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Pros and Cons of employee "leasing?"
Recruiting & Staffing
Pros and Cons of employee "leasing?"
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I'm new to this board, and have a question regarding employee leasing. Our company is thinking of making all the employees (including me) employees of a staffing company. I guess they feel that they w
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Forums » Topic Forums » Recruiting & Staffing » Pros and Cons of employee "leasing?"
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Pros and Cons of employee "leasing?"
posted at 3/3/2003 10:30 AM EST
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Posts: 2
First: 3/3/2003 Last: 3/4/2003 |
I'm new to this board, and have a question regarding employee leasing. Our company is thinking of making all the employees (including me) employees of a staffing company. I guess they feel that they would have less liability that way, and the expense seems negligible. Is there anything we should be looking out for? Is there any down-side to this arrangement for the employee? I feel a little weird at the idea that I will no longer legally work for my company!
Thanks for any advise and/or information. |
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Pros and Cons of employee "leasing?"
posted at 3/4/2003 2:05 AM EST
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Posts: 1771
First: 10/24/2002 Last: 9/14/2011 |
Microsoft did this and got dinged MILLIONS of $ in fines and retroactive benefits. Check it out - there's lots of information on the 'net about this spectacular case. You'll see there's a HUGE risk involved. |
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Pros and Cons of employee "leasing?"
posted at 3/4/2003 2:38 AM EST
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Posts: 14
First: 10/3/1999 Last: 3/4/2003 |
My company has been using a PEO for 4.5 years. For the most part I would recommend it. There was some uneasy feelings in the beginning, but that soon went away and the advantages are well worth it.
We use The Outsource Group in Walnut Creek California (#1 fastest growing company on the Inc. 500). Please let me know if you have any questions or would like an introduction to them. As for MicroSoft...They were misclassifying temporary employees through staffing companies that treated them as independent contractors. Very different. |
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Pros and Cons of employee "leasing?"
posted at 3/4/2003 6:36 AM EST
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Posts: 2
First: 3/3/2003 Last: 3/4/2003 |
I checked out the Outsource Group, but it doesn't seem to be the type of thing we are looking for. We've spoken with payrolling.com.
We are looking to move the people we already have as employees, and make them employees of the staffing company. So if this is different then what you thought, any additional thoughts on this? Thanks. |
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Pros and Cons of employee "leasing?"
posted at 3/4/2003 1:35 PM EST
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Posts: 1771
First: 10/24/2002 Last: 9/14/2011 |
WOW!!! This is EXACTLY what MicroSoft did (i.e., move their existing employees onto another "staffing company" payroll)!!! I urge you, even more strongly than before, to check out the details of this case, and find out EXACTLY how many millions of dollars MicroSoft lost after they did this. Because of the MicroSoft precedent, this is considered to be a serious legal no-no!!!
The only reason MicroSoft managed to stay in business after this major setback is that it's such a big company with so much money. Is YOUR company that big, and does it have that much money? |
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Pros and Cons of employee "leasing?"
posted at 3/5/2003 4:07 AM EST
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Posts: 3870
First: 2/12/2002 Last: 11/2/2009 |
hrbth is quite correct to point out that the MicroSoft case cost MS well over $500MM in back benefits, stock options, etc. MS took in a whole bunch of "contractors" and "temporaries" and had them do the same work as regular employees for as long as 2 years, all without the benefits and stock options. The "contractors" filed a case with the feds over ERISA violations and won; their next step was to go after MS for stock options since it'd been determined that they should've had the benefits of regular employment. (Since I've worked in the computer industry and have seen first hand how MS has sucked out a lot of the industrys profits, the only thing that bothered me about the decision was that it wasn't for a whole lot more money in favor of the employees. But that's just me...)
However, this case shouldn't prevent you from going ahead with contractors, temps or outside leased employee plans. Much if not all of the risk can be eliminated by following a few simple steps. For example, the temps should take their management direction from a temp agency supervisor, not a manager of the leasing company. They should also be offered benefits (especially the ERISA covered ones) along the same lines as the company employees. They need not be as generous, just similar. And since you say that all employees will transferred to employment with the leasing firm, I don't see any potential for an MS type of suit here. Consult with an attorney to make sure, but I see no cause of action since all the employees will have the same benefits, etc. Upside to the arrangement: admin cost savings and probably access to better and lower cost health insurance since the leasing company has a much bigger pool of employees to negotiate with than does the smaller company. Downside: a bit more cost as you've noted, something of an impact on morale as you also alluded to. Still have to watch out for all the usual legal issues, though, such as harassment, discrimination, etc. |
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Pros and Cons of employee "leasing?"
posted at 1/2/2008 2:46 PM EST
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Posts: 1
First: 1/2/2008 Last: 1/2/2008 |
I run an Employment Agency, and I was thinking about using a PEO for all my back office support. Also I would use a PEO to save on my workers comp insurance. I will be glad to take on any employees from companies who is thinking about using a employment agency any where in the USA.
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Pros and Cons of employee "leasing?"
posted at 1/24/2008 2:53 AM EST
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Posts: 1
First: 1/24/2008 Last: 1/24/2008 |
I work for a true PEO. A true PEO (vs. Employee Leasing) is a co-employment relationship. That means that that all the "worksite employees" are employees of both the PEO and the Client Employer. It is shared liability. The relationship doesn't transfer risk to the PEO so the Client Employer can do whatever they want. The PEO's services institute an employee management system that assists the client in reducing/increasing control over their liability by having the right procedures and policies in place. Also, the PEO can bring to the employee benefit packages that a smaller employer may not be able to bring. This can create value for the company as an employer as they may be able to recruit better candidates than their competitors.
"Employer Leasing" is a term that is outdated. The only time I still see it is when reviewing some legistlation that hasn't been updated. Employer Leasing is a one employer relationship and does not work. This type of relationship can't exist within the scope of todays employment and tax laws. That is probably why the Microsoft fiasco occurred. Payrolling as a term is viewed negatively in our industry. The term means processing payroll as the employer but disregarding the responsibilities of being an employer. If you want to locate a PEO to assist you in your business. I recommend that you go to NAPEO.org and see if you can find one that is ESAC certified (ESACorp.org). We are a new company and are going through the rigorous application process now. It's one of our top priorities for our company. Typically in the Member List on the NAPEO website, the certification is listed. Regardless, NAPEO's website is a great resource to learn more about the PEO industry. |
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