Employee Leasing

In today’s fast-changing business environment, organizations must scale quickly while keeping costs and compliance risks under control. For many, traditional hiring models can’t keep up with the speed of global expansion. That’s where employee leasing comes in — a strategic HR solution that gives you access to top talent skilled workers through a staffing company while the leasing company handles HR, payroll, and compliance complexities.

Employee leasing is a workforce arrangement where a company engages a third-party employee leasing company or staffing agency to provide workers who remain on the provider’s payroll.

 

The leasing firm acts as the official employer of record, handling payroll, taxes, and benefits, while the client company oversees daily operations.

This model lets businesses retain operational control without managing HR administration or legal compliance. It’s especially valuable for small and mid-sized businesses, startups, and companies expanding internationally. Employee leasing also grants access to skilled professionals for specific projects while ensuring HR compliance through the leasing provider’s expertise.

Employee leasing works through a co employment arrangement and tripartite relationship among three parties — the client company, the leasing provider, and the leased employees.

Here’s how it typically functions:

1. The client company identifies workforce needs.

2. The leasing company hires employees on its payroll.

3. The employees are “leased” to the client company for daily work supervision.

4. The leasing firm manages payroll, tax withholding, benefits, and labor law compliance.

5. The client company directs operations and manages performance.

In short, the leasing company acts as the legal employer, while the client company acts as the functional employer. This co employment relationship reduces HR complexity and ensures compliance across jurisdictions — a crucial advantage when scaling internationally. The leasing firm also helps manage compliance with labor laws and mitigates legal risks for the client company.

Companies typically turn to employee leasing in situations where:

• Rapid scaling is needed without the delay of entity setup

• Short- or mid-term projects require flexible staffing

• Global expansion requires compliance across borders

• Administrative costs of direct employment are too high

• Specialized skills are required temporarily

• Seasonal labor demands or temporary project needs can be met efficiently

For instance, a U.S. company entering the European market may use employee leasing to hire local staff through a provider like PamGro. The leasing company manages local payroll, employment taxes, and compliance, while the U.S. company stays focused on growth and operations.

The cost of employee leasing depends on location, role complexity, and provider fees. Most leasing companies charge a markup or administrative fee on top of the employee’s competitive benefits, salary and benefits. Employers must pay the leasing firm for the leased employee’s wages, benefits, taxes, and administrative fees, which are consolidated into a single invoice for simplicity. Leasing companies can negotiate better health insurance rates through pooling employees from multiple clients.

Generally, you pay one consolidated monthly invoice that includes:

• Employee salary and statutory benefits

• Payroll taxes and insurance

• Leasing provider’s administrative fee

Although the total cost is slightly higher than direct hiring, businesses often save significantly by eliminating the need for human resources teams, HR teams, legal entities, or in-house payroll management. However, there may be hidden fees or unexpected charges in employee leasing contracts that require careful review. The business pays a fee to the leasing company, which can be a flat rate or a percentage of payroll.

In most cases, the leasing company is responsible for tax filings and withholdings since they are the employee’s legal employer. This includes:

• Payroll tax deductions

• Social security contributions

• Unemployment insurance

• Workers’ compensation

The client company pays the leasing provider a single invoice covering all of these obligations. This structure removes the administrative burden of managing multiple tax systems — a major advantage for cross-border employers.

With global EOR providers like PamGro, businesses can trust that all local tax regulations are followed accurately, no matter where employees are located.

Legally, the employee leasing company is the official employer. The provider’s name appears on the employee’s payslip, handles employment contracts, and files taxes. Leased employees can be considered common-law employees of the company they work for under certain conditions.

The client company, however, manages the employee’s day-to-day responsibilities, project goals, and performance outcomes. This creates a co-employment relationship, where administrative control and operational control are split — enabling both compliance and flexibility. Leased employees may also be eligible for benefits through the leasing agency that employs them, making leased employees eligible for various compensation packages .

