What Is an Employee Leasing Company

If you’re not clear on what an employee leasing company is, in short, it’s a service that provides staffing and human resources to business clients.

If your business is growing rapidly and you need to expand your workforce to keep up, an employee leasing company could be an invaluable ally. Here’s a closer look.

What Is the Difference Between Employee Leasing and a PEO?

Many think a staff leasing company and a professional employer organization (PEO) are the same—they are not. As a business owner, it’s crucial to know the difference between the two to get the right staffing solution for your needs.

With employee leasing, you (the client) pay an intermediary organization (the employee leasing company) to provide the workers you need for a defined period or specific project. These workers will do the required job at your office or place of business until contract expiry, a set date, or project completion. Afterward, they return to the employee leasing company, as it is their employer.

A PEO does not provide workers to its clients. Instead, the PEO enters a co-employment relationship wherein it assumes some of the employer risks and handles HR responsibilities, including:

  • Remitting wages and withholdings
  • Collecting, reporting, and settling employment taxes with corresponding authorities
  • Issuing tax return Form W-2
  • Managing employee benefits such as healthcare, 401(k), and others

An employee leasing company also manages the above HR administrative tasks. In addition, it is responsible for hiring and terminating workers as they are under direct contract with the company. A PEO with a co-employment partnership does not have a say in staff-related decisions because of its limited scope.

When you partner with an employee leasing firm, you no longer have to worry about the extra work that comes with increasing your workforce. You can focus more on the core competencies of your business. But if you want to have more control over people you hire, consider co-employment with a PEO.

Employee Leasing vs. Temporary Staffing

Another common misconception is that employee leasing is the same as temporary staffing. Both types of workers are outsourced and hired to fill a client’s workforce requirements. However, leased employees have a permanent status with their employer, the leasing company.

Temporary staffing is for covering employee absences, seasonal workloads, or special or one-time assignments. It is not a long-term arrangement as with some employee leasing agreements. Moreover, temporary service providers should indicate the nature of or reason for temporary placements.

Leased workers are under the full supervision of the leasing company. The same does not apply to temporary employees—the client manages them and controls their working conditions. With temporary employees, the client firm has no right to dismiss an employee; only the staffing company does.

What Are the Benefits of Leasing Employees?

If you are thinking of leasing employees rather than hiring them directly, below are a few of its advantages.

Lower Costs

HR administration expenses are among the high operational costs of many businesses. Employee benefits, such as healthcare and workers’ compensation, fall under the leasing company’s responsibility.

They can also relieve you of the financial burden of unemployment insurance and paid leaves, as they are technically the employer of your new workers.

Since most leased employees are skilled, you do not have to spend on their training and additional education, which can be costly.

Reduced HR Workload

Expanding your workforce adds to the workload of your HR. They have to recruit the right people and manage the extra administrative complexities associated with new hires. These cover the payroll, taxes, and reporting requirements. Sometimes, the workload will include performance evaluations and disciplinary actions as well.

By partnering with an employee leasing firm, you get qualified candidates in the shortest amount of time—they have been thoroughly vetted to match your requirements. Your HR team can focus more on pressing issues and improving organizational strategies.

Fewer Risks & Liabilities

Compliance with employment-related laws and regulations is the sole responsibility of an employer. Leased workers are managed by staff leasing companies, reducing the risk and liability a business owner is exposed to.

Although the client retains some liability over leased employees, such as safe working conditions, it is significantly less than had they hired directly.

More Flexibility

By leasing employees, you can ramp up your workforce as the need arises, such as when you have larger projects than normal.

Once the project is finished, leased workers will leave your company, and you won’t have to pay costly separation benefits. Such an arrangement lets you easily scale operations and prepare for gradual expansion.

A staff leasing arrangement adds employees without investing in infrastructure or engaging in long-term commitments you cannot maintain once the project is completed.

ROI Has Staffing Solutions for You

Discover what an employee leasing company like ROI Call Center Solutions can do for you. Speak to a representative who can ease the load of hiring new employees so you can focus on other critical aspects of your business.

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