It does happen, yes.
At least in terms of erotic fiction, though, I would tread carefully with madams/pimps sleeping with their prostitutes. Consent becomes a tricky issue. Especially if it's viewed, as Maryn described it, as part of the cost of doing business, consent is shaky at best. The prostitute may feel -- or may be told outright -- that sex with their boss isn't optional. Even if the prostitute and madam like each other and enjoy sex with each other, it's not quite consensual if there's an undercurrent of obligation.
All of which may be perfectly fine in whatever a person is writing. Noncon, dubcon, etc., are things that exist, as are power games/imbalances, etc. It's just something to keep in mind.