Definition
Any person who is not an employee of the recipient and who provides services to the recipient if—
- such services are provided pursuant to an agreement between the recipient and any other leasing organization
- such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least 1 year, and
- such services are performed under primary direction or control by the recipient.
A recipient is any person for whom a leased employee performs services
Referring Cite
IRC. §414(n)
Additional Helpful Information
Leased Employees
- Under certain circumstances, a corporation furnishing workers to various professional people and firms is the employer of those workers for employment tax purposes. For example, a professional service corporation may provide the services of secretaries, nurses, and other similarly trained workers to its subscribers.
- A leased employee is treated as an employee of the recipient with respect to services performed for a recipient unless the following applies
- such employee is covered by a plan which is maintained by the leasing organization and the plan meets the following requirements
- the plan is a money purchase pension plan with a nonintegrated employer contribution rate for each participant of at least 10 percent of compensation
- the plan provides for full and immediate vesting, and
- each employee of the leasing organization (other than employees who perform substantially all of their services for the leasing organization) immediately participates in the plan.
- leased employees do not constitute more than 20 percent of the recipient’s non-highly compensated work force.
- such employee is covered by a plan which is maintained by the leasing organization and the plan meets the following requirements
- An employer who adopts a SEP IRA, may not use the IRS model SEPs if the employer uses the services of leased employees. The employer must instead use a prototype or individually-designed SEP that does not restrict the use of leased employees