Employee Leasing for Your Company's Benefit

2007-03-08 10:33:40

( Business )



Running a business does not only involve managing your sales or manufacturing operations. About a third of your company's activities have to do with human resources (HR) and personnel management functions. The HR functions of recruitment, selection, training, payroll, and termination of employees require a lot of time and HR expertise, especially if you want to hire and keep the best employees.

The Professional Employer Organization

An increasing number of American businesses have taken advantage of employee leasing, which is a form of outsourced HR functions. A Professional Employer Organization or PEO provides your business with the manpower you need for a fee. Depending on your employee leasing agreement with them, the PEO will take care or a part or even all of the HR functions of your company. You just inform them about your manpower skills and employee scheduling requirements, as well as your budget.

The PEO can conduct background checks of job applicants, screening and interviews, and will provide the training that the jobs demand. It designs the employee reward program and benefits package, all based on your company's policies. The PEO also assumes responsibility for reporting and remitting any state and federal withholding taxes due from employees' wages. Its most vital function is dealing with legal issues and disputes related to labor, an area where many business owners may lack knowledge or expertise on.

In short, while the employees work in your company, they are technically the employees of the PEO.

You will pay the salary plus a small premium for each employee you lease. This is generally cheaper than having to organize an in-house HR department composed of lawyers, psychologists, trainers, payroll accountants and other high-paying positions.

Pros and Cons of Employee Leasing

As earlier mentioned, you will save on costs of maintaining an HR department, including paying for the salaries of the people who will run it, as well as costs of equipment, testing, ID and other supplies needed.

You don't have to worry about handling labor disputes as the PEO also takes care of this area. The only downside is that if you encounter substandard employees, you may not be able to have them terminated easily. Some labor unions also prohibit companies from using employee leasing to fill manpower requirements.

Perhaps the greatest advantage of employee leasing is that it frees you up from the "business of employment" so that you will be able to concentrate more on the "business of business."


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