The most significant benefit of using a professional employer organization is the reduced administrative time. Since the PEO handles a large portion of your administrative tasks, you will have more time to focus on running your business. You can focus more on other core business functions geared towards generating revenue and growing your company. In doing so, PEOs help businesses take care of employees by enabling them to offer Fortune 500-level benefits at an affordable cost and providing access to experienced HR professionals. Larger companies often benefit more from a PEO because of their scale and the complexity of HR operations. Smaller businesses with simpler HR needs might find employee leasing a suitable, cost-effective option.
What are the differences between Employee Leasing and Professional Employer Organizations?
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.
Retaining Talent
Most leasing companies have standard benefit “packages” that cover all employees leased from the company. Some employers may not need or be able to afford an extravagant benefits package. Others will incur employee dissatisfaction, resentment, and turnover if the package is too meager. To some extent, however, the employer can mitigate the impact by choosing a leasing firm that offers an acceptable benefits package.
Why does the Professional Employer Organization concept work?
- A permanent staffing method under which an employee leasing company (sometimes called a professional employer organization or a labor contractor) provides all or most of its client’s employees.
- They are both popular HR services for small and medium-sized businesses (SMBs).
- Explore what corporate payroll services offer and how to choose the right provider to streamline payments, taxes, and compliance.
While this may seem like a relinquishment of control on the part of the client, this type of risk management expertise may significantly reduce the client’s workers compensation costs. Because they pool the employees of a large number of clients, leasing companies have the advantage of group purchasing power for employee benefits. Because risk is spread over a larger group, and because most insurers offer discounts on coverages generating a certain amount of premium, small employers can usually reduce their total cost of employee benefits.
Staff leasing in a nutshell
A PEO’s main benefit to an employer is to relieve the tasks and stress of dealing with employee administrative issues – such as payroll, employee benefits, human resources and workers’ compensation. Using an employee leasing company is a cost-effective way to outsource excessive administrative duties so that the owners and employees can focus on the profitable functions of the business. With an employee leasing company , the employer has a shared relationship over their employees for the purposes of payroll processing, workers’ compensation insurance coverage, benefits administration, and HR services. Instead of being a leased or temporary worker, employees end up having two employers – the company who hired them AND the professional employer organization.
Since the staffing company is the official employer, they could place the employee they once hired with you with a competing company, which could risk your business secrets. Additionally, if your employees work for someone else, your company might not be eligible for IRS tax benefits for employees like the Work Opportunity Tax Credit or the Employee Retention Credit. Lastly, some staffing companies charge higher rates than regular employee salaries.
It is a collaborative approach what is peo employee leasing company 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.
Simply put, leasing employees gives businesses access to specialized skills without the long-term commitment of hiring a full-time employee. In this scenario, the business only “borrows” the employee and is not considered their legal employer. When the lease ends, the business can decide to hire the leased employee as a contractor or full-time employee if they choose to. In a co-employment model, you and the PEO share certain employment responsibilities. The PEO handles payroll, tax reporting, benefits and other administrative functions, while you maintain control of your business, including managing the work performed by employees. 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.
This enables the business owner to focus on the company’s core competency and grow its bottom line. In an employee leasing arrangement, the leased employees work for you to get the job done, but they are not on payroll because they are not your employees. Legally, they are employed by the leasing agency and will return to their employer after completing the job you outsourced, or leased, them to do. Employee leasing describes an arrangement between an employee leasing company and a business in need of specific professional workers. The employee leasing company supplies the workers, typically on a temporary basis, who then perform all the work duties of a regular employee. It provides comprehensive HR management, handling tasks such as payroll, benefits administration, compliance, risk management, and more.
- “Mod renting” was a common practice whereby an employer with a high debit experience modifier would transfer its employees to a leasing company with a modifier of 1.0.
- The PEO handles payroll, tax reporting, benefits and other administrative functions, while you maintain control of your business, including managing the work performed by employees.
- However, when outsourcing your HR functions to a PEO, you might not be able to have a say in the benefit providers they choose to deal with.
- Health insurance, employee benefit offerings are easily accessible when working with a PEO, thus assisting in recruitment and employee retention.
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 and firing of workers in their clients’ workforce.
This flexibility is a key feature, particularly for companies with fluctuating workforce needs. However, a PEO takes a holistic approach, offering not only HR task outsourcing but also strategic guidance, benefits administration, risk management, and compliance services. From hiring to termination, professional human resources from professional employer organizations have become increasingly invaluable to employers in maximizing their return on investment. Communicating employee expectations, pay rates and reviews, even unemployment claims and immigration documentation, are just a few of the dozens of HR service benefits provided. While both PEOs and Employee Leasing companies handle HR tasks, PEOs share legal and compliance responsibilities with the client company, managing benefits and insurance and ensuring labor law adherence.
