U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A

                               AMENDMENT NO. 1 TO

                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1996

             |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
       For the transition period from _______________ to _________________

                         Commission file number: 0-22600

                            EMPLOYEE SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)

                      Arizona                             86-0676898
          (State or other jurisdiction of              (I.R.S. Employer
           incorporation or organization)             Identification No.)

                 6225 North 24th Street, Phoenix, Arizona 85016
                    (Address of principal executive offices)

                    Issuer's telephone number: (602) 955-5556

           Securities registered pursuant to Section 12(b) of the Act:
Title of each class:                Name of each exchange on which registered:
       None                                             N/A
--------------------                            --------------------   

           Securities registered pursuant to Section 12(g) of the Act:

                            No Par Value Common Stock
                            -------------------------
                                (Title of Class)

        Indicate by check mark whether the  Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant  was  required to file such  report(s)),  and (2) has been subject to
such filing requirements for the past 90 days.

                    Yes   X                     No
                        -----                      ----

                 Indicate  by check  mark if  disclosure  of  delinquent  filers
pursuant to Item 405 of Regulation S-K is not contained herein,  and will not be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |_|

            The   aggregate   market   value  of  the   voting   stock  held  by
non-affiliates  of the  Registrant,  based upon the $6.0625 closing price of the
Registrant's Common Stock as reported on the NASDAQ National Market on March 27,
1997,  was  approximately  $155  million.  Shares of Common  Stock  held by each
officer and director and by each person who owns 10% or more of the  outstanding
Common  Stock  have  been  excluded  in that  such  persons  may be deemed to be
affiliates. This determination of affiliate status is not necessarily conclusive
for other purposes.

        The number of outstanding shares of the Registrant's  Common Stock as of
March 27, 1997 was 30,857,101.
<PAGE>
        Employee  Solutions,  Inc.  ("ESI" or the  "Company")  hereby amends its
annual  report on Form 10-K for the year  ended  December  31,  1996 (the  "1996
10-K") by adding  thereto Items 10, 11, 12 and 13, as set forth below.  


ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------------------------------------------------------------

        The names of the  Company's  directors  and  nominees  for  director and
certain information about them are set forth below.
<TABLE>
<CAPTION>
                                                                                                      Director
Name                Age           Position with Company                                                  Since
----                ---           ---------------------                                                  -----

<S>                 <C>      <C>                                                                          <C> 
Marvin D. Brody      53       Chairman of the Board, President, Chief Executive Officer and Director      1991

Harvey A. Belfer     59       Director                                                                    1991

Edward L. Cain, Jr.  37       Vice President of Sales and Director                                        1995

Jeffery A. Colby     43       Director; President of TEAM Services                                        1995

Robert L. Mueller    69       Director                                                                    1995

Henry G. Walker      50       Director                                                                    1996
</TABLE>

        Marvin D. Brody  co-founded  the Company in 1991. He has been a Director
of the Company since its inception, became the Company's Chief Executive Officer
in November 1994 and has served as President since June 1996.  Prior to becoming
the  Company's  Chief  Executive  Officer,  Mr. Brody was engaged in the private
practice of law since 1973.  He graduated  from John  Marshall Law School with a
Juris Doctorate degree in 1969. Mr. Brody served as an outside director of Prime
Financial Partners M.L.P. since 1987 and has resigned effective April 23, 1996.

        Harvey A. Belfer  co-founded the Company in 1991 and has been a Director
since the Company's inception. He was also the Company's Chief Executive Officer
from its founding  until November 1994 and its President from its founding until
June 1996. From 1984 until 1991, Mr. Belfer was an executive officer of Contract
Personnel Systems, Inc. and Corporate Personnel Services, Inc., both PEOs.

        Edward L. Cain,  Jr. has been a Director of the Company  since July 1995
and has been the Company's  Vice  President of Sales since April 1995.  Mr. Cain
has been President of Employee  Solutions-East,  Inc. ("ESEI"),  a subsidiary of
the Company,  since June 1994.  From 1990 until June 1994 he was the Director of
Sales and Marketing for Personal  Benefits Group, an Atlanta-based  company that
brokered  PEO  services.  From  1987 to 1990,  he was a sales  agent in  CIGNA's
individual financial service division in Springfield, Massachusetts and later in
Grand Rapids, Michigan.

