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What is Employee Leasing

Written by hema

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It is a procedure in which the company transfers its employee to another company that concentrates in Human Resource activities like recruitment, payroll etc. The original company from where the employee originates is called subscribing firm and to that company to were there are leased is called the leasing firm. Such kind of leased employees are usually paid more than their salaries, and the advantage for the company is that the payroll taxes and other services are borne by the leasing firm.


 Responsibilities and duties are shared by both the owner firm and leased firm, but the owner firm grips the crucial management control for the work preformed by the employees. Employee leasing helps in adding workers without any administrative complexity. Leasing firms looks into all administration work such as regulations of W 2 forms, payroll processing, insurance, retirement claims etc. Any firm which wants to lease its employees should checklist certain pointers.

  • The company should check if such kind of arrangement fits its human resource needs.
  • Check the leasing company’s credentials like banking and credit references.
  • Take references from client and talk to them to know more about the leasing firm.
  • Scrutinize the leasing firm’s proficiencies particularly administrative skills.
  • Be sure to ensure that the leasing firm is legally registered and holds a license.
  • Review of agreement which entitles the owner company to cancel the deal with or without short notice clause added during the negotiations.

There are many advantages in leasing employees; the company can save money in many areas especially administrative costs. This can happen because the leasing firms usually have connections with lot of companies which makes them easier to negotiate rates of agreement. These leased employees are very much similar to other normal employees when it comes to legal compliances. They have all the rights as to normal employees and the leasing company therefore should abide by the laws in handling all the issues related to them.

This kind of arrangement may look good, but there are certain risks to both the owner company and its employees who are leased. As far as the owner company is concerned there is a fear that the leasing company may not file taxes on time. Another major risk is that it loses control of its employees. From the point of view of the leased employees, they may not have a good relation with leased company, there is also a risk that the owner company may have terminate them and then rehire, in such cases the continuity of service or experience breaks. Any kind of arrangement has certain amount of risk; hence employers should be careful in choosing the right kind of leasing firm that has a good track record.

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