Employee Lease Agreements

Definition

• As explained by Entrepreneur, employee lease agreements are contracts by which a primary company “leases out” employees to a business. In this sense, the employees are treated as a resource to be distributed as needed. In these contracts, the primary company is responsible for most aspects of employment such as reporting wages and taxes, while the business to whom employees are leased takes care of paychecks and manages the employees’ work.

Contents

• Sample employee lease agreements from Mobile Glaucoma Service, Inc and William Keever of Cumberland School of Law show that the contents of an employee lease agreement include all of the services the employee is to provide for the employer. The employee lease agreement also dictates what resources or forms of compensation the employer is to give the employee. Like any other lease, employee lease agreements also spell out the amount of time designated for the employee-employer relationship.

Disadvantages

• Under employee lease agreements, employers may have a more difficult time terminating or replacing workers who prove unsuitable for the work environment in which they are placed, as the contract obligates the employer to provide work to the employee for the duration of the contract. Employee lease agreements also don’t give employers as much leeway in terms of keeping on employees, since the primary company has the right not to renew the employee lease agreement, and since the employees technically are not under the employer’s purview.

Advantages

• Employee lease agreements permit employers to cover temporary shortages in the workforce while knowing that the employees will find additional work via the primary company even after the employee lease agreement expires. Entrepreneur also points out that working with a primary company may result in lower costs for items such as worker’s compensation. Lastly, since the primary company takes care of most administrative duties regarding the employees, the employer has more free time to devote to other business tasks such as production planning or marketing.

Considerations

• Most states require that leasing companies be licensed. Additionally, even though the employer is free from most administrative tasks related to the employees, the employer still is obligated to look out for the well-being of the employees. Employers thus need to do a thorough examination of the leasing companies they use in order to make sure that the leasing company has the experience and proper attitude to treat employees fairly under the agreement.