The term “employee leasing” means different things to different people and has been, and continues to be, used in many diverse contexts. In the event a PEO relationship is terminated, the co-employees will cease to work for the leasing organization but will continue as employees of the client. In conclusion, while both PEOs and employee leasing companies streamline HR tasks, PEOs offer a more comprehensive solution. PEOs share employer responsibilities, reduce administrative burdens, and provide accessibility to a wider range of benefits for your existing workforce. This fosters a more engaged and stable team, allowing you to focus on core business aims. Consider your company’s needs – for temporary staffing, employee leasing might suffice.

Are leased employees considered employees?

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.

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. If you need any assistance regarding PEO companies, contact us at PEOConnection.com We provide the best PEO, HR Outsourcing, and payroll services to help your business thrive. It’s important to remember that in a PEO partnership, small business owners do not lose control of various aspects of their business, including their hiring and firing decisions. Business owners retain full control of their business, while the PEO handles the administrative side of HR. This confusion may stem from the relationship between a PEO and its client, called co-employment. And while many think employee leasing and co-employment are the same, they are very different.

• PEOs participate in what is called a “co-employment” relationship with small and medium-sized business employers.
• Work responsibilities are typical to those of a regular employee at your business, such as customer service, executive assistant, marketing, and so on.
• Employee leasing is an arrangement where an employee leasing company supplies the workers a business needs, often on a short-term basis or for a longer term on a per-project basis.
• In this article, we break down the key differences between PEO and staff leasing, their advantages and disadvantages, and how to decide which solution is best for your organization.
• This means you’ll still be in charge of hiring and termination decisions, and other employee management issues such as salary, raises and bonuses.

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The added risks and administrative costs for the services provided is why staffing companies are most commonly used as a temporary solution. Workers who work for companies or businesses through a temporary agency or other employee-leasing firm are usually considered to be employees of both the temporary agency/leasing firm and the business. The application of employment laws normally depends on whether the employer using the leased employees is considered to be a “joint employer” with the leasing agency. A worker who seeks employment through a temporary agency is the most common type of leased employee. A temporary agency is a company that contracts with businesses to provide workers on a contingent basis. These temporary agencies handle all payroll, tax, and other human resources functions for the workers.

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.

How Can PEOs or Leased Employees Benefit Your Business?

In this article, we break down the key differences between PEO and staff leasing, their advantages and disadvantages, and how to decide which solution is best for your organization. Larger enterprises often have more complex HR requirements due to their size and industry diversity. A PEO’s ability to offer specialized expertise and manage these complexities makes it a logical choice for such companies. Employee leasing, on the other hand, may not offer the same level of strategic consultation.

Difference Between A PEO vs Employee Leasing: Things You Need to Know

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.

Employees feel more valued & recognised

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 what is peo employee leasing company 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.

Greater access to benefits

• Working with a certified PEO ensures business owners that they remain compliant with all HR and employment related laws and regulations.
• Some define employee leasing as a temporary employment arrangement where one or more workers selected by the leasing or staffing entity is assigned to a customer frequently for a fixed period of time or for a specific project.
• The misconception that PEO and employee leasing are the same; often, causes business owners and broker to scrap a PEO solution, even though a prosperous partnership is in the horizon.
• 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.
• Though many think that employee leasing and co-employment are one and the same; clearly, they are totally different.

For example, with PEO insurance, you can see savings of about 20% to 30% on your monthly health insurance premium costs. Co-employment is a contractual agreement between a company and a PEO that allocates and divides employer responsibilities. By providing payroll, benefits, and HR services and assisting with compliance issues under state and federal law, PEOs allow small businesses to improve productivity and profitability, to focus on their core mission, and to grow.

Additionally, PEOs provide employees with a broader range of benefits, training, and development programs. With a PEO, you can better compete for talent by offering competitive benefits usually available only to larger companies — including health insurance, commuter benefits, perks and discounts, and a retirement savings plan. Employee leasing is often confused with the services offered by PEOs, and you might sometimes hear the two terms used interchangeably. This results in the need for additional cyber security defense measures in order to protect employee information from being subject to a data breach or misuse, something that also comes at a cost. Our flexible staffing solutions are designed to adapt to your business’s evolving needs.

You can also ask for a substitute to fill in for a worker who is sick and will not be back for a while. In this arrangement, you won’t establish an employer-employee relationship with these workers; they will solely serve to meet your short-term or seasonal requirements. Employee leasing — also known as professional employer organization (PEO) services — is when a business borrows, or “leases,” an employee from a third-party company (usually a staffing agency).