Payroll Leasing is a contractual arrangement in which workers are officially employed by a leasing company, also known as PEO (Professional Employer Organization) and are leased to a Business owner when demanded. PEO is responsible for overseeing all employee related functions such as HR, wages, benefits & employment taxes. However business owner retaining management control over the employee and is only responsible for writing a check to the PEO so that they can cover their employee related costs such as payroll, administration, benefits and taxes.
Employee leasing allows you to add best workforce in your business in no time without going through administrative complexity. Employee leasing firms are responsible for compliance with state, federal and local regulations, insurances, W-2 form processing and filing. Some of the PEOs also provide pensions to these employees. The main benefit of using leased employees is that it helps you reduce business cost and frees up your time of administration and management to focus on business operations.
Along with the benefits of time and cost saving in the leasing contract, some disadvantages may arise. Employees hired from another firm may not be completely in your control since you have contract with the leasing firm not with the employee. Employee switch over may be faced if a particular employees personal contract with the PEO ends. Employee-employer relations may not be that strong as with employees that are hired by the company directly.
Employee leasing costs may vary, based upon the size of your business and type of workforce required. Firstly there is a one-time charge at the start of contract when the service is secured. This fee is normally $1000 to $5000. After this initial fee is charged, companies pay a percentage of the total payroll to the leasing company on monthly basis. This fee may be between 2% to 8% of total payroll on average. However, the costs may vary depending upon the size and type of employees being leased. Large volume discounts may be availed if workforce leased is big in number. Moreover these costs may increase or decrease if additional services are availed or if services availed are reduced.
The success of employee leasing decision is determined by the leasing company business choose to hire leased employees. Business owners must make sure that the company you are choosing must be financially viable and can fulfill all employee related liabilities on time such as taxes, wages and insurance. It must be verified that the PEO has a good track record in the market. You must ensure whether the firm has been providing good workforce and is compliant towards its responsibilities. If the company is not paying employees on time and is inaccurately filing their taxes, this would lead to unsatisfied employees who would not be performing their duties as required on-site. Hence, business owners would have to face losses in terms of output and time saving.
Employee leasing is a viable option of companies who desire to hire best workforce and remain compliant for employee related activities. Employee leasing is efficient if the main aim of saving time and cost is fulfilled.
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