As it relates to contingent staffing, payrolling is the provision of longer-term temporary workers to a customer where the workers have been recruited (possibly interviewed, tested and approved) by the customer but become, in effect, employees of the supplier providing the payroll services.
This may occur in an instance when only the customer has the proper knowledge and experience to properly evaluate potential workers. Some argue that payrolling occurs only where no benefits are provided — otherwise, it resembles employee leasing. Others say that the payrolling arrangements are temporary in nature and usually only involve a specific client function or position, not all or a significant portion of a client’s workforce as in employee leasing. Payrolling services are typically billed at significantly lower markups than traditional temporary staffing because the staffing firm has not incurred any recruiting costs.
Source: Staffing Industry Analysts