In 2026, the labor market in North Dakota is in crisis, with the fewest available workers for positions. Employers in the state are under intense pressure to offer highly competitive benefits to workers, as North Dakota has one of the worst workforce shortages in the country, with 47 available workers to 100 open positions.

A key obstacle for many growing companies is payroll management, state taxes, and compulsory insurance filings. A North Dakota Professional Employer Organization (PEO) can offer a co-employment relationship where these HR challenges can be shared with an expert.

In North Dakota, as in all states, compliance is essential and must be managed correctly, or companies will not be able to operate. North Dakota PEOs must be licensed by the Secretary of State, Chapter 43-55, and demonstrate they have the financial resources necessary to guarantee employee pay and benefits.

Working with a PEO can give employers the bandwidth to address labor quality bottlenecks that are already impacting nearly 20% of businesses in North Dakota, while the PEO manages the details of the 2026 labor market.

Employers sometimes think that a PEO is the same as an Employer of Record (EOR), although they are completely different services. A PEO is simply a co-employer, which means that the business owner must have their own local entity in the state. On the other hand, the EOR is the legal employer, who hires employees using their established local entity, without the need of a local entity established by the original business owner.

What Are PEOs in North Dakota?

In North Dakota, a PEO is a for-profit organization that contracts with a client to co-employ the client’s workers.

PEOs are defined under North Dakota Century Code § 43-55-01(8) as the administrative employer who processes payroll and tax filings, while the client employer directs the day-to-day work of the employees.

The PEO becomes the employer of record for tax purposes, but has access to the combined volume of its clients’ organizations to offer more robust benefits and streamline HR services.

The state evaluates PEOs for licensing annually and assesses a one-time fee of $1,000 to become a PEO and a $500 annual renewal fee. A PEO must also be bonded with a surety bond or irrevocable letter of credit, in the lesser of $100,000 or 5% of the total wages reported to Job Service North Dakota by the PEO during the quarter preceding the date the PEO submits the quarterly report.

A new PEO that has not filed a quarterly report with the state is required to post a $100,000 bond to guarantee payment of all taxes, wages, and benefits for the employees under its coverage.

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Why Hire through a PEO in North Dakota?

If an employer is hiring in North Dakota through a PEO, they will be able to better address the second-worst workforce shortage in the country and focus on creating a professionalized employee experience that is difficult for smaller employers to provide on their own.

A key benefit of the PEO model is that every hire you make is supported by an administrative system with in-depth knowledge of the hiring state’s employment laws. North Dakota employers are subject to a monopolistic workers’ compensation system and must comply with detailed wage payment regulations.

  • Work Hours – There is no maximum workday for adult employees in North Dakota, but retail employees must be given 24 consecutive hours of rest in each calendar week
  • Overtime – Overtime must be compensated at a rate of not less than one and one-half times the regular rate of pay for hours exceeding 40 in a seven-day workweek
  • Vacation – Vacation pay is considered wages when it is earned and must, in most cases, be paid on termination of employment if it is not forfeited in accordance with clearly communicated rules.
  • Minimum wage – North Dakota has a minimum wage equal to the federal minimum wage of $7.25 per hour. The state tipped minimum wage is $4.86 per hour
  • Sick leave – North Dakota has no state-wide paid sick leave requirements for private sector employees. Employers subject to the federal FMLA law must have 50 or more employees

Which Services Do PEOs Provide in North Dakota?

North Dakota PEOs offer a complete package of HR services that take the employer through the entire lifecycle of the workforce. This would include all the steps from the beginning of the process with recruitment and “Ban-the-Box” compliance through the 2026 supplemental tax rates on bonuses and more.

In one place, a PEO will also take care of an employer so that they remain in good standing with state agencies such as the Secretary of State, as well as Job Service North Dakota.

Payroll Management

Payroll in North Dakota must be made in accordance with state pay frequency and documentation requirements. Wages must be paid to an employee at least once a calendar month on regular, predetermined paydays. Although direct deposit is allowed in North Dakota, it is strictly voluntary, and an employee must be allowed to choose the financial institution through which to transfer their funds.

A PEO ensures that each pay cycle has an informative statement of total hours worked, rate of pay, and all state and federal deductions. Income tax withholding in North Dakota in 2026 will be one of the more involved taxes for a PEO to manage due to North Dakota using both of the tables in W-4, pre-2020 and post-2020, based on an employee submitting a pre-2020 or post-2020 W-4 form.

