- Employee leasing allows management to focus on profit-generating tasks.great job image by DXfoto.com from Fotolia.com
Employee leasing is a popular human resources option for companies of all sizes. A professional employer organization, or PEO, takes on the burden of payroll, employer taxes and benefits from the company. Professional employer organizations also reduce the liability of workers' compensation and unemployment claims by assuming the legal responsibility of employee welfare on the job.
Employee leasing agreements can often be negotiated on a flat rate based on the number of employees at the company, or on a percentage of payroll costs. The standards by which PEOs must conduct business are governed by the National Association of Professional Employer Organizations.
Benefits to Employees
- Employees who worked for small companies prior to switching to a professional employer organization tend to see the greatest increase in benefits. They receive access to retirement plans, health benefits and stock options that may not have been available previously due to the size or finances of the company.
Employees of larger companies often find that employee contributions for health benefits are lower because of the purchasing power of the large organization. Many PEOs offer tuition reimbursement, employer-matched 401k plans and other benefits that individual companies may not be able to provide.
Employees of PEOs also have an outside party to voice their job and management concerns to. The third-party nature of these arrangements can help reduce turnover as a result.
Benefits to Small-Business Owners
- Growing the business is often the primary goal of a small-business owner. Time spent doing payroll and other human resources-related administrative tasks cuts into time that could be spent marketing. Employee leasing takes the burden of these tasks off of the management staff.
Many small-business owners find it very difficult to be competitive in hiring top-caliber staff. The limited resources of small businesses make it very difficult to afford the benefits employees look for in a new employer. Professional employer organizations have the means to provide a competitive benefits package and often will help recruit the talent a small business needs to be successful.
Benefits to Large Companies
- Traditionally, the more employees a company is responsible for, the more human resources professionals the company needs to ensure that it complies with laws and regulations. Processing payroll, maintaining benefit packages and handling workers' compensation and unemployment claims for a large organization requires a full human resources department. Employee leasing allows a large company to streamline its HR staff. This reduces salary expenditures and ensures that the human resources department can focus on training new employees and maintaining ethical compliance standards, actions that have a direct benefit to the company's bottom line.