The Complete Guide to Employee Leasing Agreements

employee leasing agreement

Are you a business owner or an HR manager seeking flexible staffing solutions? Today, a lot of businesses feel that flexible staffing is the answer to their current challenges, like employee retention and beating inflation while also delivering on quality. But even though it is a great thing- it brings a new worry- what kind of employee contract should you have with a temporary hire?


Employee leasing agreements could be the answer you’re looking for.  


In this comprehensive guide, we’ll walk you through everything you need about employee leasing agreements. We’ve got you covered, from understanding the basics to exploring the advantages and disadvantages. Let’s dive in and explore the world of employee leasing agreements together!

Understanding Employee Tenancy Agreement

Employee tenancy agreements, also known as employee leasing contracts, are fundamental documents that establish the terms of a unique employment arrangement. It is a contractual arrangement where a leasing company (lessor) provides skilled workers to a client company (lessee). These leased employees work under the direction and supervision of the client company but remain employees of the leasing company.


For businesses, employee tenancy agreements offer a flexible staffing solution. They provide access to skilled workers without the long-term commitment or administrative burdens of traditional hiring. This arrangement allows businesses to scale their workforce based on fluctuating demands while focusing on their core operations.


One of the primary benefits of employee tenancy agreements is cost-effectiveness. Businesses can save on recruitment, training, and benefits costs associated with permanent employees. Additionally, these agreements provide access to specialised skills that may not be available in-house.


However, businesses must carefully consider the terms of the agreement, including payment terms, duration, and termination clauses. Ensuring that the agreement aligns with the business’s needs and complies with relevant labour laws and regulations is crucial.

Employee Leasing Advantages Disadvantages

Employee leasing solutions, also known as staff leasing solutions, offer several advantages and disadvantages for businesses. Let’s explore these in detail:


  • Cost Savings: Employee leasing in HRM can result in cost savings for businesses, as they do not have to bear the costs of recruiting, training, and providing employee benefits. Additionally, companies can save on administrative costs associated with payroll and HR management.
  • Access to Skilled Talent: This type of leasing allows businesses to access a pool of skilled and experienced employees that they may not have in-house. This can be especially beneficial for companies that require specialised skills for short-term projects.
  • Flexibility: Employee leasing offers businesses flexibility in managing their workforce. They can quickly scale their workforce up or down based on fluctuating demand without the long-term commitment of hiring permanent employees.
  • Reduced Legal Liability: In an employee leasing arrangement, the leasing company is responsible for certain HR functions, such as compliance with labour laws and regulations. This can reduce the legal liability for the client company.


  • Loss of Control: One of the main disadvantages of employee leasing is the loss of control over the leased employees. The client company may have limited control over these employees’ hiring, training, and management.
  • Dependency on the Leasing Company: Businesses that rely heavily on employee leasing may become dependent on the leasing company for their staffing needs. This can be risky if the leasing company fails to meet its commitments.
  • Confidentiality Concerns: There may be concerns about the confidentiality of sensitive information when working with leased employees. Businesses must ensure appropriate measures are in place to protect their proprietary information.
  • Potential for Disputes: Disputes can arise in employee leasing arrangements, particularly regarding employment status, benefits, and termination. Businesses must have clear agreements in place to address these potential disputes.

In short, employee leasing offers several advantages, but businesses must also consider the disadvantages to make a more informed decision. By weighing these factors carefully, businesses can determine if employee leasing is the right solution for their staffing needs.

Key Components of an Employee Leasing Agreements

Employee leasing agreements, like any contract, contain several key components that define the terms and conditions of the arrangement. Let’s explore these components:

Identification of Parties

The agreement should identify the leasing company (lessor), the client company (lessee), and the leased employees. This section typically includes the names and contact information of all parties involved.

Scope of Services

This section outlines the specific services that the leasing company will provide to the client company. It should include details such as the type of work to be performed, the location of the work, and any special requirements or conditions.

Duration of the Agreement

The employee leasing agreements should specify the start date and end date of the leasing arrangement. It may also include provisions for renewing or terminating the contract before the end date.

Payment Terms

This section details the payment terms for the employee leasing arrangement, including the fees to be paid to the leasing company and the payment schedule. It may also include provisions for additional costs, such as expenses related to training or equipment.

Confidentiality and Non-Disclosure

The agreement may include clauses relating to confidentiality and non-disclosure to protect the client company’s proprietary information. This section should outline the obligations of both parties regarding protecting confidential information.

Insurance and Liability

The employee leasing agreements should mention the insurance coverage required for the leased employees and any liability issues that may arise during the leasing arrangement. This section helps protect both parties in case of accidents or other unforeseen events.

Termination Clause

Conditions under which either party can terminate the agreement. It should include provisions for notice periods and any penalties or fees that may apply in case of early termination.

Dispute Resolution

The agreement should include provisions for resolving disputes that may arise during the leasing arrangement. This can be include mediation or other forms of dispute resolution.


So, employee leasing agreements contain several key components that define the terms and conditions of the arrangement. By understanding these components, businesses can ensure that their employee leasing agreements are clear, comprehensive, and legally sound.

How 6 Pence Helps

Are you considering employee leasing to grow your workforce? 6 Pence can be your trusted partner. Our staffing experts will help you navigate complex employee leasing agreements, handle payroll and benefits for leased staff, and ensure compliance with local labour laws in Bahrain, UAE, Oman, and Iraq. 


Let 6 Pence streamline your employee leasing process. Contact us today for a personalised consultation!

Frequently Asked Questions

What is a leased employee? 

A leased employee is an individual who works for a leasing company but is assigned to work under the direction and control of a client company. In this arrangement, the leasing company remains the official employer, but the leased employee performs duties for the client company.

What is an example of employee leasing? 

An example of employee leasing is when a leasing company provides a client company with temporary workers for a specific project or period. For instance, a leasing company may supply skilled IT professionals to a client company to assist with a software development project.

Are leased employees temporary employees?

Yes, leased employees are typically considered temporary employees. This is because their employment status is contingent upon the leasing arrangement between the leasing company and the client company.


Also Read: Looking at 7 Benefits of Recruitment Agency – Are They Worth It?

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