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Employee Leasing Arrangements May Have Unexpected Consequences

For contractors utilizing employee leasing arrangements – have you considered a payroll solutions company instead? While there is no denying the benefits of an employee leasing arrangement, you may be unaware that these arrangements can also expose your company to huge gaps in your workers’ compensation policy.

Because employee leasing arrangements typically provide their own workers’ compensation policy for the leased employees, it is common for contractors to forego acquiring a workers’ compensation policy for their company. While this is one of the benefits of using an employee leasing arrangement, any additional employees that your company hires outside of the employee leasing arrangement and uninsured employees provided by a subcontractor will not be covered by that policy. If one of these employees is injured on the job, your company may be liable for hundreds of thousands of dollars in legal costs, not to mention the costs to your reputation and your relationships with subcontractors.

Luckily, there are modern solutions to this potential problem. Many payroll solutions companies issue their workers’ compensation policies directly to your company. In addition to providing the same payroll and HR benefits as an employee leasing arrangement, payroll solutions companies will cover a workers’ compensation claim even if the injured employee is not a leased employee. For many contractors, these services are affordable and valuable cures to the gaps in coverage caused by employee leasing arrangements.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.