The Growing Burden of Employment

The Growing Burden of Employment

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In the last few decades, the growing burden of employment has been the driving force behind the growth of the employee leasing industry. Local, state and federal governments have created an incredible burden of employment and employee benefits regulations. Employee leasing solves this problem by shouldering much of the routine personnel work, payroll, and benefits administration. By outsourcing, businesses are enabled to decrease administrative burden and expense, while redirecting focus towards the product or service of their core business. Benefits include:

  • Relief from payroll and tax administration.
  • Simplified and streamlined workers compensation management.
  • A wide range of HR management solutions through a team of professionals.
  • Access to a comprehensive employee benefits packages.
  • Assistance to improve productivity and profitability.
the growing burden of employment

The Growing Burden of Employment

The Growing Burden of Employment | By Mike Smith

 

All employment is a form of leasing

All Employment is a Form of Leasing

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All Employment is a Form of Leasing

Some employers are hesitant to embrace the concept of “employee leasing”, but why? Keep in mind that all employment is a form of leasing. An employment relationship is a “renting” or “leasing” agreement between an employer and an employee. In fact, the modern concept of employee leasing has a long legal history originating back to the “borrowed-servant doctrine”. Note the similarities below:

Single Employment

  • Employee agrees to exchange labor for wage
  • Employer is responsible for human resource management
  • Employer provides workers compensation
  • Employer provides employee benefits
  • Responsible for payroll & tax administration
  • Employment provided by the core business

Employee Leasing

  • Employee agrees to exchange labor for wage
  • Employer is responsible for human resource management
  • Employer provides workers compensation
  • Employer provides employee benefits
  • Responsible for payroll & tax administration
  • Employment is outsourced to a PEO

If you would like to learn about the differences between the traditional concept of employment, compared to employee leasing, read single employment vs. co-employment.

All Employment is a Form of Leasing | by Mike Smith

Single employment vs. co-employment

Single Employment Vs. Co-employment

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Single Employment vs. Co-employment

The key difference between single employment and co-employment is outsourcing. Single employment is exactly what is sounds like; it is the status of an employer who has the sole legal rights and responsibilities of employment with regards to their workforce. Co-employment exists when the legal rights and responsibilities of employment have been divided and outsourced. In the co-employment scenario, there are two employers with actual or potential legal rights and obligations with respect to the same employee or group of employees.

Single Employment

  • One employer retains all employer responsibilities
  • Employed and paid the direct provider of product or service
  • The sole employer administers wages and benefits
  • Hours worked and wages are collected and paid by the sole employer
  • The sole employer deals directly with work comp carrier regarding risk management, premium calculations and deposits, claim investigations, loss control, premium audits, etc.

Co-Employment

  • Two legally separate employers share some, or all, of the employer responsibilities with the same employees
  • Employed by the staff leasing company, but working for the direct provider of product or service
  • The staff leasing company administers wages and benefits
  • Hours worked and wages to be paid and directed by the sole employer, but administered by the staff leasing service.
  • The staff leasing company deals directly with the work comp carrier regarding risk management and the correlating responsibilities and liabilities.

Single Employment vs. Co-Employment | Eagle Employer Services

What is Employee Leasing?

What is employee leasing?

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What is employee leasing?

Question: What is employee leasing?

Answer: The term “Employee Leasing” refers to an employment outsourcing arrangement where many of the employer related responsibilities and liabilities are outsourced to a specialist. This fundamentally means that one company manages the HR responsibilities, while the other manages the product or service.

Employee leasing has been around for a long time, but many employers still need clarity regarding “what is employee leasing?” Employee leasing is an outsourcing service that enables clients to cost-effectively delegate the management of human resources, payroll administration, employee benefits and workers’ compensation. Clients can typically reduce their cost of revenue, while also re-directing time and energy towards the operational and revenue-producing side of its operations. Some key points of the employee leasing arrangement include:

  • Two legally separate employers who share some or all of the employer responsibilities with the same employees.
  • Leased employed are employed by the staff leasing provider, which pays their wages and benefits, but whose employees report to (and work for) the client company.
  • Client companies write a check to the leasing company to cover payroll, taxes, benefits, and administrative fees, typically for less than if they did it themselves.
  • The employee leasing company manages compliance with state and federal regulations, payroll, unemployment insurance, W-2 forms, claims processing, etc.

If this is your first introduction to the concept of employee leasing, it probably won’t be your last! There is a growing burden of employment, and our industry is growing right alongside of it! Take a look at some of our other articles to see if the employee leasing solution is right for you.

What is Employee Leasing? | By Mike Smith

PEO Model

PEO Model

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PEO Model

What is the PEO model? The PEO model is where an employer enters into a “co-employment” relationship with a PEO. The PEO accomplishes this through what is called an “employee leasing” agreement. With an employee leasing agreement, the client company agrees to release all workers to be employed by the PEO, who then leases these workers back to the client company, for a fee. This is called a co-employment relationship because the employees remain under the direction and supervision of the client company, however most all of the HR, tax, and insurance obligations for these employees are administered by the PEO. Theoretically, specialization and economies of scale enables the PEO to perform these employer related responsibilities at a cheaper rate than the client company, who specializes in some other service. This business model is designed for the PEO to be able to perform these functions for a cheaper rate than the client company, and extend these savings to the client, creating value. Thus, an effective PEO model is designed to reduce the cost of revenue for their customers, and increase profitability.

My name is Mike, and I would love to get feedback from you! Please leave me a question or comment below.

PEO Model | By Mike Smith

What Does PEO Stand For?

What does PEO stand for?

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What does PEO stand for?

Quesstion: What does PEO stand for?  Answer: PEO is an acroym for Professional Employer Organization. Read more below!

What is a PEO?

A PEO is an “Employee leasing” service. Employee leasing is where the PEO hires the employees of the customer, and then leases those employees back to the customer. The business model of a PEO enables the client company to outsource their tax, payroll, and insurance related operations to the PEO. Since the leased employees are legally employed by the PEO, the PEO is then responsible for functions such as processing garnishments, fighting unemployment claims, filing taxes, payroll processing, and many more. Leased employees continue to work under the direction of the client company (Not the PEO), allowing the client company to focus on their revenue producing operations. Theoretically, specialization and economies of scale enables the PEO to perform the HR related duties at cheaper rate than the client company, and then extend these savings to the client, creating value. If the cost of revenue has been reduced via the PEO service, then the client company has become more profitable.

What Does PEO Stand For? | By Mike Smith