Staff Leasing: What Is It and How Does It Work?
As a small business, you’ve probably had to deal with situations where you’re short-staffed and could really use an extra hand (or three) for the short term. Follow along to learn more about what is employee leasing, how it differs from professional employer organizations (PEOs), co-employment and joint employment. The leasing agency then undertakes the recruitment and selection process, identifying candidates that fit the client’s criteria.
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It is a collaborative approach where the PEO becomes a co-employer, taking on HR-related tasks alongside the client company. It provides businesses with the flexibility to address immediate workforce needs and specific HR tasks. When looking at the Difference Between A PEO vs Employee Leasing, it is vital to grasp this key distinction in approach. As a business owner, you have to make important choices every day that will affect how your company grows and performs. They are both popular HR services for small and medium-sized businesses (SMBs). The two terms are not the same, but they are sometimes used interchangeably.
The specific responsibilities of each party should be spelled out explicitly in the contract. Responsibility for recruiting, hiring, training, disciplining, promoting, conducting performance reviews, and firing varies. Some leasing companies retain the sole responsibility for some or all of these functions primarily for liability reasons and to preserve their status as an employer or coemployer of the leased employees. Once an employee is assigned by a staffing agency to work for you, their workers’ compensation insurance, taxes and wages are paid by the staffing company.
An employee leasing company offers businesses short-term or per-project staffing solutions by providing their clients with workers who can work on-site at the client’s office or place of business. Staff leasing offers significant cost savings by outsourcing human resources (HR) functions such as payroll, benefits administration, and compliance, allowing companies to reduce overhead expenses and focus on core business activities. It also provides access to a larger pool of skilled professionals through extensive networks that leasing companies maintain, enabling quick and efficient filling of positions with qualified candidates. According to the National Association of Professional Employer Organizations (NAPEO), initially, PEOs used to provide employee leasing services, which they then evolved from. Some older state regulations governing PEOs still use leasing terminology, which adds to the complexity surrounding PEOs.
You Retain Control Over Your Employees
Professional employer organizations (also known as PEOs) contract with a company to take many time-consuming hiring and human resourcing responsibilities off their plates. In many cases, PEOs are staffing agencies and it’s basically like outsourcing your human resources department to a team of external experts. The biggest distinction is that in a co-employment relationship through a PEO, the PEO does not provide staff for their client. This responsibility falls on the client, as do any other staff-related decisions. However, if needed, some PEOs offer comprehensive recruiting services, including job advertisement creation, interview assistance, offer letter creation, and more. When a business works with a staffing company that uses employee leasing, the staffing firm provides workers to their client who work at the client’s place of business.
Leasing companies are professional human resources managers and as such should stay current on all employment related laws, such as those concerning discrimination and immigration. By retaining the right to make all hiring, promotion, and termination decisions, a good leasing company can keep a client from exposing itself to claims of wrongful termination and discrimination. Contractual Details—Contracts should spell out every detail of the arrangement that is being made. After all, human resources management is a complex area that is rife with complicated rules and regulations in the realms of payroll, benefits, etc. Moreover, human resources management has seen increased lawsuit activity in recent years, a trend that has led some PEOs to ask for varying levels of input in the realms of hiring what is peo employee leasing company and firing of workers in their clients’ workforce.
What is the Difference Between Employee Leasing and PEO Companies?
- We have covered a lot of ground, but let’s touch on one more topic that’s likely to come up when getting familiar with employee leasing.
- When navigating this choice, understanding the major differences between these two options is paramount.
- When the industry first started it was often times referred to as employee leasing.
- However, if needed, some PEOs offer comprehensive recruiting services, including job advertisement creation, interview assistance, offer letter creation, and more.
- Reliasourcing’s staff leasing solutions empower businesses to thrive by offering access to top-tier global talent without the hassle of navigating international legal systems and employment regulations.
Our strategic approach ensures that your company can focus on growth while we handle the complexities of global talent acquisition. The business owner retains ownership of the company and control over its operations. As co-employers, the PEO and client will contractually share or allocate employer responsibilities and liabilities per a client service agreement (CSA).
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- And while many think employee leasing and co-employment are the same, they are very different.
- Let’s delve into the world of employee leasing and PEO companies, exploring how they can empower your business to thrive.
- The Employee Leasing arrangement suits businesses aiming to maintain control over their workforce while needing a helping hand with temporary hires.
- Unlike temporary staffing providers, PEOs typically do not recruit, train, or provide staff to their clients; although some PEO’s have a separate division now for that need.
This all-encompassing approach makes it suitable for businesses seeking an enduring solution for their HR needs. A PEO aims to provide comprehensive HR support, including payroll processing, benefits administration, compliance management, and workforce development. This long-term commitment allows businesses to access in-depth HR expertise, ensuring sustainable growth and compliance. Because these companies can access a large number of applications through their database, they can fill a position, no matter the qualifications required for it, with ease.
What About Staffing Companies?
An employer would contract with a leasing company, terminate its employees, and then lease back the workers from the leasing firm. This arrangement enabled employers to cut costs and transfer many employment-related risks to the leasing company. When the leasing company is providing workers compensation insurance on leased employees, it should back that up with a sound safety program. At the very least it shows a disregard for the client’s net costs ; at worst, it may be a sign that the company is engaging in workers compensation insurance premium fraud. The overall employee-related costs will be much higher, including premiums that are added for using their staffing services.
In essence, the Difference Between A PEO vs Employee Leasing is evident in the scope of HR services they provide. Today PEO’s are known for being full-service providers that offers an amazing array of products and services. The PEO industry has been around for over 25 years and has dramatically evolved in that time period. When the industry first started it was often times referred to as employee leasing.
If you are looking for strategic guidance and HR expertise to grow your business, a PEO offers ongoing support and consultation. It is ideal when you require support for specific HR tasks or a short-term workforce solution. It provides flexibility but may not cover the entire spectrum of HR services that a PEO does.
A PEO, or Professional Employer Organization, is a company that provides an extensive list of HR services to help you manage your human resources department under a co-employment agreement. Some even offer recruitment support, which includes creating and posting job ads, providing interview assistance, and more. A PEO pays wages and taxes under the PEO’s EIN, offers workers’ comp and risk management services, and provides compliance assistance with employment-related rules and regulations. In addition, PEOs provide HR technology systems and access to 401(k) plans, health, dental, and life insurance, dependent care, and other benefits. Being a full-service professional employer organization (PEO), we provide employment-related services, such as employee benefits, human resources, risk management and payroll. We also offer ongoing supervisory training to employees regarding employment laws, procedures and policies.