Leased employees work for a client business on a project-specific or temporary basis, providing flexibility for businesses with fluctuating workforce needs. However, leased employees may risk trade secrets by being placed with competitors after their assignments end.

While both models provide external workers, employee leasing and temporary staffing serve different business goals.

Employee leasing is more strategic — ideal for ongoing roles or international teams — whereas temporary staffing focuses on short-term projects or seasonal surges.

A Professional Employer Organization (PEO) and an employee leasing company are often confused, but they differ in structure:

• PEO: You hire employees directly, and the PEO becomes a co-employer handling HR, payroll, and benefits under your existing structure. A client company maintains the ability to hire and terminate employees when using a PEO.

• Employee Leasing: The leasing firm hires and supplies employees to your company under its payroll. The key difference between employee leasing and co-employment is staffing; PEOs do not provide staff. Employee leasing is often associated with staffing firms but is incorrectly tied to PEOs, leading to confusion about their distinct roles.

In short, PEOs manage your existing workforce, while leasing companies provide the workforce.

PamGro’s global EOR services combine the best of both models — you get many benefits, including full legal compliance and global payroll, while retaining total control of your talent strategy.

Employee leasing provides tangible business benefits, including:

• Faster market entry: Hire quickly in new countries without creating legal entities.

• Compliance confidence: The leasing company assumes employment law risk.

• Reduced HR overhead: No need for in-house payroll or benefits administration.

• Access to HR expertise: Leasing providers bring deep local knowledge.

• Scalability: Easily scale teams up or down based on business demand.

• Improved benefits: Leasing offers access to competitive health insurance and retirement plans that businesses might not secure independently.

However, employee leasing arrangements can create challenges and put employers in difficult positions.

This model lets growing companies stay lean, compliant, and competitive — especially when expanding internationally.

To make the most of your leasing partnership:

1. Define roles and responsibilities clearly between your company and the leasing provider.

2. Vet your provider for compliance expertise and legal accreditation.

3. Monitor costs and request transparency on markups and benefits.

4. Align leased roles with business strategy — not just short-term needs.

5. Maintain consistent communication between leased staff and your core team.

6. Plan conversion options if you intend to hire leased employees full-time later.

7. Avoid over-reliance on a single leasing company to mitigate risks of operational disruptions.

A trusted global partner like PamGro ensures smooth coordination and full transparency across each of these steps.

Imagine a U.S.-based fintech startup expanding into Germany. Instead of forming a German entity, they partner with an employee leasing company. The provider hires two local compliance officers and a product marketer under its payroll.

The startup manages daily tasks, while the leasing company handles:

• German labor law compliance

• Payroll and social security deductions

• Health insurance and benefits

This approach allows the startup to launch operations in just a few weeks — saving months of setup time and thousands in legal and administrative costs.

A Singapore-based SaaS firm wanted to establish operations in Mexico and Spain within four months. Instead of setting up entities, they used PamGro’s leasing model. PamGro hired local staff under its legal entities, managed payroll and benefits, and ensured full local compliance.

Results:

• Hired 12 local employees in 5 weeks

• Reduced compliance risk to zero

• Saved 60% in administrative costs

• Entered two new markets simultaneously

Employee leasing helped the company scale globally, stay compliant, and focus entirely on revenue growth — all without adding internal HR infrastructure. However, leased employees may feel less connected to the client company, potentially affecting morale and retention, especially regarding retirement benefits .

Employee leasing empowers your business to expand globally, stay compliant, and efficiently onboard new workers as you access world-class talent — without the need for complex hr setups.

At PamGro, we make it effortless. Our global Employer of Record (EOR) platform helps you, especially if you’re considering a peo :

• Hire talent in 150+ countries

• Manage payroll and taxes compliantly

• Handle employee benefits and onboarding

• Stay audit-ready across jurisdictions

Whether you need leased employees, co-employment solutions, or a global EOR partner — PamGro helps you grow confidently, anywhere.