What is an Employee Leasing Company?
Employee Leasing Companies, often times referred to as Professional Employer Organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation. Employee Leasing Company clients focus on their core competencies to maintain and grow their bottom line.
Who uses an Employee Leasing Company?
Any business can find value in an Employee Leasing relationship. Employee Leasing clients include many different types of businesses ranging from accounting firms to high-tech companies and small manufacturers. Many different types of professionals, including doctors, retailers, mechanics, engineers and plumbers, also benefit from these services.
How does an Employee Leasing arrangement work?
Once a client company contracts with an Employee Leasing Company, that company will then co-employ the client’s work site employees. In the arrangement among an Employee Leasing Company, a work site employee and a client company, there exists a co-employment relationship in which both the Employee Leasing Company and client company have an employment relationship with the worker. The Employee Leasing Company and client company share and allocate responsibilities and liabilities. The Employee Leasing Company assumes much of the responsibility and liability for the business of employment, such as risk management, human resource management, and payroll and employee tax compliance. The client company retains responsibility for and manages product development and production, business operations, marketing, sales, and service. The Employee Leasing Company and the client will share certain responsibilities for employment law compliance. As a co-employer, the Employee Leasing Company will often provide a complete human resource and benefit package for work site employees.
Why would a business use an Employee Leasing Company?
Business owners want to focus their time and energy on the “business of their business” and not on the “business of employment.” As businesses grow, most owners do not have the necessary human resource training; payroll and accounting skills, the knowledge of regulatory compliance, or the backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer. Employee Leasing Companies give small-group markets access to many benefits and employment amenities they would not have otherwise.
Do the business owners lose control of their businesses?
No. The client retains ownership of the company and control over its operations. As co-employers, the Employee Leasing Company and client will contractually share or allocate employer responsibilities and liabilities. The Employee Leasing Company will generally only assume responsibilities and liabilities associated with a “general” employer for purposes of administration, payroll, taxes and benefits. The client will continue to have responsibility for work site safety and compliance. The Employee Leasing Company will be responsible for payroll and employment taxes, will maintain employee records and reserves a right to hire and fire. Because the Employee Leasing Company also may be responsible for workers’ compensation, many also focus on and improve safety and compliance. In general terms, the Employee Leasing Company will focus on employment-related issues and the client will be responsible for the actual business operations.
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