        Jeffery A. Colby has been a Director of the Company since November 1995.
Mr.  Colby  founded  TEAM  Services,  L.P.,  a PEO in the music and  advertising
industries,  in 1992 and has been its Chief  Executive  Officer  since  1994 and
President since January 1996. TEAM Services was acquired by the Company in 1996;
see Item 13 below.  Since  December  1986,  Mr. Colby has served as President of
Colbyco,  Inc., a  Chicago-based  company which provides  consulting,  audit and
freight bill  payment  services for the  transportation  industry.  From 1975 to
1986, Mr. Colby was a principal at the Chicago-based law firm of Fox & Grove. 
                                       2
<PAGE>
        Robert L.  Mueller  has been a Director of the  Company  since  February
1995. Mr. Mueller has been an independent  consultant  since 1993.  From 1987 to
1993, he was the  President,  Chief  Operating  Officer and a Director of Proler
International Corp., a steel recycler in Houston, Texas.

        Henry G. Walker became a Director of the Company in November  1996.  Mr.
Walker  became  president and chief  executive  officer of Sisters of Providence
Health System, Seattle, in 1997. Previously, Mr. Walker was president and CEO of
HealthPartners of Arizona,  Inc., a statewide managed care company, from 1996 to
1997, and president of Health Partners of Southern Arizona from 1992 to 1995.

Section 16(a) Beneficial Ownership Reporting Compliance

        Under the securities laws of the United States, the Company's directors,
its  executive  officers,  and persons  holding  more than 10% of the  Company's
Common  Stock are required to report their  initial  ownership of the  Company's
Common Stock and any subsequent  changes in that ownership to the Securities and
Exchange  Commission  (the  "Commission").  Specific due dates for these reports
have been  established  and the Company is  required to disclose  any failure to
file by these dates. All of these filing  requirements were satisfied during the
year ended  December  31,  1996,  except that Mr. Brody did not file on a timely
basis two reports  relating to a series of transactions  resulting from a single
sell order of his spouse.  Because the transactions  were effected over a number
of days at various prices,  the  transactions  were reported as 22 separate line
items.  The filings  have been  brought  current by Mr.  Brody.  In making these
disclosures,  the Company has relied  solely on written  representations  of its
directors and executive  officers and copies of the reports that they have filed
with the Commission. 
                                       3
<PAGE>
ITEM 11. - EXECUTIVE COMPENSATION
---------------------------------

                           SUMMARY COMPENSATION TABLE

        The following table sets forth, with respect to the years ended December
31, 1996, 1995 and 1994,  compensation  awarded to, earned by or paid to (i) the
Company's Chief Executive Officer and (ii) the other executive officers who were
serving as  executive  officers at December  31, 1996 and whose total salary and
bonus exceeded $100,000 in 1996.

<TABLE>
<CAPTION>
                                                                                    Long Term
                                               Annual Compensation                Compensation
                                               -------------------                ------------
                                                                                   Securities
                                                           Other Annual            Underlying              All Other
Name and                                                   Compensation           Options/SARs            Compensation
Principal Position            Year       Salary ($)            ($)                   (#)(1)                   ($)
-------------------           ----       ----------       --------------          ------------           -------------

<S>                           <C>          <C>             <C>                    <C>                     <C> 
Marvin D. Brody,              1996         276,246              (3)                     -                   5,333 (4)
Chief Executive               1995         165,992          20,493 (5)                  -                   5,244 (4)
Officer, President            1994            -             10,394 (5)                  -                   4,366 (4)
(2)

Roy A.                        1996         177,400              (3)                 70,000                  5,401 (4)
Flegenheimer, Chief           1995         151,699              (3)                360,000 (6)              5,508 (4)
Operating Officer             1994         138,846              (3)                160,000 (6)              4,663 (4)
</TABLE>


(1)      Consist  entirely  of  stock  options;  no  stock  appreciation  rights
         ("SARs") were granted or are outstanding.
(2)      Compensated  as Chief  Executive  Officer since  January  1995;  became
         President in June 1996.
(3)      Less than 10% of the total of annual salary.
(4)      Term life and health insurance premiums.
(5)      Automobile lease.
(6)      Includes  options to purchase  160,000 shares of Common Stock issued in
         February  1994 which  were  canceled  in April 1995 and  simultaneously
         replaced by options to acquire the same number of shares.
                                        4
<PAGE>
                    OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)

