What is “Employee Leasing?”

Every California employer must secure workers compensation benefits for its employees, but it need not do so directly from an insurance company. One employer may contract with another employer for this purpose. Many “Professional Employee Organizations,” often abbreviated “PEOs” and/or called “labor contractors,” are in business to assume the role of primary or “administrative” employer of a business’s labor force.

Typically, when an employer enters into a contract with a PEO-labor contractor, the PEO simultaneously “leases” the employer’s staff back to the original employer, hence the term “employee leasing.”

Among other benefits, employee leasing allows the business to:

• transfer human resource and related administrative functions (and headaches!) to another firm, thereby freeing management to focus on providing the business’s products and services
• avail itself of various forms of “expert” employment services, and
• take advantage of economies of scale and other negotiated cost reductions in employee benefits and workers compensation insurance purchased by the PEO for all of its (or its clients’) employees