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Partner Managed Cloud SF Employee Central Payroll

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I wish to understand about how the licensing works in the scenario explained hereunder:

A Payroll Service Provider, provides outsourced payroll services to multiple clients having employee strength of 5 to 20 each.

Can the service provider buy say 500 licenses and utilize them for multiple clients as in the above example? or is he required to buy licenses against the name of each of his clients for the respective no of employees?

If you can throw some light.



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