The following table sets forth  information about stock option grants during the
last fiscal year to the  executive  officers  named in the Summary  Compensation
Table  receiving  grants  during such period.  Mr. Brody did not receive  option
grants.
<TABLE>
<CAPTION>
                                                        Individual Grants
                              ------------------------------------------------------------------        Potential Realizable Value 
                              Number of              % of Total                                           at Assumed Annual Rates  
                               Securities           Option/SARs                                         of Stock Price Appreciation
                              Underlying             Granted to      Exercise or                            for Option Term (2)    
                              Options/SARs          Employees in     Base Price       Expiration        ---------------------------
          Name                   Granted (#)        Fiscal Year        ($/sh)            Date              5%                   10%
-------------------------     ----------------      ------------     ----------       ----------        ---------           -------
<S>                          <C>                       <C>          <C>                <C>            <C>                <C>     
Roy Flegenheimer              70,000                    7.1%         $14.50             6/25/01         $280,426          $619,668
</TABLE>

(1)      Consist entirely of stock options and do not include SARs.
(2)      Amounts  represent  hypothetical  gains that could be achieved  for the
         respective  options if exercised  at the end of the option term.  These
         gains are based on  assumed  rates of stock  appreciation  of 5% or 10%
         compounded  annually from the date the respective  options were granted
         to their  expiration  date and are not  presented to forecast  possible
         future  appreciation,  if any,  in the price of the Common  Stock.  The
         potential  realizable  value of the foregoing  options is calculated by
         assuming that the market price of the underlying  security  appreciates
         at the  indicated  rate for the entire  term of the option and that the
         option is exercised  at the exercise  price and sold on the last day of
         its term at the appreciated  price. Based upon the $4.625 closing price
         of the Common Stock on April 22, 1997,  on that date these  options had
         no realizable value.

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FY-END OPTION/SAR VALUE TABLE (1)

 The  following  table  sets forth  information  with  respect to the  executive
officers named in the Summary  Compensation  Table  concerning  option exercises
during the last fiscal year and the number and value of options  outstanding  at
the end of the last fiscal year.  Mr. Brody did not exercise  options in 1996 or
have options outstanding at year end.

<TABLE>
<CAPTION>
                                                                         Number of Securities               Value of Unexercised
                                                                        Underlying Unexercised              In-the-Money Options
                                                                         Options at FY-End (#)                at FY-End  ($)(2)
                                                                     -----------------------------       --------------------------
                            Shares Acquired    Value Realized
        Name                on Exercise (#)            ($)           Exercisable    Unexercisable      Exercisable    Unexercisable
------------------------    ---------------      -------------     -------------    -------------      -----------    -------------
<S>                             <C>                <C>                    <C>       <C>                <C>            <C>       
Roy Flegenheimer                38,000             $315,300               288,666   203,334            $5,310,449     $2,772,071
</TABLE>

(1)      No SARs are outstanding.
(2)      Based on the last  trade of the  Company's  Common  Stock on the NASDAQ
         National  Market on December  31, 1996 at $20.50 per share.  Based upon
         the $4.625 closing price of the Common Stock on April 22, 1997, on that
         date the  value of Mr.  Flegenheimer's  exercisable  and  unexercisable
         options was $727,876 and $235,394,  respectively.
                                        5
<PAGE>
Employment   Contracts,   Termination  of  Employment,   and   Change-in-Control
Arrangements

         Roy A.  Flegenheimer  entered  into an  employment  agreement  with the
Company on April 21, 1993,  which  employment  agreement has  subsequently  been
amended to revise Mr.  Flegenheimer's  compensation.  The third amendment to Mr.
Flegenheimer's  employment  agreement  became  effective on October 1, 1995. The
third  amendment set Mr.  Flegenheimer's  salary for the period from February 8,
1995 to September 30, 1995 at $98,808,  from October 1, 1995 to February 7, 1996
at $60,577,  from  February 8, 1996 to  February 7, 1997 at  $175,000,  and from
February 8, 1997 to February 7, 1998 at $185,000.  Mr. Flegenheimer's  agreement
also  provided  for the grant of certain  stock  options  in 1993 and 1994.  Mr.
Flegenheimer's  employment  agreement  ends  February  7, 1998,  unless  earlier
terminated.

