Advantages and disadvantages of staff leasing for your business

How does staff leasing work?

Staff leasing works when a third-party provider hires and manages workers for you, while you direct their daily tasks and cover their pay and benefits.

• The provider handles hiring, payroll, taxes, and compliance.
• You set the work duties and lead the team day to day.
• You share employment responsibilities with the leasing company.

Understanding how staff leasing works helps you decide if it fits your business. Remote work is on the rise. Still, small firms sometimes need a team they can meet in person. So this is where staff leasing comes in.

Businesses turn to employee leasing when they want to grow a team in a smart way. A third-party provider can supply in-house admin help at a fraction of the cost of direct hiring.

These tasks include small jobs. For example, they cover office upkeep, courier coordination for deliveries, or on-site security.

Staff leasing for your business

Staff leasing or employee leasing is the process of hiring workers through a third-party company.

This works much like seat leasing. In that model, the third party covers the office space, equipment, and connection needed for the work. To compare the models, see this guide on staff leasing vs. seat leasing vs. BPO.

With staff leasing, the provider supplies the manpower. It also covers their admin duties.

The company and the business owner share employment duties for the staff.

Work tasks come from the employer. Meanwhile, the leasing company handles workers’ compensation, salaries, benefits, and tax payments. Still, the employer pays for all of these.

Employers choose staff leasing for a few reasons.

Ease the burden on administrative tasks

Hiring more staff means more paperwork for compliance. It also adds tasks like payroll management.

With staff leasing, the Professional Employer Organization (PEO) can handle the administrative services needed for staff. This includes tax payments and benefits.

Save on recruiting costs

Since PEOs do the hiring, your recruiting and onboarding costs drop.

It also helps your HR team. As a result, they can focus on core work for the company.

Hire for maintenance and other services

To focus on core tasks, employers lease staff for upkeep work. Most PEOs supply blue-collar workers. For example, these include janitors, lobby staff, and security guards.

Relationship with the company

Leased workers often feel they belong to the company. So they take on its culture, work ethic, values, and morals.

They also get to know other staff. In addition, they bond through team events and social activities.

Employer benefits

Staff leasing gives employers several benefits, such as the following:

• Access to local top talent – You do not need to be an expert at finding great talent. Instead, the PEO or leasing agency does it for you.
• Expertise in compliance – PEOs know how to work with tax agencies and file the right paperwork for new staff. As a result, you file these documents with few errors.
• Legal protection – If a worker sues over alleged discrimination or wrongful termination, a PEO can help supply the legal papers for the case.

Disadvantages of staff leasing

Staff leasing has drawbacks that every business should know. Here are some to weigh.

Less control over employees

Leased staff do work for your business. However, they are still employed by a PEO or staffing agency.

So the company must still talk with the agency to hire or let go of certain staff.

Lack of direct communication

Workers do not have direct contact with your HR when they want a raise or raise a concern.

Instead, they go to their staffing agency to voice it. The same goes for the company they work for.

Increased dependency on staff leasing

Companies may grow too reliant on staff leasing. As a result, this can hurt the business.

In turn, work and product quality may drop. So customer and staff satisfaction can suffer.

Lack of motivation and commitment

Finally, leased staff commit to a company for only a set time.

Because of this, employers may hesitate to plan long-term or invest in their growth.

It can also lower worker motivation. After all, they know their time with the business is limited. Some firms use staff augmentation instead to add skilled workers for longer projects.

What to consider when employee leasing

To avoid these issues, owners should weigh a few things before they lease staff.

Find the best staff leasing provider

The internet is the easiest place to start your search for a leasing agency.

Review sites like Manta list many agencies. They show the address, contact numbers, pricing, and ratings. Some even add reviews and rankings. You can also browse a roundup of the best staffing agencies to compare options.

A referral is also a good way to start. So ask a few friends or local business owners who have tried staff leasing for a company to refer.

Determine the need for staff leasing

Leased staff work full-time. Still, they are best hired for the short term. If the work needs a long-term commitment, an in-house hire or offshore staffing may fit better.

Staff leasing has drawbacks, such as a lack of say in hiring. However, you can avoid these by working with a trusted agency like Booth.

Frequently asked questions about how staff leasing works

What is staff leasing?

It is the practice of hiring workers through a third-party company. So the provider handles admin duties while you direct the work.

Who pays leased employees?

The employer covers salaries, benefits, and taxes. However, the leasing company processes the payments and paperwork.

What is the difference between staff leasing and outsourcing?

With staff leasing, you still direct the team’s daily work. With full outsourcing, the provider owns the process and the results.

Is staff leasing good for small businesses?

Yes, it can be. It gives small firms a team without the full cost of direct hiring. Still, weigh the drawbacks first.

How do I choose a staff leasing provider?

Compare reviews, pricing, and compliance skill. In addition, ask for referrals and check the provider’s track record.

Key takeaways

• Staff leasing works when a third party hires and manages workers while you lead the daily tasks.
• It eases admin work, cuts recruiting costs, and speeds up hiring.
• The drawbacks include less control and lower worker commitment.
• Short-term needs suit staff leasing best.
• Choose a trusted agency to avoid common pitfalls.

Consider outsourcing

Consider outsourcing the work that does not need in-person contact. As a result, you can save big on costs and resources.

Hiring an offshore BPO company is also a smart way to grow your business.