There are now many differences between them, the main being that Employee Leasing companies provide businesses with workers for a short period of what is peo employee leasing company time. However, PEOs help you hire talented employees by offering the recruiting services previously mentioned, and the staff remains yours when the contract with the PEO ends. When they present you with the talent they find, the hiring or termination process is your responsibility. Employee leasing is a type of human resource outsourcing (HRO) with which employers terminate their employees and “lease” them back from a staffing agency. While this model provides risk mitigation for business owners, it has fallen out of favor due to the competitive advantages of its successor, professional employer organization (PEO) – also referred to as co-employment.
With the perfect service provider, companies can access a global pool of skilled professionals without the administrative burdens and expenses of direct employment. This model offers significant flexibility, allowing businesses to scale their workforce according to their needs, whether for rapid expansion, project-based work, or cost management. Staff leasing costs vary based on factors such as the number of employees, the level of expertise required, and the specific services provided by the leasing agency. Generally, it is more cost-effective than traditional or onshore employment whereas professional leasing can start at an hourly rate of USD $10 to $20 in the Philippines. Additionally, employee leasing can be priced as a percent of payroll or as a flat fee, offering flexibility based on your business needs. With advancements in technology and the globalization of the workforce, staff leasing has become a strategic tool for businesses worldwide.
- This model offers greater flexibility in workforce management, allowing companies to scale their workforce up or down based on project needs or market conditions without the long-term commitment of direct hires.
- PEOs operate in all 50 states, and many states provide some form of specific licensing, registration or regulation.
- A PEO, also known as a professional employer organization, is a company that practices employee leasing models.
- When it comes to managing your workforce and human resources, understanding the Difference Between A PEO vs Employee Leasing is paramount.
- Employee leasing is often confused with the services offered by PEOs, and you might sometimes hear the two terms used interchangeably.
- There are now many differences between them, the main being that Employee Leasing companies provide businesses with workers for a short period of time.
When a job has been completed, an employee on lease will return to its leasing company ready for the next job.A PEO, on the other hand, provides its services to an existing workforce with the ability to employee new hires. Employees hired under a professional employment organization are considered employees of the client, so if the contract with PEO was to terminate, those workers remain under the client’s employment. Although many still view these two staffing arrangements as the same – they are in fact quite different.
Need an Employer of Record (EOR) in the Philippines?
Leasing adapts to fluctuating workforce needs and is ideal for growing businesses that need to hire fast without expanding HR infrastructure. Employee leasing comes with a range of features designed to support HR and compliance. When a Professional Employer Organization or Employee Leasing Company employs workers for any other business and/or also manages their HR-related functions, the process is known as Employee Leasing or co-employment. Look no further — we, at THS, handle HR tasks, payroll, and labor compliance, so you can grow your workforce globally without the hassle of setting up a local entity. All employees are either with the client or are future employees hired by the client. You get the workforce without the administrative burden of being their employer of record.
What you want to look for is the relationship they have with their employers or clients and how they are managed (or how they manage themselves). Leased employees are just that — employees — and the HR responsibilities are managed by the PEO. Contractors, on the other hand, are generally contracted to work directly with the hiring business, and do not go through a PEO to do so.
In this employer’s guide, we’ll explore why companies consider employee leasing, some key differences between these types of workers and independent contractors, and things to remember during tax time. To clear up the confusion, let’s take a closer look at both employee leasing and co-employment, how they differ, and why a PEO isn’t the same as an employee leasing company. At NetPEO, we help businesses like yours simplify HR, reduce costs, and stay focused on what you do best — growing your company. If you’ve heard of employee leasing but aren’t quite sure how it works (or if it’s right for you), this article breaks it down in plain English. In some countries, such as France and South Africa, co-employment through a PEO can even be considered illegal in certain situations. Because working with a professional employer makes you a part of a larger group of employers, so you get more health insurance purchasing power.
Where do staff leasing providers typically operate?
We are dedicated to being by your side, providing constant support throughout your journey. The PEO Vs. Employee Leasing Differences become apparent when we explore the scope of HR services offered by each option. Difference Between A PEO vs Employee Leasing is crucial to understand, especially when considering long-term HR solutions. It is essential to grasp that a PEO is not designed as a short-term solution. The choice between Employee Leasing and PEOs boils down to your business’s unique needs and priorities. Consider factors like cost, administrative workload, and the level of HR support required before making your decision.
As mentioned earlier, working with a PEO helps reduce your liability because they are well versed in state and federal employment and tax laws and regulations. These laws and regulations tend to change over time which can be hard to keep up with, especially since you’re busy with other aspects of your business. PEO companies are well versed in these laws, so they will always ensure you are up to date. Employees appreciate the wide array of benefits available to them through the PEO, as well as the online technology PEOs can offer and the availability of HR expertise.
Retaining Talent
- The business owner retains ownership of the company and control over its operations.
- PEO companies are well versed in these laws, so they will always ensure you are up to date.
- The industry continues to grow as companies increasingly seek to optimize their operations through flexible and cost-effective staffing solutions.
- In short, your PEO assumes liability for all the HR services it provides to your company.
In contrast, PEO Employee Leasing companies act as the employer of record, assuming full responsibility for payroll taxes, unemployment insurance, and compliance. PEOs and employee leasing companies both help manage HR tasks, but the key difference is who the legal employer is. In a PEO co-employment model, both the PEO and your company share employer responsibilities and liabilities for your existing staff.
What is the difference between PEO and an Employer of Record?
Firstly, it is essential to recognize that employee leasing is typically not intended for extended solutions. Instead, it serves as a short-term arrangement, providing businesses with the flexibility to outsource specific HR functions when needed. In summary, both Employee Leasing and PEO services have their pros and cons worth weighing.
Who is the employer of leased staff?
With co-employment, the PEO is liable for ensuring your employees and benefits are paid, employment taxes are covered, workers’ compensation insurance is current, and any other relevant compliance concerns are met. In short, your PEO assumes liability for all the HR services it provides to your company. Employee leasing companies often focus on payroll services, workers’ compensation, and other immediate HR needs.
Share this article
Business owners often pay less for their PEO services than they would pay for simple, HR activities… and receive much more in return. The National Association of Professional Employer Organizations (NAPEO) offers a comprehensive search of hundreds of PEOs here. ADP’s PEO also has the experience to help you understand your benefits plan and other options so you can make an informed decision.
Insight to PEO vs Employee leasing for your specific needs
You would like to launch a new marketing effort but only anticipate needing the help of a Chief Marketing Officer (CMO) for less than a year. However, as the business landscape has evolved, they have become two very different concepts that are often misunderstood. Because these terms are typically used in relation to a Professional Employer Organization, or PEO, the confusion may cause businesses to hesitate to work with a PEO.