Indiana is the 38th-largest state in the US by land size, but it’s the 17th most populous state with 6.968 million inhabitants. This state also has the 19th-largest economy in the country, with a GDP of $527 billion at the end of 2024. To put things in perspective, this GDP competes with entire nations. If Indiana were a country, it would have the 31st-largest GDP, ranking just after Austria and before Norway. 

As of the middle of 2025, Indiana was home to 3.489 million workers, which represents a significant labor force on par with many nations. The state’s unemployment rate is also down to 3.6%, with employment up in nearly every industry but construction, information, and financial services. Education and health services have seen the biggest increases in employment. Less than 3% of Indiana’s workers are employed in agriculture, largely due to the increasing automation of that sector. Roughly 15% of Indiana workers are employed in industry, particularly in manufacturing and construction. The overwhelming majority of workers, 82% of Indiana’s workforce, is employed in services, including government services, trade, transport, utilities, professional and business services, health and education, hospitality, financial services, and more. Indiana is known as a business-friendly state with favorable tax rates, pro-business legislation, relative affordability, and a highly skilled workforce, all acting as major draws for investors. 

If you’re interested in hiring skilled Indiana workers, this review will explain how you can do so efficiently by partnering with an Indiana PEO to manage your workers’ HR needs.

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What is an Indiana PEO?

An Indiana PEO, or Professional Employment Organization, is a type of service provider that helps you manage employees in Indiana following a co-employer model. Instead of managing all aspects of HR in-house, you can choose to effectively outsource your HR needs to it instead. PEOs generally also manage compliance with local laws to help reduce your risk exposure in the state. For most small and medium businesses (SMBs), partnering with a PEO is a cost-effective way to access high-quality, professional HR services for less than they’d normally cost in-house.

Modern PEOs employ legal, HR, and tax experts who monitor conditions and legislation in Indiana and adjust their services accordingly. These services are normally provided through extensive cloud-based digital platforms, many now with AI integration. Most platforms offer comprehensive functionality and help to streamline and automate processes like payroll processing, benefits administration, and leave management. Functions like performance management, talent management, and employee engagement may also be offered by PEOs in Indiana. HR processes are made even more efficient by giving employees direct access to their profiles so they can make requests and keep track of their benefits.

PEOs function in a similar way to Employers of Record or EORs, and some providers offer both PEO and EOR services. While both manage HR and compliance, the main difference between these services is that Indiana EORs can directly hire employees for their clients who don’t own entities in Indiana or even in the US. PEOs, on the other hand, act as co-employers by managing HR needs while their clients hire their employees directly. Aside from this important distinction, EORs and PEOs are very similar, and the terms are often used interchangeably.

Why Hire through a PEO in Indiana?

Indiana works hard to attract investment, both from out of state and internationally. The state is a center for advanced manufacturing, especially in the automotive and technology industries, as well as a growing data center location. Indiana also assesses a corporate income tax (CIT) rate of 4.5% across the board, which is relatively attractive and competitive in the US. The labor force in the state is also well-educated and highly skilled. Over 90% of residents complete high school, and of those, over 51% move on to attend college. These factors combine to make setting up a business and hiring Indiana workers an attractive choice. 

At the same time, it can be complicated to manage the needs of workers according to federal and state laws, especially if you don’t have extensive experience in doing so. Partnering with a PEO helps to ensure that your workers are well-treated, happy, and managed compliantly. PEO experts help you stay in line with numerous labor regulations, including: 

  • Regular hours: While employers can generally set their hours of operation, they normally equate to eight hours of work over five days a week. Indiana state law doesn’t mandate a maximum daily or weekly limit for hours, but it follows the Fair Labor Standards Act (FLSA) and requires overtime pay for employees who work more than 40 hours a week.
  • Overtime: Indiana doesn’t set a limit on the number of overtime hours an employee can work per day, week, or month. However, in keeping with the FLSA, it requires that employees be paid 150% of their normal wages or “time-and-a-half” for these extra hours.
  • Annual Leave: The state doesn’t require a minimum annual paid leave for workers. Instead, employers can offer leave as a benefit through individual contracts.
  • Minimum Wage: Indiana follows the federal minimum wage of $7.25 per hour. Tipped employees can be paid $2.13 per hour as long as their tips bring them up to the minimum wage.
  • Maternity and paternity leave: Indiana doesn’t require that employers provide their workers with minimum maternity or paternity leave allowances. However, in keeping with the federal Family and Medical Leave Act (FMLA), Indiana employers must provide workers with 12 months of unpaid, job-protected leave for the birth and care of a newborn or the adoption of a child.
  • Right-to-work: Indiana has imposed right-to-work legislation, which prohibits employers from requiring workers to join labor unions in order to gain employment.
  • At-will employment: In the state, both employers and employees can terminate their employment agreements at any time without needing to give notice or justification.

Learning all of the legal requirements for managing workers in Indiana can be very challenging and often prohibitively resource-intensive for SMBs. By partnering with PEOs, however, they can reduce their administrative burdens and lower costs, while leveraging expert knowledge to stay compliant with Indiana’s labor laws.

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Services Offered by Indiana PEOs

Indiana PEOs take care of an impressive range of services to help their clients stay compliant while managing HR for their employees. These services include: 

Payroll Management

Payroll management is one of the most difficult HR functions to perform, and that’s when you’re already familiar with the local regulations you need to follow. If you’re not already established in Indiana, learning to handle payroll compliance with all local tax and labor laws can be immensely challenging. This is why payroll management is one of the most important services offered by Indiana PEOs.  

