What Is a PEO and How Does an Employee Leasing Model Work?

It is also common for PEO agreements to cover a range of related services such as recruitment and onboarding. Consider a Professional Employer Organization (PEO), a key outsourced HR solution for startups and established companies alike. The choice between Employee Leasing and PEOs boils down to your business’s unique needs and priorities.

In terms of traditional employer responsibilities, these are divided between the client company and the PEO (professional employer organization). While an employee leasing company supplies businesses with workers, a PEO does not. Instead, a PEO provides employee-related services, such as payroll and benefits. And unlike employee leasing, when your contract with a PEO ends, your employees remain your employees. A PEO acts as a co-employer that provides services for your business and its employees. It can allow you to outsource important HR functions, such as payroll, benefits and training while ensuring compliance with federal and state employment laws.

Instead of managing the HR responsibilities of another part- or full-time employee, the PEO manages these tasks, which can reduce the administrative burden on the business. Our job is to connect you with PEOs who are best suited to meet your business’s unique needs. https://adprun.net/peo-and-employee-leasing-whats-the-difference/ Using the information you provide in our Universal Form, we can analyze your company’s needs and the services a PEO offers using our PEO comparison chart to find the best fit. The number of employees covered by a professional employer organization in the U.S.

How much does a PEO cost?

In some countries, employee misclassification can lead to serious implications for companies and individuals. This is where a worker is classified as a contractor or freelancer but is actually working in more of an employee capacity. If a company is found to be misclassifying or disguising employees, this can lead to consequences. This is why it is beneficial to have a global PEO in place to ensure that companies are following the rules of the countries in which they operate. Employee leasing, as an HR concept, has become less popular in recent years, due to the influence of government regulation.

  • This confusion most likely stems from the relationship that actually exists between a PEO and its client, called co-employment.
  • Let us know if you’d like us to fast-track your international employee hiring, saving you time and money.
  • By contrast, an employee leasing company supplies their own workers, often on a temporary basis, to a client company.
  • However, with the importance of international expansion for ambitious enterprises, PEO has arisen as a global employment solution.

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. Professional employer organizations (also known as PEOs) contract with a company to take many time-consuming hiring and human resourcing responsibilities off their plates. In many cases, PEOs are staffing agencies and it’s basically like outsourcing your human resources department to a team of external experts. Simply put, leasing employees gives businesses access to specialized skills without the long-term commitment of hiring a full-time employee. In this scenario, the business only “borrows” the employee and is not considered their legal employer.

PEO Defined

A PEO, or Professional Employer Organization, is a company that provides an extensive list of HR services to help you manage your human resources department under a co-employment agreement. This means that they share employer and legal responsibilities with you. Some even offer recruitment support, which includes creating and posting job ads, providing interview assistance, and more. A PEO is in a relationship with a small business, not to provide staffing solutions, but to provide HR and payroll solutions to them. A staffing company may or may not provide benefits to your leased employee and they do pay your leased employee but you have little control over anything else. A PEO works with a small business as a partner and a co-employer for the best interest of your small business and your employees.

What is an employee leasing company?

PEOs have since evolved, however, and there are now many differences between employee leasing companies and PEOs. Because the leased employee is effectively employed by both the PEO and the leasing company, the business-employee relationship can feel more complicated. As a result, the leasing business and the PEO should take steps to maintain a clear division of responsibilities as well as clear communication with the employee so all parties are on the same page. It is worth considering these differences when choosing which type of worker you’d like to collaborate with in your business. It’s also possible to work with both leased employees and independent contractors at the same time.

But even though they can perform similar tasks and work for the same period of time, there are several key differences between leased employees and independent contractors to be aware of. 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). PEO employee leasing or staff leasing lets a business owner add workers without adding administrative complexity. Employee leasing firms manage compliance with state and federal regulations, payroll, unemployment insurance, W-2 forms claims processing, and other paperwork.

How Does a Professional Employer Organization Work?

Currently, over 150,000 start-ups and small businesses utilize PEOs. Companies that used PEOs for at least a year are 50% more likely to remain in business. It will help you move faster and more efficiently so you can scale your business and finally reach the goals that have felt out of reach. The right PEO will simplify HR, improve efficiency, and help you scale your business.

What Are the Disadvantages of Using PEOs for Staff Leasing?

Generally, “employee leasing” is a business arrangement where a staffing agency provides its employees to another business, usually for an agreed amount of time or project duration. When you enter into an employee leasing arrangement, the employee leasing company’s employees work for you but you do not employ them—as the term “leasing” indicates, it’s a lease arrangement. While doing research to determine whether employee leasing is right for you, you might come across something called PEO co-employment.

Key advantages and disadvantages of PEO

Employee leasing can be used when companies are expanding to other countries. It is a great solution to use as it allows companies to be able to scale easier and quicker without having to actually set up a foreign entity (such as a subsidiary company). Client companies do not need to ensure compliance with local employment laws and regulations, as this can be dealt with by the PEO. Sometimes tax laws and employment regulations in other countries can be complex with limited information available to companies to help them understand. Global PEOs specialize in complying with international laws which is beneficial for companies that are wanting to expand and do not have knowledge of a certain jurisdiction. In the relationship between the PEO and the client company, the PEO serves as the “Employer of Record” (EOR) for insurance and tax purposes.

In short, it’s a win-win for you and your employees because they provide all the benefits of an HR solution without the enormous fees an employee leasing company charges. Peo, or Professional Employer Organization, is a comprehensive human resources provider that offers a range of services, including payroll, benefits administration, and compliance assistance. On the other hand, employee leasing typically refers to a situation where a business leases employees from a third-party provider, who handles their HR-related functions.

Although there are many great benefits that come with working with a professional employer organization, there are a few disadvantages you should be aware of. For example, you have a limited choice of benefit carriers and plans. When you work with a PEO company, they can take care of all of the administrative tasks, so you don’t have to. This allows you to focus more on running your business instead of dealing with smaller administrative tasks.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>