A key component of audit processing is determining chargeable exposure of the risk. A leasing company provides labor to other businesses.  The labor can be used for long-term use or to fill short-term vacancies including vacation replacements, sick leave, temporary increase in business, etc.

A common practice is for a company to use staff from a leasing agency instead of FICA (W-2) labor.  In a normal leasing agreement, the insured will pay a fee to the leasing company in lieu of wages.   The insurance coverage for Workers’ Compensation is generally covered by the leasing company.

When a company uses leased labor, long-term or short-term,  a contract from the leasing company should be on file along with a copy of the Workers’ Compensation Certificate of Insurance.  It should be verified whether the insured or the leasing company is responsible for the Workers’ Compensation coverage.

A leasing company could also provide a liability certificate, however, the insured is responsible for all work performed by the leased labor.  They are considered employees, under direct control of the insured for liability purposes and would be assigned to the classification for the work they perform.  A liability certificate from the leasing company is not applicable.

For additional clarification, contact our Audit Team at extension 2586 or your Underwriter.