         Mr.  Flegenheimer  entered  into a new  employment  agreement  with the
Company on March 19, 1997, which terminated and replaced his previous employment
agreement. Under his new agreement, Mr. Flegenheimer earns a salary of $185,000,
which will be reviewed  annually by the Company's  compensation  committee.  The
agreement also provides that if Mr. Flegenheimer  terminates his employment with
the Company for any reason other than for cause,  by his  disability,  or by his
death,  within 12 months from events which  constitute a "change of control" (as
defined in the  agreement),  Mr.  Flegenheimer  will receive a lump sum equal to
2.99 times a base amount as well as a continuation  of his medical  coverage and
other benefits to which he, as a terminated  employee,  was entitled at the time
immediately prior to the change of control. Mr. Flegenheimer's agreement extends
indefinitely,  but is terminable by either the Company or Mr.  Flegenheimer with
stated  notice.  The Company has entered  into  substantially  similar  employee
agreements  with two other  executive  officers  not  named in the  compensation
table.

         The Company's  1995 Option Plan provides that in the event of a merger,
consolidation or reorganization with another corporation in which the Company is
not the surviving corporation (an "Acquisition"), appropriate provision shall be
made  with  respect  to  outstanding  and  unexercised  options  to  either  (a)
substitute on an equitable basis appropriate shares of the surviving corporation
for such  options or (b) cancel  such  options  upon  payment of the fair market
value of such options to the respective holders.  The Company's 1993 Option Plan
provides that in the event of an  Acquisition,  appropriate  provision  shall be
made  with  respect  to  outstanding  and  unexercised  options  to  either  (a)
substitute on an equitable basis appropriate shares of the surviving corporation
for such  options or (b)  accelerate  the vesting and permit the exercise of all
such options prior to such Acquisition.

Compensation of Directors

       The Company's  directors who do not receive a salary or commissions  from
the Company  receive  $500 per each meeting  attended,  plus  reimbursement  for
reasonable  out-of-pocket  expenses  incurred in attending  Board of  Directors'
meetings.  Nonemployee  directors  of the Company are  eligible for the grant of
stock options  pursuant to the 1993 Option Plan,  and are eligible under certain
circumstances  for option  grants  under a formula  grant  provision of the 1995
Option  Plan.  Under the  provisions  of the 1995 Option Plan in effect prior to
June 1996, every nonemployee  director of the Company was automatically  granted
options to acquire  80,000 shares of the Company's  Common Stock upon becoming a
director,  and  subsequently  was  automatically  granted an  additional  80,000
options at the fifth annual meeting of shareholders  following the initial grant
if such director was still a  nonemployee  director of the Company at that time.
In June 1996,  the 1995 Option Plan was altered to provide for annual  grants of
options for 2,500  shares of Common  Stock upon  election and at the date of the
annual meeting (or other day of election) for each non-employee director for ten
years terms;  provided,  however,  that directors elected prior to June 1996 are
not  eligible to receive  such  options  until the year 2000  annual  meeting of
shareholders. 
                                       6
<PAGE>
       In 1995,  Robert L.  Mueller  and  Jeffery  A.  Colby,  both at that time
nonemployee  directors,  were each granted  options for 80,000  shares of Common
Stock, with an exercise price equal to the fair market value of the Common Stock
on the date of grant. Mr. Mueller's  options were immediately  exercisable,  and
Mr. Colby's options vest in equal installments on the first three  anniversaries
of the date of grant.  Mr.  Walker was  granted  an option  for 2,500  shares of
Common  Stock,  with an exercise  price equal to the $21.25  market value of the
Common  Stock on the date of grant,  upon his  election to the Board in November
1996; his options vest in equal installments on the first three anniversaries of
grant.

       Harvey A. Belfer entered into a five-year  employment  agreement with the
Company  effective  January 1, 1993.  Mr.  Belfer  also  agreed not to engage in
certain  activities  that  compete  with the  Company  until two years after the
termination  of the  employment  agreement.  Mr.  Belfer  retired  as  President
effective June 26, 1996, at which time his employment  agreement was terminated.
The  Board of  Directors  replaced  Mr.  Belfer's  employment  agreement  with a
five-year  consulting  agreement which provides for  compensation of $35,000 per
year and contains non-competition provisions;  $20,417 was paid to Mr. Belfer in
1996 under this Agreement.

ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------------------------------------------------------------------------

       The  following  table sets forth  information  regarding  the  beneficial
ownership  of the  Company's  Common Stock at March 27, 1997 with respect to (i)
each  person who  beneficially  owns more than 5% of the  Company's  outstanding
Common Stock including such persons' address,  (ii) each director of the Company
and each person nominated to become a director at the Annual Meeting, (iii) each
of the executive  officers  listed in the Summary  Compensation  Table below and
(iv) all directors and executive officers of the Company as a group.


                                              Shares Beneficially Owned (1)
                                              -----------------------------

                                                   Number        Percent
                                                   ------        -------

Harvey A. Belfer (2)                              1,830,480        5.9%
6225 N. 24th Street
Phoenix, Arizona  85016

Marvin D. Brody (3)                               2,709,088        8.8%
6225 N. 24th Street
Phoenix, Arizona 85016

Edward L. Cain, Jr.                                 656,370        2.1%

Jeffery A. Colby (4)                                 26,694           *

Roy A. Flegenheimer (5)                             326,666        1.0%

Robert L. Mueller (2)                                80,000           *

Henry G. Walker                                           0           *

All executive officers and directors as a         5,655,964       18.1%
group (10 persons) (6)

American Century Companies, Inc. (7)              2,656,400        8.7%
4500 Main Street
Kansas City, Missouri 64111

Putnam Investments, Inc. (8)                      1,822,107        5.9%
One Post Office Square
Boston, Massachusetts 02109


*      Less than one percent.
                                        7
<PAGE>
(1)    Beneficial  ownership is determined  in accordance  with the rules of the
       Securities and Exchange  Commission ("SEC") and generally includes voting
       or investment  power with respect to securities.  In accordance  with SEC
       rules,  shares which may be acquired upon conversion or exercise of stock
       options,   warrants  or  convertible   securities   which  are  currently
       exercisable  or  which  become  exercisable  within  60 days  are  deemed
       beneficially owned by the optionee.  Except as indicated by footnote, and
       subject to  community  property  laws where  applicable,  the  persons or
       entities named in the table above have sole voting and  investment  power
       with respect to all shares of Common Stock shown as beneficially owned by
       them.

(2)    Voting and investment power shared with spouse.

(3)    Includes  2,309,088  shares  held by a limited  partnership  of which Mr.
       Brody and his spouse are the general  partners and Mr. Brody,  his spouse
       and adult  children  are the limited  partners.  Also,  includes  400,000
       shares of Common  Stock  held by an entity  wholly-owned  by Mr.  Brody's
       spouse, as to which Mr. Brody disclaims beneficial ownership.

(4)    Includes  26,666 shares which Mr. Colby has the right to acquire upon the
       exercise of stock options.

(5)    Includes  308,666 shares which Mr.  Flegenheimer has the right to acquire
       upon the exercise of stock options.

(6)    In addition to the option referred to in the above notes, includes 26,666
       shares which other executive  officers have the right to acquire upon the
       exercise of stock options.

(7)    Information  derived from a report on Schedule 13G dated February 5, 1997
       filed by American  Century  Companies,  Inc.  ("ACC"),  American  Century
       Investment Management, Inc. ("ACIM"), American Century Mutual Funds, Inc.
       ("ACMF") and James E. Stowers, Jr. ("Mr. Stowers"), reporting sole voting
       and dispositive  power as to 2,656,400  shares of Company Common Stock at
       December 31, 1996.  The report states that ACIM, a registered  investment
       advisor and wholly-owned  subsidiary of ACC,  manages  investments of six
       investment   companies,   including   ACMF,   and  the  assets  of  other
       institutional  investor  accounts.  At  December  31,  1996,  ACMF  owned
       2,600,000  of the  shares of Common  Stock  that were the  subject of the
       report.  ACC, as a result of its control of ACIM, and Mr.  Stowers,  as a
       result of his  control of ACC,  are also deemed to  beneficially  own all
       such  shares  deemed  to be  beneficially  owned  by ACIM;  however,  Mr.
       Stowers, ACC and ACIM all disclaimed beneficial ownership of the reported
       shares.

