Employee Leasing -- What Is It and Is It For You?

few years ago, as our business expanded and covered multiple states and locations, we started struggling to manage our payroll and benefits administration. As we evaluated opening remote offices and offering comparable benefits among employees, we realized that between our health insurance and pension plan, we needed some assistance. Early in this process, we investigated using a payroll service which manages all of the administration related to payroll. While this addressed the issues with multiple offices and multiple state rules, we were still left to pick and choose among benefit packages. After much discussion among employees, we decided that we would use the services of an employee leasing company. Since this decision was made over a year ago, I have become a supporter of the idea behind permanent leased employees. In a nutshell, here is

why I chose an employee leasing company:
All of my employees (including me - the owner) are employees of the leasing company. I still make all hiring, firing and compensation related decisions although, now I have the access to a Fortune 500 Human Resource and legal department for advice on employment issues. This is helpful in getting advice on tricky employee related issues. Employees who are terminated are encouraged to access the employee leasing company's out-placement services which offers unemployment related information. In the event of claims for unemployment or garnishment of employees wages, the employee leasing company is the employer and manages the entire process. When we first looked at this service, all of my employees were cool to the idea and wondered why they were going to have to "work for someone else?". Since we have been with the employee leasing company for over a year, the employee reaction has been very positive and they welcome the benefits otherwise unavailable at a start-up company.
My payroll is either mailed Fed-X, or wired into an employee's bank on the pre-established payroll dates. When you have employees scattered over a large area, this alone becomes a management nightmare.
My company's benefits are designed by me and managed by the employee leasing company. All of my employees are allowed to choose either an HMO (when available) or PPO paid for by my company. They are also allowed to add dental, disability, or life insurance as they would like. Employees can participate in a 401K that is designed by me but managed by the employee leasing company. Sick days, vacation days and other employment related tracking is done by the employee leasing company.
I write one check per pay period which includes the payroll, FICA, health insurance premium and workers compensation premium. And since I now have no employees, it is not my responsibility to make sure that all of these assorted checks are received and correctly posted.
An employee leasing company can be cost justified using your fully loaded payroll costs, and then comparing those costs to the proposal that the employee leasing company provides. In my case, allowing for a reduction in employees needed to process the payroll, I actually spend less overall money using the employee leasing company. Individual employer situations specific to the risks and workers compensation will impact the typical proposal provided by an employee leasing company. My fully loaded employee cost increased by only two per cent. However, this amount will vary by leasing company. Compared to the headache, liability and salary costs of managing this process internally, I feel that this has been a wise decision for my company. I now have the flexibility and capability to move my company in new directions without the issues related to overall employee administration management.
Adding new employees and offices are a breeze administratively and we can offer benefits usually only seen in a much larger company.
At some point, we may decide that we have grown to the point of allowing an internal human resources person, but until that time, I expect to continue to use and promote the services offered by the employee leasing company.

How to Lease Employees

For many small and medium businesses, the cost of handling administrative duties is so overwhelming that they need to seek outside alternatives for handling such matters. One great way to do so is to lease employees. If you are a business owner considering this option, here are the steps you need to take to get started.

Instructions

Step1 Find a local profesional employer organization (PEO) to help you. A PEO will offer you the opportunity to lease employees to handle tasks like payroll, taxes, and bookkeeping.
Step2 Go online to find places to help you lease employees. There are 2 great places to help you with this task: Staff Market and Employee Leasing. (See resources below.)
Step3 Do your research. Employee-leasing organizations vary considerably; so you need to make sure you find the right fit for your business.
Step4 Ask for a quote. Explain what you need to the leasing organization and get a specific price for their services.
Step5 Let the leasing organization do the work for you. Free yourself from the burden of administrative tasks. Lease employees and get rid of the hassles of employing non-income-producing parties. This will allow you to set your sights on the business of doing business.


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Today's Employee Leasing Companies Are Better Than Ever

Many business owners believe that employee leasing is simply outsourcing your HR department or payroll department. However, most small- or medium-sized businesses probably don't have the luxury of "departments" to handle these functions. That's why so many of these companies turn to employee leasing.

Today's employee leasing companies are different from employee leasing companies of the past because they offer a wider variety of employee leasing services to clients, and the services offered are more in-depth. They are able to do this because of the co-employment relationship that exists. Through this relationship, employee leasing companies can better help small- and medium-sized businesses provide affordable benefits, attract and retain the most talented employees and have access to enhanced technology they could not get from employee leasing companies in the past, including:
A broad range of health and other insurance benefits
Enhanced payroll services including web-based employee self service
Complete risk management support and training
Unemployment claims management
Employee training and development
Employee discount programs
And much, much more

