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Leased Employees

Definition: Workers who are officially employed by a professional employer organization, which is responsible for overseeing all HR-related functions, but who actually perform all work for your company

Employee leasing is a contractual arrangement in which the leasing company, also known as a professional employer organization (PEO), is the official employer. Employment responsibilities are typically shared between the leasing company and the business owner (you, in this case). You retain essential management control over the work performed by the employees. The leasing company, meanwhile, assumes responsibility for work such as reporting wages and employment taxes. Your main responsibility is writing a check to the leasing company to cover the payroll, taxes, benefits and administrative fees. The PEO does the rest.

Employee leasing lets you add workers without adding administrative complexity. Employee leasing firms manage compliance with state and federal regulations, payroll, unemployment insurance, W-2 forms claims processing, and other paperwork. Some also offer pension and employee assistance programs.

By combining the employees of several companies into one large pool, PEOs can also offer business owners better rates on health-care and workers' compensation coverage. The net effect can be significant savings of your time and money.

If you've decided to look into employee leasing and are considering working with a PEO, how can you decide if that PEO is right for your business? The National Association of Professional Employer Organizations (NAPEO)makes the following recommendations:

See also "Professional Employer Organizations."