What is Employee Leasing? – Briefly Explained With Examples in 2022

published on: October 25, 2021 last updated on: February 3, 2022
Employee Leasing

Do you need workers for your company on a temporary basis? Then, you must know about employee leasing and consult a firm that can make an arrangement for workers.   Sometimes you may need employees for your business, but you don’t want to go through the complications of hiring and managing all the HR administrative work.

If that’s the case, you can work with an employee leasing company that can handle all the employment responsibilities. After reading this article, you will know how employee leasing works, its benefits, and its drawbacks.  

Understanding Employee Leasing  

understanding employee leasing

Employee leasing or is a process that a leasing company that employs workers for a business and handles all the HR-related activities. There are several misconceptions surrounding this type of employment arrangement.

For a better understanding of employee leasing, you need to clearly understand the distinction between different types of employment arrangements. There are five common ways that companies deal with employees: 

  • The most common category of employment arrangement is a business that directly handles all the employment-related activities from hiring to firing an employee. In this type of arrangement, a business has an HR team that recruits employees, handles all the administrative works, managing wages, tax deduction, and other employment-related activities. 
  • Another type of employment arrangement is in which the business owner employs a commercial vendor for payment processing of the employees. It’s as simple as that the vendor works like a payment partner for the business. There is no contact between the employees and the vendor. The vendor ensures the payment of wages, deductions, and tax deductions. 
  • Some businesses also employ commercial services where the vendor takes care of all the aspects of employment management. From hiring to paying wages, managing the administration works, and every employment activity. The vendor also handles employee complaints and legal issues. 
  • Most of the time, businesses also employ a vendor that works for the business for a temporary period. The workers are the employees of the vendor, and they take direction from the business till the assignment is complete. 
  • Finally, businesses also employ professional employer organizations where the employees belong to the business as well as to the commercial vendor. Here both the business and the vendor work like co-employment in which they share the employment responsibilities among them. This type of employment arrangement is called employee leasing or integrity employee. 

Now, let’s explore how a business and the professional employer service share employment responsibilities. By the end of this article, you will also understand whether you need to employ a professional employer organization for your business. 

Example of Employee Leasing: 

Example of Employee Leasing

Usually, an employee leasing company appoints an account manager who will answer all your queries regarding HR services, integrity employees, payrolls with any PEO plan. There are hundreds of employee leasing companies, but Justworks, Trinet, ADP, and Oasis are some of the top PEOs. 

All the companies provide your different facilities like integrity employees when you outsource employees from these companies. However, below are some of the common facilities that you get from a PEO. 

  • HR Services: An employee leasing company will administrate all the HR functions such as hiring, tracking employee performance, employee policy development, recruitment tools,  dispute assistance, etc. 
  • Payroll and Taxes: A PEO also manages all the activities related to payroll and tax administration. It provides you software or a framework for payment of wages, tracking attendance, preparing W-2, deductions, tax administration, etc. 
  • Employee Insurance: When you outsource employees, the leasing company takes care of the employee benefits, including medical insurance covering the vision, dental, and overall health of the employees. The leasing company also conducts different wellness programs for the employees. 
  • Training and Development: Most of the employee leasing companies offer a learning management system for the training and development of the employees. 
  • Risk and Compliance: The leasing companies also ensure employment liability such as disability insurance, unemployment insurance, etc. Additionally, it also provides training for discrimination, sexual harassment to the employees. 

Benefits of Employee Leasing

Benefits of Employee Leasing

The best thing about employee leasing is you can get employees instantly without going through the HR processes. Apart from that, there are several other benefits of employee leasing mentioned below:

  • It’s beneficial for both the employees and the business. Let’s say a company X outsources its worker from a PEO Y, then X does not have to worry about the fringe benefits and insurance of the employees. On the other side, the employees don’t get unemployed if company X lays them off. They can find works at other clients of Y. 
  • A small business can get great benefits from employee leasing because it can avoid administrative tasks and other employment activities. 
  • Additionally, businesses can also complete their task at a lower cost because they don’t have to think about the payroll costs, employment package, health insurance of the employees, etc. 
  • It also helps the economy to reduce unemployment and increase the per capita income of the nation. However, we can never ignore the challenges and negative impact of employee leasing. 

Drawbacks of Employee Leasing

Drawbacks of Employee Leasing

Along with the benefits, there are several drawbacks to joining a POE. Outsourcing integrity employees from an employee leasing company can make the employment process complicated. Here are some downsides of employee leasing: 

  • The management of employees becomes complex because there are two masters for the employees. Since the business and the PEO have equal rights to hire, terminate, and direct them, employees may get confused. 
  • The employees may get other opportunities from the PEO’s client, but there is a negative impact on the employees’ careers. So, the employee may get fewer opportunities in the future. 
  • From the business owner’s perspective, the owner has less control over the employees. There are many litigation issues against PEOs for not paying employees when a small business owner didn’t pay the PEO if there is any dispute. 

Frequently Asked Questions:

Here are the most frequently asked questions that we have scouted over the internet and answered to further clarify your queries.

1. What Is The Difference Between Employees Leasing And Outstanding?

Personnel leasing also saves you time and effort in terms of labor law. The PEO will be responsible for the paperwork of the employees, but the outsourced team will continue to respond directly to you, respecting the company’s values and policies.

2. Is ADP Employee Leasing?

At PEO Talent Leasing, we have the experience to make you understand the benefit plans and other options. Additionally, it helps you make an informed decision. With ADP leasing, we work alongside HR professionals who know what other companies like you, attract and retain talent.

3. Who Is The Largest PEO Company?

ADP TotalSource that is the biggest PEOs which is located in around 140 countries. They made their name through their phenomenal customer services.

4. What Is The Advantage Of A PEO?

It is of great assistance when it comes to employee liability or compliance-related tasks. It also helps in the monitoring of employment law.

In Summary

From the above-presented information, I think you have got a fair idea of employee leasing. Additionally, it also has given you some insights into how businesses manage employees in different ways. If you are running a small business, consider hiring an employee leasing company. Leverage this guide to understand whether a professional employer organization suits your needs. Lastly, don’t forget to share your opinion in the comments section.

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