Strategic Human Resource Management

Section Two

Employee Leasing

Employee leasing is different from the use of temporary
workers because there is no implication that employees will be
other than full-time, long-term employees. Often, when an
employer makes the decision to lease employees, his or her
employees then become employees of a leasing firm. The
leasing firm then supplies these same employees to the original
employer. As with the use of temporaries, there are some
advantages with employee leasing. One primary reason for
leasing is that small employers can obtain more economical
health insurance by virtue of the leasing company’s larger
numbers of employees and inclusion under pooled rates.
Another motivating factor is that all payroll and administrative
services are performed by the leasing company, leaving the
management of the small company free to focus on other
aspects of the business.^127

However, there are other disadvantages with the use of
leased employees. One is that some of the advantages of small
size, such as exclusion from coverage by various federal laws
based on size limits, are lost because of the leasing company’s
larger size. The use of a leasing company also may not
eliminate liability, as there may be a shared employment
relationship. Another disadvantage is that a number of leasing