Employee Leasing Licensure

An employee leasing company is a business, which by agreement and for a fee, places employees of a client company on the leasing company's payroll. In turn, the leasing company "leases" these employees back to their original employer, usually for an unlimited period of time.
In 1996, the Vermont Legislature passed a law (21 V.S.A. Secs. 1031-1043) to regulate the employee leasing industry. This law, which originated through an industry request for regulation of leasing companies requires the employee leasing companies doing business in Vermont to be licensed by the Vermont Department of Labor, which is the state department responsible for administering both the unemployment insurance and worker's compensation programs.
Regulation of the employee leasing industry was enacted in part as a response to some situations, most of which occurred outside of Vermont, where an employee leasing company went bankrupt after having collected from its clients money which was to be used to pay wages, benefits, worker compensation premiums and unemployment insurance contributions, but without first making those payments to the appropriate agencies. In those situations, the client companies bore the responsibility of paying those wages, premiums and taxes twice. The financial responsibility and bonding provisions of the employee leasing law are intended to reduce or eliminate the exposure of the client companies should their leasing company suddenly go out of business. By helping ensure that only stable employee leasing companies do business in the state, Vermont's employee leasing law provides protections to workers, client companies and the leasing industry itself. It also helps to ensure that the cost of unemployment insurance and workers' compensation is borne by the client company, and not spread amongst all other employers.
Employee leasing companies provide a number of valuable services to their clients. Typically, an employee leasing company will provide payroll services and assist companies in managing their human resources by providing employee manuals and other services, which are sometimes difficult for smaller companies to provide on their own. Better management of workplace safety can help control the cost of worker compensation. Improved hiring practices and experienced representation in unemployment insurance benefit and tax matters can help keep the cost of unemployment compensation down. Because leasing companies represent a number of employers, and therefore a larger pool of workers, the cost of benefits can sometimes be lowered. In some cases, client employers, which could not afford to provide certain benefits such as health insurance, find it affordable to do so when taking advantage of the buying power of an employee leasing company.
In order to maximize the advantages and minimize the risks of employee leasing, Vermont employers are encouraged to only utilize those services provided by a company licensed to do business in Vermont. A list of employee leasing companies licensed to do business in Vermont is maintained by the Vermont Department of Labor

Employee Leasing Regulations

5.07 Purpose
The purpose of 430 CMR 5.07 through 430 CMR 5.13, inclusive is to establish procedures regarding reporting requirements for employee leasing companies and their clients.
5.08 Scope and Applicability
430 CMR 5.07 through 5.13 apply to employee leasing companies and their clients.
5.09 Definitions
The following words and phrases shall have the following meanings, unless otherwise clearly indicated by the context of 430 CMR 5.07 - 5.13:
Client Company: an individual, association, partnership, corporation or other business entity that agrees to or is leasing its employees through an employee leasing company on a long-term basis.
Commissioner: Commissioner of the Division of Unemployment Assistance
Division: the Division of Unemployment Assistance
Employee Leasing Company: an employing unit that contracts with a client company to supply workers to perform services for the client company; provided that, the term employee leasing company does not include private employment agencies that provide workers to employers on a temporary help basis or entities such as driver-leasing companies which lease employees to an employing unit to perform a specific service.
Employer: any employing unit subject to M.G.L. c. 151A
Employing Unit: a sole proprietorship, partnership, corporation or other form of business entity which has one or more individuals performing services for wages within the Commonwealth.
5.10 Reporting Requirements
(1) Each employee leasing company doing business in the Commonwealth shall register with the Division in accordance with the instructions printed on the forms issued by the Division.(2) Each employing unit intending to contract with an employee leasing company for the supply of workers shall notify the Division at least 60 days prior to the next due date for the payment of unemployment insurance contributions. Such notice, signed by such employing unit, may be transmitted to the Division by the employee leasing corporation.(3) Any employer which terminated a contract with the employee leasing company must notify the Division of such termination within 30 days following the termination of the contract.(4) Employee leasing companies shall provide the Division a list of their client companies annually on or before December 31 of each year. Such list shall include the client's name, address, employer account number and federal identification number (FEIN).(5) Employee leasing companies shall notify the Division when a client company establishes or terminates a contract with them within 30 days of such event. Such notice shall include the employer's name, address, employer account number and FEIN.(6) Properly registered employee leasing companies, whose client companies have notified the Division, may file quarterly contribution reports and pay contributions on behalf of their clients, and may also file Health Insurance reports and pay unemployment health insurance contributions on behalf of their clients; provided, that such reports and contributions are paid for all employees of their client companies.(7) Each employee leasing company shall report and pay contributions under the employer account number and at the experience rate assigned to the client company by the Division. New employers, or those who have not previously registered with the Division, shall establish their own employer account number by filing an Employer Status Report with the Division.(8) Each employee leasing company shall keep payroll records in such a manner that separate records can be produced for employees of its client companies.
5.11 Benefit Charges
The Division shall charge unemployment insurance benefits against the client company's account in accordance with the provisions of M.G.L. c. 151A. The Division shall mail notice of benefits charged to client accounts to the employee leasing company following the close of the month in which such benefits were paid.
5.12 Experience Rates
The Division shall establish annually experience rates for the client companies based on their individual status as an employer. Employee leasing companies, in compliance with the notice provision of 430 CMR 5.00, may be provided with rate information for properly registered client companies.
5.13 Miscellaneous
(1) Employing units for whom services for wages are performed will be considered the employer of the worker.(2) Except where inconsistent with 430 CMR 5.00 all other rules and regulations of the Division shall apply to the employee leasing companies and client companies.(3) Employee leasing companies and client companies shall comply with the procedures prescribed by the Commissioner.
Regulatory Authority
430 CMR 5.01: M.G.L. c. 23, s. 9J; c. 151A, §. 1, 2, 6, 8(b), 13, 14, 14A, 14(f), 14(d)(3), 14(n)(1), 38(a), 38(b) and 45.

Employee Leasing Solutions

How Does Employee Leasing Work?
Through a contractual agreement which is known as "co-employment," Employee Leasing Solutions provides companies with one central source for all tax, employee and legal compliance issues, as well as the administration of all workers' compensation, benefits, and unemployment.
This agreement allows you, the business owner, to devote all of your resources toward running and growing your business and allowing you to cut out the hassle of employee-related administrative tasks that don't add anything to your bottom line.