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.
You’re in business to make money, not worry about employee handbooks, job descriptions, records management, and conflict resolution. Once an employee joins the company, PEOs assist with onboarding, employee training, retaining employees and making sure new hires complete paperwork such as I-9 forms so there’s no issues with compliance. Many offer assistance with job descriptions, interviewing candidates and help employers with hiring decisions. All employees are either currently employed by the client or will be hired in the future by the client. Some PEOs offer expanded HR services as well, such as employee training, recruitment and performance management.
The agency serves as the legal employer, while your company directs and supervises the employees’ daily work. In contrast, employee leasing is ideal for project-based work and shorter-term HR needs. While it provides flexibility, it may not provide the same level of comprehensive HR services as a PEO. One of the pivotal aspects of the PEO Vs. Employee Leasing Differences is the cost factor. To begin with, a PEO’s fee structure often includes a flat-rate fee based on the number of employees and services required.
While doing research to determine whether employee leasing is right for you, you might come across something called PEO co-employment. PEO co-employment is an interesting workforce management option for many businesses because it allows them to share employer responsibilities for their normal workforce with a PEO. But even though they can perform similar tasks and work for the same period of time, there are several key differences between leased employees and independent contractors to be aware of.
- In contrast, employee leasing, while beneficial, typically focuses on specific HR tasks.
- Here’s where employee leasing and Professional Employer Organizations (PEOs) come in.
- Sure, it’s not rocket science- but payroll is tedious work and you can’t afford mistakes.
- The PEO assumes responsibility and liability for payment of state unemployment taxes, and most states recognize these service providers as the responsible entity.
- There are many benefits to using a PEO and can be a great way to add increased value to a company that chooses co-employment.
About PEO Companies?
To help you navigate this crucial decision, we will delve into the PEO Vs. Employee Leasing Differences in detail. If you’re a small or medium-sized business owner and find yourself swamped with the demands of growing your company, outsourcing your HR responsibilities to a PEO can be a game-changer for both you and your employees. A PEO provider will not only help you navigate through the challenges you’re facing but also assist you in prioritizing where your attention should be focused.
Administers Benefits
Add to that the fact that most temp agencies pay weekly and it becomes an important consideration for someone who needs a job quickly. Here are some examples of compliance fails and why you should manage them… In this scenario, you may want to contact a marketing agency to lease, or outsource, your CMO. Once you meet your marketing objectives, you can decide whether to create new goals and renew the contract with the marketing agency, or end the contract altogether. Accelerate prospecting with instant access to 300M professionals from 30M companies with the right contact details. Perhaps the PEO solution is the competitive track that is aligned with your company goals and market entry.
HR Control and Management
“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. Some firms went so far as to establish a subsidiary leasing company whose only client was the parent. When you enter into a co-employment arrangement with a PEO, your company continues to make all hiring, promotion, and termination decisions about the people who work for you. The PEO handles the HR administrative tasks, such as onboarding, legal paperwork, taxes, workers’ compensation, payroll services, benefits administration, and so on.
(Professional Employer Organization)?
In general terms, the PEO will focus on employment-related issues, and the client will be responsible for the actual business operations. However, the1986 Tax Reform Act eliminated this advantage for most employers. The new requirement stated that if leased employees constitute more than 20 percent of an employer’s total workforce, they must be counted as employees for purposes of meeting ERISA’s qualification requirements.
Outsourcing staff leasing to specialized agencies means the client company can focus on core business activities while the agency manages the intricacies of HR functions. The way it most often works is that PEOs hire their clients’ existing workforce and then assume responsibility for HR management functions like benefits, payroll, workers comp, Regulatory Compliance laws, and more. The business maintains a long-term investment and commitment to the employees but uses the PEO as a means of outsourcing the burden of HR. If the agreement between the business and the PEO is terminated, workers continue as the client’s direct employees. In contrast, employee leasing, while beneficial, typically focuses on specific HR tasks.
Flexibility and Scalability
- It provides businesses with the flexibility to address immediate workforce needs and specific HR tasks.
- Instead of managing the HR responsibilities of another part- or full-time employee, the PEO manages these tasks, which can reduce the administrative burden on the business.
- In essence, the Difference Between A PEO vs Employee Leasing lies in the extent to which shared responsibility and expertise are integrated into the HR partnership.
- These leased employees return to the staffing service for reassignment after completion of their work with the client company.
From this point forward, the PEO has the fiduciary responsibility to accurately report and pay both employer and employee taxes for that worker. Co-employment is an arrangement in which two organizations, namely your company and a PEO, share responsibilities for an employee. The PEO handles the administration responsibilities while your company manages the day-to-day duties of your employees.
As mentioned earlier, PEOs take care of administering HR benefits and other types of benefits. Most companies assume that they have to take on the task of managing all aspects of their business in order to scale successfully, but that is far from the truth. These companies are beneficial tools that provide you with the services you need to stay compliant while you scale and focus on your bottom line. With PEOs, the employees are still yours and the fees are way less than leasing and staffing companies. Historically, the term “employee leasing” was used to describe what has evolved into the PEO industry.
Using a PEO company to help you manage your daily administrative tasks gives you more time to focus on running the business. This gives you free time to focus on marketing and retaining your customers instead of dealing with payroll or benefits administration. PEOs allow businesses like yours to outsource specific human resources administrative functions as well if needed. The PEO acts in as the administrative employer while you act in s the onsite worksite employer.
When a business engages with a PEO, it enters a co-employment relationship that spans years, not months. Today, we outsource everything from food delivery and transportation services, to someone who will walk our dogs. 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. Want to discover how a co-employment relationship with ExtensisHR can help you reach your business goals?
PEOs and international expansion: Is it worth it?
When a business enters into a contractual arrangement with a PEO, it’s what is peo employee leasing company basically outsourcing its administrative HR tasks. As a busy business owner, the last thing you need is for your operations to come to a screeching halt because you failed to stay within the state or federal compliance. When you partner with a PEO, there are other rules that apply to larger organizations that you, too, will have to comply with.
