The A-Zs of Hiring Glossary

Employee leasing

What Is Employee Leasing?

Employee leasing, also known as PEO (Professional Employer Organization), is a practice in which a company hires a third-party organization to handle all aspects of human resources management, including payroll, employee benefits, and compliance with employment laws and regulations.

Under an employee leasing arrangement, the PEO becomes the employer of record for the leased employees, while the client company retains control over the day-to-day activities of the employees. This allows the client company to focus on its core business activities while the PEO handles the administrative tasks associated with employment.

Employee leasing can be a cost-effective solution for small and medium-sized businesses that may not have the resources to manage their own human resources department. By pooling their employees with those of other companies, PEOs can offer economies of scale that can result in lower costs for employee benefits and other HR-related expenses.

It is important to note that employee leasing is not the same as temporary staffing. In a temporary staffing arrangement, the staffing agency remains the employer of record for the workers, while in an employee leasing arrangement, the PEO becomes the employer of record.

Why do companies use employee leasing?

Companies use employee leasing as a way to reduce administrative burdens and costs associated with hiring and managing employees. Employee leasing allows a company to outsource tasks such as payroll, benefits administration, and human resources management to a third-party leasing company. This can free up the company’s time and resources to focus on core business activities.

What are the benefits of employee leasing?

Employee leasing can provide a number of benefits to companies, including reduced administrative costs, improved compliance with employment laws and regulations, access to specialized expertise, and increased flexibility in workforce management. Additionally, employee leasing can help companies reduce their liability and risk associated with employment-related claims and lawsuits.

Dos And Donts of Employee Leasing


  • Do research and choose a reputable employee leasing company.
  • Do clearly define the roles and responsibilities of the employee leasing company and your business.
  • Do communicate regularly with the employee leasing company to ensure smooth operations.
  • Do provide proper training and support to leased employees.
  • Do ensure compliance with all legal and regulatory requirements.


  • Don’t choose an employee leasing company solely based on price.
  • Don’t assume that the employee leasing company will handle all HR-related tasks.
  • Don’t neglect to review and understand the contract between your business and the employee leasing company.
  • Don’t overlook the importance of maintaining a positive relationship with leased employees.
  • Don’t ignore any issues or concerns that arise with the employee leasing company or leased employees.
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