An HR leasing company, also known as a professional employer organization (PEO), is a vendor that you hire to take over select legal responsibilities toward your employees. You create a contractual relationship with the leasing company/PEO to share employment duties. Under this contract, the employees are “leased” so that your PEO becomes their employer of record—even though all of the employees’ work is still done for your company. The PEO can take over many duties for you:
- Tax withholding
- Benefits administration
- Regulatory compliance
- Workers compensation, unemployment cases, and other claims
What are the advantages of “leasing” employees?
The main benefit is that you can continue to add new staff and grow your organization without worrying about increased complexity. As a business grows, the amount of administrative work can become staggering—and typically outstrips the expertise of the business owner. Likewise, as much of this work involves HR or regulatory compliance, it is not a good use of time for the leadership team. Contracting with a PEO allows your business to get all of your administrative responsibilities handled by professionals, and stay in compliance with all laws.
HR leasing can also carry other benefits:
- The PEO acts as a single vendor to handle all your HR needs, rather than dealing with the cost and complexity of multiple vendors
- Hiring a PEO is often more cost-effective than creating full time HR positions on staff
- Your PEO can assist with risk management, liability, staff training, even recruiting and onboarding new employees
- Many PEOs specialize in finding better benefits packages for their customers
Since PEOs have huge numbers of “employees,” they often carry a great deal of clout in the benefits market. Your PEO may be able to get you substantially better benefits at a much lower cost.
Do I have to give up control of my business?
No. Your business retains full control over your employees and how they do their work. You and the PEO each take on a specific role:
- Your business is the executive. You decide employee work plans and duties, and all employee work is done for you, not for the PEO.
- The PEO is the “employer of record,” and takes responsibility for human resources and administrative actions, as chosen by you.
Typically, your only HR responsibility under this arrangement is to underwrite the cost of payroll, taxes and other costs that the PEO is paying on your behalf each month. In effect, you are leasing access to a smooth, efficient HR machine that handles all administrative work for you.
Do you need better HR—at a lower cost? At NetPEO, our mission is to make your business run better. We’ll give you a free quote and help you develop a customized human resources, payroll or PEO service to fit your needs. Fill out the form to your right or contact us and get a free quote today.