(8)    Information  derived from a report on Schedule 13G dated January 27, 1997
       filed by Putnam Investments,  Inc. ("PI"), Putnam Investment  Management,
       Inc.  ("PIM"),  the Putnam  Advisory,  Inc.  ("PAC") and Marsh & McLennan
       Companies,  Inc. ("MMC"),  reporting beneficial ownership of an aggregate
       of 1,822,107  shares of Company  common  stock at December 31, 1996.  The
       report  states that PIM, the  investment  advisor to the Putnam family of
       mutual  funds,  had shared  dispositive  power as to 1,715,307  shares of
       Common  Stock and that PAC,  investment  advisor to Putnam  institutional
       clients,  had shared  dispositive  power as to  106,800  shares of Common
       Stock, with shared voting power as to 60,100 of such shares.  PIM and PAC
       are  wholly-owned  subsidiaries  of PI,  which in turn is a  wholly-owned
       subsidiary of MMC. Although PI reports beneficial ownership of the shares
       held by PIM and PAC,  MMC does not. PI and MMC both  disclaim  beneficial
       ownership of the reported shares.


ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------------------

       ESEI Acquisition/Cain Employment Agreement

       Effective June 1994, the Company entered into an agreement with Mr. Cain,
an officer of the Company  since that time and a Director  of the Company  since
July 1995, to conduct business in the  southeastern  United States pursuant to a
joint  venture  operating  under  the  name  of  Employee  Solutions-East,  Inc.
("ESEI").  ESEI was 99% 
                                        8
<PAGE>
owned by Mr.  Cain,  and 1% owned by the  Company.  At that  time,  the  Company
received an option to acquire Mr. Cain's  interest in ESEI  commencing June 1995
at a price equal to three times certain annualized fees. The initial term of the
venture  was one year and was to be  automatically  extended  for an  additional
two-year period unless the Company exercised its option to purchase ESEI, during
which period the Company provided certain support services and financial support
to ESEI. In 1994,  Mr. Cain received  warrants to acquire  400,000 shares of the
Company's  Common  Stock at an exercise  price of $2.125 per share which were to
expire through  November 10, 2004, and were  exercisable in five years or sooner
if certain events occur.  In April 1995,  such warrants were replaced with stock
options granted under the 1995 Plan and exercisable at the same price.

       Effective  January 1, 1996, the Company acquired the remaining 99% equity
interest in ESEI from Mr. Cain pursuant to its option.  The base purchase  price
consisted of 648,000  unregistered  shares of Common  Stock.  Mr. Cain  received
piggyback  registration  rights as to these  shares  during  the  period  July 1
through December 31, 1996 and one demand  registration  right exercisable during
1997. In July 1996, the Company filed a registration  statement registering such
shares for resale by Mr. Cain.

       Mr. Cain was required to sign a promissory  note in  connection  with the
ESEI  acquisition  in the principal  amount of $385,624  payable,  together with
interest at 8% per annum,  on December  31,  1996 to  reimburse  the Company for
certain expenses incurred by ESEI. Such amounts have been repaid to the Company.

         ESEI had entered into a five-year  employment  agreement beginning June
23, 1994 with Mr. Cain under which he served as ESEI's  president  and  received
cash   commissions,   reimbursement   of  certain  expenses  and  certain  other
compensation.   The  Company   guaranteed  payment  and  performance  of  ESEI's
obligations under the employment  agreement with Mr. Cain. Mr. Cain entered into
an Amended and Restated Employment  Agreement with the Company effective January
1, 1996.  The agreement  provides for  compensation  in the form of  commissions
based upon  administrative  fees  collected  from the Company's PEO business and
contains non-competition  provisions which include certain exceptions during the
term  of the  employment  agreement  and  thereafter.  The  term  of Mr.  Cain's
employment agreement ends June 23, 1999, unless earlier terminated.

