staff leasing is defined as a process of hiring an employee temporarily for an indefinite time with or without using any staffing agency.
What Is Staff Leasing?
It is a contractual arrangement in which the leasing company, which is also known as a professional employer organization or PEO, is the one who recruits. Usually, the business owner and the leasing company share employment responsibilities.
However, the management control over the work by the employees is retained by the business owner.
The leasing company takes up other responsibilities like employment taxes and wages. The business owner is responsible for writing a cheque to the leasing company, which covers taxes, payroll, benefits, and other fees.
The PEO takes care of the rest. The leasing works on both the parties’ coordination and mutual agreement, including the employees, to be leased. Therefore transparency in every aspect of the hiring process is essential for all three parties involved.
Why should the Employer’s Lease?
The following are a few of the reasons why an employer may lease the staff instead of hiring directly:
- Recruitment costs are reduced drastically, which helps HR to focus on essential issues. Depending on the type of job, some PEO’s have a ready-made pool of employees who may be available to work immediately. This will save time and make the process faster.
- One of the critical aspects of managing taxes, payroll, reporting, etc. is removed in leasing employees. These things not only cost an organization but also take up a lot of resources and involve multiple people to do the job.
- Employers are not required to have unemployment insurance if there are no employees. Therefore this will reduce the expense of the employers. Apart from unemployment insurance, there are many other expenses that full-time employees have to be given, including paid leaves, medical insurance, Sick leave, etc. All such expenses are avoided if the employer decides on staff leasing.
- In many cases, employees may get benefits since the leasing company can pool multiple employers. This may result in higher negotiating power for many things like insurance.
- The PEO handles all the tasks, and therefore you will not have to handle any administrative expertise. The leasing organization can help the company to conduct performance reviews as well.
- Since the company requires top talent, it should work with the staffing provider so that there is no compromise on it.
What Are the Risks of Staff Leasing?
The following are some of the risks which are associated with staff leasing:
- The employer has no control over the wages, so the leasing party should ensure no wage payment problems. This is because the employer does not handle business administration. Therefore, if anything happens with the wage or if any employee receives unsatisfactory wages, the blame goes on the employer even if he does not handle that part of the employees.
- The organization usually does not have any control over the benefits which are offered to the employees. In some cases, the organization may want to extend the benefits that they provide to their permanent employees to the leased employees. But they will not be able to do so because of the contractual obligations with the PEO.
- There will be a copayment situation in some cases, and the employer will bear some liability and responsibility of the employees. This means that even if the PEO handles the admin work, the employer will still have an obligation to control some aspects and check for accuracy so that there are no problems with the admin aspects.
- In some cases, staff leasing organizations get their employees from other countries. Offshore employees may not work well with every business. While offshore employees may be economical when it comes to working for businesses, they may not be relevant or practical for your kind of work every time.
Staff leasing is a popular process in many industries and startups since it is a time-saving method to get employees.
While it has various advantages like reduced costs, reduced liabilities, etc. they may also come with some other disadvantages.