Your PEO partner will create a profile for each of your new employees on its platform and set up a regular calculation for each based on their salary, benefits, and tax obligations. For each pay period, it will receive the time and attendance data you collect as the worksite employer and use this to power those calculations. It will determine how much each employee has earned for the period, how much must be deducted for Social Security, and how much to withhold in taxes. This will leave each employee’s net earnings, which your PEO will pay to them on your behalf, normally via bank transfer.

Employee Benefits Administration

In Indiana, workers must be covered by workers’ compensation and unemployment insurance. They must also pay into the federal Social Security and Medicare programs, which are mandatory across the country. These mandatory benefits are assessed according to the following percentages of the employee’s gross earnings:

Benefit Employee Contribution Employer Contribution
Workers’ Compensation Insurance N/A 0.75% (on average)
Unemployment Insurance N/A 0.5–9.4% (up to $9,500 wage base)
Social Security 6.2% (up to $176,100 wage base) 6.2% (up to $176,100 wage base)
Medicare 1.45% (+0.9% on income over $200,000) N/A

Most PEOs will also administer additional benefits for their clients. If you want to offer supplemental benefits to attract and retain top talent in Indiana, your PEO will normally be able to connect you to plan providers or offer its own plans directly. It can also manage these benefits – including equity, health insurance, and retirement plans – for an additional fee.

Tax Compliance

PEOs in Indiana are required to register with the Indiana Department of Insurance (IDOI) and renew their registration annually. They must also report annually to the Indiana Department of Workforce Development (DWD) to ensure they’re following the state’s employment and tax requirements. One of the primary reasons for all of this regulation of PEOs is that they handle employment taxes for their clients’ employees. They calculate and withhold pay-as-you-earn income taxes from employee paychecks and remit them to the IRS and the Indiana Department of Revenue (IDR). 

Indiana has a flat state income tax on personal income of 3.05%. PEOs also withhold federal taxes at rates from 10% to 17% for individual taxpayers.

Recruitment and Employment Contracts

Some clients already have specific employees in mind when they decide to partner with Indiana PEOs. Others, however, may need help with recruitment, especially if they’ve never done business in Indiana in the past. Some PEOs offer additional recruitment services, using their professional recruiters to help clients quickly find the talent they need in the state. They may also help with advanced tasks like candidate interviews and selection. Other PEOs may simply provide recruitment tools through their platforms – tools like access to talent pools and applicant tracking systems (ATSs) – to help their clients perform their own recruitment function more effectively.

After selection is complete, most PEOs will also help with hiring tasks. They may offer support for negotiations to help you offer salaries and benefits that are appropriate to the market but also attractive enough to entice quality employees. Most PEOs will help you create employee contracts, ensuring that they’re fully compliant with Indiana’s laws. Some will also help manage these contracts and candidate commitments.

In Indiana, contracts can be verbal unless they’re for a duration of one year or more. Contracts should include details of job description, compensation, payment schedule, benefits, and working hours. While Indiana is an at-will employment state, contracts can include additional termination conditions like notice periods or even severance pay.

Onboarding

New employees need to be onboarded to your organization. For employers, this generally includes orientation, job-specific training, and granting access to the tools, equipment, and data they need to do their jobs. While you’re doing these tasks, your EOR partner will handle most administrative tasks. It will also collect their personal, employment, and banking details with which it will set up their automated payroll calculations and salary bank transfers, as well as register them with the state and federal tax authorities and Social Security.

Terminations

As an at-will state, Indiana does not require employers or employees to provide each other with notice, justifications, or severance pay when contracts are terminated. Both parties are free to terminate their agreements at any time. However, individual contracts or collective agreements can include clauses that require notice periods and severance pay, and these commitments are legally binding if used. Your PEO partner can help calculate and provide notice and severance pay to the employees you dismiss if required.

Advantages of Using a PEO in Indiana

When you choose to partner with an Indiana Professional Employment Organization, you gain an ally that can make your hiring and HR management much more efficient and effective. Some of the main advantages of working with a PEO include:

  • Speed: PEOs can help you onboard employees quickly, usually getting them started in just a few days.
  • Risk mitigation: With help from their legal, tax, and HR experts, PEOs help manage your employees in full compliance with Indiana and federal law. 
  • Cost savings: Because they work at scale and automate many processes through their platforms, PEOs can normally manage HR for less than most SMBs can on their own.
  • Recruitment: Some PEOs offer active recruitment services or recruiting tools to help clients locate quality talent quickly.

How to Engage an Indiana PEO

Dozens of PEOs offer services in Indiana. To engage one, follow this simple process:

  1. Select a provider: Look at the services provided, reputation, and price that each PEO offers. Choose a reputable PEO that meets your budget while still giving you all the services you require.  
  2. Contact the PEO: If you choose and contact a PEO, it will offer you a consultation to assess your needs. It will then offer you a set of services and a quote for its fees.
  3. Enter a service agreement: If you’re happy with the price and services offered, you can engage the PEO by entering into a monthly or annual service agreement. Once this is agreed, the PEO will start recruiting new workers and onboarding existing employees to its platform.

REMOTE PEOPLE FURTHER READING

Want to dive deeper? Check out our full guide: PEO vs. EOR: What’s the Difference?

Indiana PEO Services

Setting up a business and managing workers in a new state like Indiana can be an intimidating challenge. With the help of Indiana PEO services, however, you can easily manage payroll, benefits, time off, and more for your employees, all while saving money and staying compliant. To learn more about the best PEOs operating in Indiana, contact Remote People today.

Think a PEO could be the right move? Contact Remote People to explore your options and find a provider that fits your Indiana business perfectly. We’ll help you simplify HR, stay compliant, and support your team as you grow.