000 if it employs fewer than 250 covered employees, $75,000 if it employs at least 250 but not more than 750, and $100,000 if it employs more than 750. The $100,000 figure on this page is the top tier. A smaller PEO sits in a lower tier.

What the bond actually does

Working capital is shown with a GAAP financial statement audited by an independent CPA, without a going concern qualification. A newer PEO with less than 12 months of operations may file CPA reviewed statements instead. Under 16 TAC 72.40 the statement must show positive working capital as of a date no earlier than 15 months before the application. If the statement comes up short, Section 91.014(b) lets the PEO cover the deficiency with a guaranty, a letter of credit, other security the department accepts, or a bond in an amount that demonstrates compliance with its tier.

Bond requirements under the rule

16 TAC 72.40 requires the bond to be issued by a surety authorized to do business in Texas, conform to the Texas Insurance Code and be on a department approved form. TDLR lists that form as PEO016. The security must be maintained the entire time the licensee does business in Texas and kept in effect for two years after the licensee stops doing business here or its license expires. Do not cancel the bond the day you close.

License term

A PEO license is valid for one year from issuance or renewal under Section 91.016, and working capital is shown again at each renewal. Section 91.019 provides a separate limited license for a PEO with fewer than 50 covered employees in Texas at any one time that has no Texas based clients and no Texas office or solicitation. License fees under 16 TAC 72.80 scale with the number of covered employees.

Eligibility and Requirements for a Texas Staff Leasing Service ($100,000.00) Bond:

Texas Department of Licensing and Regulation as the regulator receiving the bond.
Surety authorized to do business in Texas, with a bond that conforms to the Texas Insurance Code.
Department approved form PEO016.
Working capital of $50,000, $75,000 or $100,000 by tier, shown by statement, bond or other approved security.
Surety underwriting, usually including financial statements, which sets the premium.

Texas Staff Leasing Service ($100,000.00) Bond FAQs:

Is a staff leasing license the same thing as a PEO license?

Yes. Senate Bill 1286 in 2013 replaced the term staff leasing services company with professional employer organization in Labor Code Chapter 91. TDLR licenses these businesses as PEOs today.

Does every PEO post a $100,000 bond?

No. The working capital requirement is $50,000, $75,000 or $100,000 depending on covered employees. A bond is one way to cover a shortfall, sized so you meet your tier. $100,000 is the top tier for PEOs with more than 750 covered employees.

What else can I use besides a bond?

Section 91.014(b) and 16 TAC 72.40 also accept a guaranty with the guarantor's audited financial statement, an irrevocable letter of credit, or another form of security acceptable to the department.

How long does the bond have to stay in place?

For the entire time you do business in Texas, and for two years after you stop doing business here or your license expires, under 16 TAC 72.40.

Which form does TDLR use?

TDLR lists form PEO016 for the PEO surety bond on its PEO forms page. The rule requires a department approved form.