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Yes, he can use any company/corporation for any legal purpose...and employing people is certainly a legal purpose. Most major corporations have some system of this, where the employees may not actually be employed by the company they would seem to work for. It helps in the administration of payroll/benefits, etc matters in many ways. Especially where a copany is actually a group of legal entities (many retail stores actually incorporate each of their stores as different Corps), and it brings everyone under one payroll, medical etc system - and means as workers move from one position to another - which may actually be another legal entity, they don't have to change employers and have maybe lose or have problems with years of service, vesting, etc.

The companies that usually handle this type of situation are generally referred to as PEOs or Professional Employer Organizations. A PEO is a company that assumes the role of employer for another company's employees, thus becoming their employer-of-record. The employees are then leased back to the original employer under a contract in an arrangement commonly known as "co-employment".

This situation is most common with small to mid-size businesses with payroll being the most common function that is outsources. PEO companies can also take on other roles in the employer-employee relationship including human resources consulting, employee benefit consulting, unemployment claims management, risk management consulting, and medical insurance.

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Q: Is it legal for your employer to have a payroll company as your employer?
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