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Leasing PEO: Is It the Right Choice For Your Company?

Apr 3, 2008
The decision to lease your employees is not quite as simple as deciding whether to lease or buy a car, or rent or buy a home. However there are some basic fundamental similarities. Ultimately the decision requires you to weight the costs and benefits of each, and leasing PEO is not for everyone. For some employers their business operations do not warrant a leasing PEO, others could benefit greatly. Just like choosing to buy or rent a home, you have to assess your personal needs and the needs of your business to decide.

A leasing PEO essentially hires the employees that already work for you. There is generally no staffing change, and no change in the daily operations for the employees. What does change is how the payroll, employee benefits, taxes, human resources, workers compensation and other devices are run. A leasing PEO takes on the professional duties of a company's HR department and simplifies it for you, the business owner. You pay one amount every payroll period and that takes care of everything.

Employees can also benefit from being hired by the leasing PEO. Because PEOs are larger companies than yours probably is, the options for employee benefits are greater and insurance will be cheaper for the employees. It is easier for a large company to get lower insurance rates because it is simply a bigger pool. Whereas, your company which may employ 50 to 100 people would have higher insurance rates because the risk pool (made up of the employees) is smaller.

There are some disadvantages to a leasing PEO that can make it unattractive to many business owners. Once a PEO hires your employees, they retain the right to hire and fire them. They can also reassign employees as they see fit. Although you as the business owner still have control over the workers on a daily basis, their ultimate employment rests in the hands of the PEO. For some business owners this is a loss of power, but for others it is a godsend. Many employers find great relief in not having to "manage" their employees and simply supervising them on the job.

To decide whether or not your business would thrive through a relationship with a leasing PEO, there are several factors to be considered. Because a leasing PEO is essentially a human resources management company, you should first decide if your company needs someone to manage their human resources. If you run a pretty tight ship, the workers are happy, they all have good benefits and you have a low turnover rate, then you seem to be doing pretty well on your own. A leasing PEO may not benefit you in any way. However if your company is just the opposite, that's when a PEO could step in an turn some things around. Just think about it like leasing a car: It is not for everyone, but those that do benefit from it can save money in the long run. Even better than leasing a car though, a leasing PEO can help increase your profitability by allowing you time to focus on running your operation.
About the Author
Stewart Baker writes for Pinnacle Business Solutions. PinnacleOutsourcing.com specializes in the high risk construction industry where it provides leasing PEO services. It is a construction PEO offering construction employee leasing.
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