Employee Leasing – How to Choose the Correct PEO for Your Business

employee leasingWhether you recently started your own company or you have been doing business for yourself for quite some time now, there comes a point when you may realize that you are spending a lot more time handling payroll, benefits, and other administrative hassles than you expected. Wouldn’t you rather get back to the business of selling the products and services you excel at creating and offering your customers? Not only can taking care of these administrative duties take up a lot of extra time, but ultimately it can have a negative impact on your productivity, which means that your revenue suffers, too. Contracting with an employee leasing company is one way you can recover some of that lost time and get back to being productive and profitable. It’s a great solution for small, midsized, and large business.

What is PEO Employee Leasing?

A company that provides employee leasing solutions is called a PEO, which stands for “professional employer organization.” There are a coupe of other types of HR outsourcing companies, but a PEO is the most comprehensive solution. PEOs differ from other human resources outsourcing companies in the sense that they function as co-employers, taking over many of the decisions involved with administrating employees, not just the leg work. A PEO can take care of matters related to employee payroll, benefits, worker’s compensation, legal disputes, risk management, recruiting, training and more. For tax purposes, the PEO is the employer of record for your employees, which makes it much easier to submit the paperwork every year. Millions of workers are overseen by more than 700 PEOs in the United States alone.

Benefits of Employee Leasing

Why should you consider contracting with an employee leasing company for your HR needs? Here are just a few of the benefits:

  • Rely on the experts to handle payroll, benefits, and more. As you have certainly discovered by now, the choices made by your human resources department impact your bottom line, just like your other business decisions. The experts at an employee leasing company can save you money by choosing benefits plans which provide more value for the price and hiring recruits that are able to deliver more value to the company from within.
  • Save time and money on legal matters. Unless your business is law, you are probably not a legal expert, and even if you are, your area of expertise may not be employment law. PEOs have staff members who are trained specifically in this arena and can save you money on legal disputes by preventing costly mistakes and addressing issues when they do arise. Reducing your risk and liability is always beneficial, just make sure you have a clear understanding of the risks and liabilities you are still responsible for.
  • Free up your time and resume your normal job duties and focus on core competency. If you or your employees are currently tasked with handling HR responsibilities while still juggling other job duties, you can free up time by handing over the HR tasks to an employee leasing service. This lets you get back to the core of your business where you and your other staff members are most productive and talented.

Tips for Choosing a PEO

A PEO is more than just a contractor, so deciding on a PEO takes some real thought and effort. Because of how highly involved the company will be in your affairs, it is essential that you select a provider that can function as a trusted business partner. Before you even select a PEO, you should first make sure that a PEO will best suit your needs. You may do better with a less comprehensive HR outsourcing solution which allows you to retain greater control over your operations, or a PEO may be perfect for you. Only you can figure out which type of solution will best fit your needs. Here are some tips for selecting the best PEO:

  • Check into the reputation of any PEO you are thinking using. PEO vendors are certified through an organization called the Employer Service Assurance Corporation (ESAC). In their online database, you can search for any vendor you are considering to check the vendor’s status. Find out how long the company has been in business, ask for referrals, and look for reviews online. Investigate the financial background as well to ensure the organization can meet its obligations. You can also find out whether the individuals who work within the organization are required to keep up their own certifications.
  • What services does the PEO offer? Will they take care of payroll administration, benefits selection, workers’ compensation? What about recruiting and other staffing needs? Make a list of features you are looking for and then see whether the PEO can fulfill those needs. What types of benefits plans are offered? Do you have choices, or does the PEO offer one and only one solution?
  • What kind of technology does the PEO rely on? Look for a PEO that can integrate its technological solutions with your existing solutions if possible. Otherwise, consider how challenging the transition will be and what the PEO can do to streamline the change. Is there a self-help website? How secure is the technology used by the PEO?
  • How much control will you have over your daily operations, and how much do you want or need? Pay close attention to any contracts you are presented with, and learn to identify phrasing which denotes responsibilities. “Responsible for” is a term which indicates the PEO is assuming cost and liability for a given activity. Anywhere you see the phrases, “Assists with, “Advises on,” or “Provides consulting,” your company is assuming all the cost and liability, whereas the PEO is providing suggestions and support.
  • In order for a PEO to be worthwhile, it needs to fit within your budget. Do cost-benefit analyses before you sign up with any PEO to make sure that you will actually profit through the decision. Check how you will be billed. Is it a flat rate per month or is it based on a fee for each employee? Is the fee calculated based on the payroll? Are there other administrative fees in the small print?

Perhaps the most important aspect of any employee leasing company is customer service. Customer service is doubly important when you contract with a PEO because not only are you relying on great customer service when you have a question or concern, but your employees will also be relying on that same quality of service for their own needs. If an employee has a question about payments, taxes, benefits, workers’ comp or any other human resources-related issue, he or she may be dealing with the PEO directly.

Once you do select a PEO for your company, the process isn’t complete. You are still ultimately responsible for quality control when it comes to your company’s HR department. Check with your employees regularly to ensure that they are happy with the PEO’s benefits plans and other services. Once you build a strong relationship with a PEO, you can look forward to streamlining your business, offering better and more comprehensive benefits to your employees, and boosting your bottom line.

Utilizing Employee Leasing to Focus on Your Business

The majority of small to medium-sized companies don’t have a dedicated human resources or payroll department. Having a team of employees handle only those aspects of a business can be very time consuming and costly. That’s why many of these businesses are hiring employee leasing companies. These companies make a business owner’s life easier by handling certain parts of their business, such as payroll and human resource management, recruiting, training, development, and/or risk and safety management.

How Employee Leasing Works

Employee leasing is the process in which a business transfers its employees to an employee leasing company, which is specialized in human resources, payroll management, or risk administration. The leasing company then leases the employees back to the business, while handling their payroll and human resource management. The client business will still be in charge of the employees’ activities and responsibilities, while being charged by the leasing company for handling the employees’ payroll and human resources management.

Employee leasing companies offer a large variety of services, such as many health insurance benefits, improved payroll services, risk management support and training, handling unemployment claims, employee training, or employee discount programs.

How Would Employee Leasing Benefit Your Business?

Employee leasing may be a good choice for businesses that are trying to reduce costs and focus more on growth. Utilizing an employee leasing company allows businesses to focus on current staff, therefore improving many aspects of the organization. Here are a few key benefits that hiring such a company will bring to your business:

  • More time and resources for your business – Employee leasing will take over the responsibility of managing your staff, allowing you to focus on other aspects of your business, such as acquiring new clients, developing new products, or coming up with new marketing strategies and ideas. Employee leasing also gives you peace of mind when it comes to employment policy and procedure problems.
  • Save on employee benefits and taxes – When an employee leasing company handles your employees, you are only required to pay a fixed monthly salary for every staff member. You can add some performance incentives to motivate the staff, but it is the duty of the leasing company to provide the employees with health insurance, paid or sick leave, and other benefits that a business who doesn’t use the services of an employee leasing company should provide.
  • Reduced Risks – Employee leasing companies help you reduce your business’s risks and liability by assisting the employees through training, providing progress reports and work-related information regarding the staff. Most employee leasing companies are specialized in a certain domain, such as accounting or graphic design, so you are guaranteed that the people you hire are experts in their field.

In Conclusion

While the payment that you make to the employee leasing company will be larger than the salary that you would otherwise pay to the transferred employee, the difference is easily offset by the savings that you are making by not having to pay employee benefits and taxes. You also save money by using the time that you would normally spend on accounting and payroll management on other, more important, aspects of your business.

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