A PEO is responsible for applying the 1.5% flat withholding rate to supplemental wages, such as overtime and bonuses, so that the employer does not incur an under-withholding penalty.

Employee Benefits Administration

The primary way a North Dakota PEO creates value for clients is by aggregating their employees with those of other client companies to access large-group pricing and broader plan coverage.

It’s also never been more important to offer attractive benefits in 2026,with the North Dakota labor market being as competitive as it is, and the difference between a qualified applicant accepting or declining a job offer often comes down to a better or worse benefits package.

The PEO assumes responsibility for negotiating group rates with insurance carriers and the ongoing administration of claims and enrollments, making sure all group health plans meet federal requirements as well as North Dakota’s specific laws around continuation coverage.

The North Dakota “Mini-COBRA” law (NDCC § 26.1-36-23) applies to employers with less than 20 employees and requires that group health coverage be continued for up to 39 weeks after a qualifying event such as a layoff or reduction in hours.

In that way, it’s more generous than the typical 18-month COBRA continuation coverage for larger firms as it relates to duration for small groups. A PEO ensures all notices and premium payments are made within the 60-day election period.

The PEO also handles the reporting to Workforce Safety & Insurance (WSI), the monopolistic state fund for workers’ compensation insurance that is mandatory for all employers.

Benefits that the PEO provides include:

  • Health Insurance – Full-featured large-group medical, dental, and vision plans that may be more affordable than the options you have when self-insuring your small business.
  • Retirement Plans – Professional management and compliance for 401(k) and other retirement savings vehicles.
  • Workers’ Compensation – Administrative services for the mandatory coverage offered by Washington’s WSI program, including premium reporting and claims filing for job-related injuries
  • Life and Disability – Supplemental life and disability insurance to complete your total compensation package
  • Section 125 Plans – Administration of pre-tax accounts, such as Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs)

Tax Compliance

Administering North Dakota’s taxes can be one of the state’s most complicated requirements, but with a PEO, they will either report and remit your company’s payroll taxes under its FEIN or on the employer’s behalf. The tax rates for North Dakota income taxes can range from 0% to 2.5% in tax brackets for 2026. Your PEO will ensure correct withholding for each employee, based on the appropriate version of the W-4 they’ve completed. A PEO ensures the state is paid, and your employees are compliant with the law.

North Dakota’s State Unemployment Insurance (SUI) taxable wage base is $46,600 for 2026. Rates are the new employer rates of 1% (9.67% for construction employers). The PEO will file the quarterly reports with Job Service North Dakota, even in “zero wage” quarters, so you don’t get hit with a penalty.

FICA taxes, though less visible, can also add up quickly. The PEO will calculate and pay the employer’s share of the 6.2% for Social Security and 1.45% for Medicare with each paycheck. Additionally, if the state decides to audit the company, the PEO will be your first line of defense. It’s required to keep payroll tax documents for 3 to 4 years, as well as any written communications from the Tax Commissioner.

2026 ND Tax Parameter
Value / Requirement
SUTA Taxable Wage Base
$46,600
SUTA New Employer Rate (Non-Construction)
1.00%
SUTA New Employer Rate (Construction)
9.67%
Income Tax Withholding (Single Top Bracket)
2.50% over $258,450
Income Tax Withholding (Married Top Bracket)
2.50% over $168,525
Supplemental Wage Withholding
1.50%
Standard Deduction (Single/MFS)
$12,875 (Factored into tables)

Recruitment and Employment Contracts

The PEO recruitment process helps North Dakota employers comply with the state’s “Ban the Box” law, which says an employer can’t ask about criminal history on an initial written application if it has four or more employees.

The PEO does not ask about criminal history until after a candidate has been chosen for an interview or a conditional offer has been made. This decreases the likelihood that a criminal history inquiry would lead to a discrimination claim.

When it comes to employment contracts, North Dakota is an “at-will” state. This means that, barring a fixed-term contract, either party may end the relationship at any time for a lawful reason.

ND has the most stringent of the restrictive covenant laws, NDCC § 9-08-06. A non-compete and a non-solicitation covenant are void except when entered into upon the sale of a business’s goodwill or the dissolution of a partnership.