Other Cain Arrangements

       Under their  noncompetition  arrangements with the Company,  Mr. Cain and
another  person are  permitted  to sell  certain  PEO  services  which have been
declined by the Company,  not  otherwise  meeting  Company  standards or meeting
certain  other  conditions.  Mr.  Cain is required to pay the Company 50% of all
commissions and similar compensations which he receives for such brokerage.  The
amount  paid  in 1996  was  approximately  $24,975.  In  addition,  Professional
Employer  Resources  Corporation  ("Perc"),  a  company  jointly  owned by those
individuals,  has an  arrangement  with the  Company  under  which  it  receives
commissions  for  the  referral  of new  business  to  the  Company;  a  Company
subsidiary performs certain administrative services on behalf of Perc.

       In 1996, the Company paid Perc $352,648 in aggregate  commissions for the
referral of business (net of an adjustment described below). Perc also conducted
a number of activities in 1996 which were ultimately  agreed among Mr. Cain, the
other  individual  and the Company that,  although  they were  conducted in good
faith,  may have been beyond the scope of activities  which the individuals were
permitted to conduct. Perc has reimbursed the Company $543,550, constituting its
1996 estimated earnings resulting from these activities.  In addition,  Perc has
agreed to pay the Company  $273,000  (plus 6% interest from January 1, 1997) not
later than  December 31, 1997;  that amount  represents  $157,000 in payment for
administrative  services  performed for Perc by a Company subsidiary in 1996 and
$116,000  representing  an  overpayment  by the Company to Perc resulting from a
determination  that commissions were not due with respect to a transaction.  Mr.
Cain has agreed with the Company to divest his interest in Perc prior to the end
of 1997.

       In  certain  instances,  if it is  determined  upon  review  of year  end
information  that  commissions have been overpaid during the course of the year,
persons who received  those  commissions  payments are required to repay them to
the Company.  During 1996, the Company overpaid commissions of up to $123,000 to
Mr. Cain, in addition to the adjustment for Perc referred to above. Mr. Cain and
the  Company  have  agreed to  reconcile  final 1996  commissions  and  complete
repayments by the end of 1997.

       TEAM Services Acquisition/Colby Employment Agreement
                                       9
<PAGE>
       On June 22, 1996, the Company acquired all the outstanding  capital stock
of TEAM Services,  a Burbank,  California based company  specializing in leasing
commercial  talent,   musicians,  and  recording  engineers  to  the  music  and
advertising  segments of the  entertainment  industry.  In  connection  with the
acquisition,  the Company assumed net liabilities of approximately $825,000. The
total purchase price will be four times total TEAM Services'  pre-tax income for
the 12-month period ending June 30, 1999. The purchase price will be paid in the
form of net assumed  liabilities and unregistered Common Stock. Any unregistered
shares  of  Common  Stock  which  may be issued  would be  entitled  to  certain
piggy-back  and  demand  registration   rights.   There  is  no  stated  maximum
consideration  payable in the  transaction.  In connection with the acquisition,
the TEAM  Services  itself paid  $41,000 of expenses  properly  allocable to the
former TEAM  Services  shareholders,  which the director and other  shareholders
have agreed to repay at December 31, 1996.

       Mr. Colby,  a member of the Company's  Board of Directors  since November
1995, was the  controlling  shareholder  of TEAM  Services,  and served as Chief
Executive  Officer of TEAM  Services  since 1993.  In  connection  with the TEAM
Services  acquisition,  Mr. Colby entered into a three-year employment agreement
with the  Company  pursuant to which he will  continue to act as TEAM  Services'
President and will provide,  among other services,  certain marketing  services.
Mr.  Colby will be  compensated  by means of a base  salary of $75,000 per year,
plus commissions  equivalent to those of Company regional sales vice presidents,
but not less than $60,000.

       Other

       Mr.  Belfer is part owner of M.D.  Labs,  Inc.  ("MD"),  a company  which
utilizes the Company's employee leasing services. The Company billed MD $632,891
for employee leasing services during 1996.

       In 1996, the Company paid Marsh & McLennan, Incorporated, an affiliate of
a greater-than-5% shareholder, approximately $150,000 for consulting and related
services. 
                                       10
<PAGE>
                                   SIGNATURES

       Pursuant  to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

       Dated the 30th day of April, 1997.

                                        EMPLOYEE SOLUTIONS, INC.


                                        By /s/ Marvin D. Brody
                                           -----------------------------------
                                           Marvin D. Brody
                                           Chief Executive Officer
                                       11