What is a leased employee and what are the company's payroll related obligations?
A leased employee is an employee of a professional employer organization (PEO), which is also known as an employee leasing company. The PEO enters into a contract with the company to provide workers and a fee is paid to the PEO for each individual provided. The PEO maintains control of the worker, as their employer, and therefore can terminate or reassign the worker. In reality, the PEO's client supervises the worker and controls their day-to-day activities.
The PEO is considered their employer and is responsible for hiring new employees, paying their wages, paying their employment and unemployment taxes, and providing any other benefits. However, should the PEO cease operations without remitting their employees' payroll tax obligations, the responsibility for unpaid employment taxes is the responsibility of the company for whom the temporary workers provided services.