Understanding Employee Leasing

Understanding Employee Leasing

Employee leasing is a specific arrangement where businesses transfer their staff to a leasing firm that specializes in HR management, risk administration, and payroll accounting. The enterprise then leases its employees back, and they are now considered the staff of the leasing firm. These employees are now paid more than what they usually receive during the transfer. Businesses enter into such practice so the payroll, associated expenses, and the taxes of the leased staff will now become the liabilities of the manpower pool firm.

Employee Leasing An Important Ingredient for Business Expansion

Smaller companies aiming for workforce expansion do not foresee any problems with the technical aspects of the hiring process. Theyll be facing certain issues on the human resource side however, as they are constantly overwhelmed with all administrative functions (records keeping and payroll accounting tasks) that come to bear with the introduction of newly hired employees. Failure to address this issue can affect productivity. To get around this, they could consider leasing employees.

The process employs almost the same system of hiring temporary workers. What sets them apart is the permanency factor. Business enterprises must contact a PEO (Professional Employment Organization) to discuss particular employment needs/requirements. The PEO (or other employment companies) then sets up an interview process for new staff recruitment. In other case, they could also accept responsibilities for existing workers. While businesses can still influence the hiring process, it must be noted that any hired staff will answer to the manpower pool company officially.

For majority of employees, making the switch (from their original parent companies to staff leasing companies) is a good deal financial-wise. Since the PEO handles large numbers of employees coming from numerous companies, all their future health insurance and other employee benefits will be processed and negotiated in bulk, which means many good things. A typical employee working in a small company for example, can now receive the same benefits that regular workers in large automotive plants are promised. The staff leasing company administers the wage and performance review, not the employees original company.

Employers clearly see the benefits of the practice; eliminating the need for an HR department and accountants is one. Aside from employee wages, leasing agencies will also have to charge a certain fee that also applies in temporary employment systems. The fee is less the costs in hiring payroll accountants and HR experts. Since workers are not considered as company employees in a legal sense, issues such as personal injuries and the compensation claims of workers will now become the responsibility of the agency.

Employee leasing may be a great solution to many, but other companies do not share the same sentiments however. A strained communication would then become an issue since business enterprises do not have control of their workers anymore. In other cases, conflicts could be arbitrated by agency representatives. But once these issues are addressed, both parties will definitely benefit from this arrangement.

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