A PEO will help an employer protect its intellectual property through a non-disclosure agreement that is legally compliant, rather than having an unenforceable non-compete agreement.

Onboarding

The North Dakota onboarding process is done on a very specific timeline to keep the employer in good standing with the State Directory of New Hires. All new hires, rehires, and re-entries must be reported within 20 days from the date of the employee’s first day of work.

A PEO manages the automatic reporting of these employees and provides this data to the state so that they can help with child support enforcement and other government regulations.

Onboarding to the new online background check system through the ND Gateway Portal is another major focus for many industries in North Dakota.

The PEO will complete these checks as well as the required federal Form I-9 verification within 3 business days of the hire date. Documents will be maintained in an organized manner and made available for future inspections.

Terminations

Final wages must be correctly calculated and delivered on time when terminating employment in North Dakota. The state is “at-will,” but all earned wages are due on the next regularly scheduled payday.

In cases of involuntary termination, the final paycheck must be delivered to the address specified by the employee via certified mail, unless another delivery method is agreed upon.

The main area where employers trip themselves up in termination is vacation pay. North Dakota classifies PTO as wages, and employers must therefore typically pay out all unused leave in the final paycheck.

The exceptions are if the employer can prove that at the time of hire, they gave the employee written notice of a forfeiture policy, if the employee worked less than one year, or if an employee resigns with less than five days’ notice.

PEO final calculations will be accurate, ensuring the employer is not on the hook for 30 days of pay in wage penalties due to late or incorrect final pay.

Advantages of Using a PEO in North Dakota

PEOs provide relief from the particular administrative and legal challenges that are part of doing business in North Dakota. For small and medium businesses, a PEO offers purchasing power to recruit and retain employees, especially compared to the state’s largest energy and healthcare companies. The best benefits and retirement packages are attractive to job seekers, and 20% of North Dakota business owners surveyed consider labor quality to be one of their most important problems. An outsourced HR professional to backstop the HR team and ensure the employer is in compliance will be a competitive differentiator for the highest-skilled workers.

PEOs also relieve an organization of the legal risk associated with human capital management in the state. The state’s most significant law of that nature is the monopolistic workers’ compensation system, Workforce Safety & Insurance, or WSI. The North Dakota Department of Labor can levy $10,000 penalties for employers found to be uninsured within the state, and being uninsured is inexcusable for mistakes in coverage payment or accident reporting. WSI will pay claims under its own reporting and processing procedures through its no-fault insurance system. A PEO will assume responsibility for the relationship with WSI, ensuring the employer’s premiums are paid and claims handled according to state requirements.

PEOs also offer assistance with many of the needs of rural businesses. The state’s 2026 workforce ecosystem assessment found that program access in rural communities tends to be less robust, and many employers are unaware of existing programs. A PEO becomes a knowledge and technology hub for the business, in the same way that a compliance vendor would do for the state’s largest employers in an economic center.

How to Engage a North Dakota PEO

When an employer begins the process of working with a PEO, it’s important to do a review of current HR practices and confirm that their administrative partner is in good standing with the state. The following steps ensure the employer benefits the most from this co-employment relationship:

1

Audit HR Needs

Determine the areas of payroll, tax, or benefit administration your organization needs help with.

2

Confirm License

Confirm the PEO is registered and has the required $100,000 surety bond.

3

Execute the Agreement

Sign a professional employer agreement establishing the terms of the co-employment relationship and allocation of responsibility.

4

Port Existing State Accounts

Set up accounts with state portals, such as myWSI for workers’ compensation and ND Gateway for criminal background checks.

5

Report Employees

Register all current and future employees with the State Directory of New Hires within 20 days of hire.

6

Establish Payroll Routines

Set up 2026 state withholding profiles and designate a specific, pre-determined payday each month.

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

North Dakota PEO Services

PEO services ensure that the business is compliant with all aspects of the North Dakota Century Code, from “Ban-the-Box” recruitment law to PTO mandatory payout as wages at termination. The PEO will manage the WSI account and all North Dakota-specific reporting so you can have the stable, protected growth you need in the energy, healthcare, and retail industries of this state.

RemotePeople offers a PEO solution for North Dakota employers and 2026’s unique economic situations. Partner with RemotePeople today to compete in the marketplace with high-tier health plans and 401(k)s, and recruit talent when there are 100 jobs for every 47 workers.