What Is Employee Leasing and How Does It Work? - Growth Freaks

What Is Employee Leasing and How Does It Work?

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Employee leasing is a practice that gains more and more adepts. It is a great solution especially for people who own a small- or medium-sized business and don’t want to take care of the administrative tasks themselves. Today we will find out more about what is employee leasing and how it works.

What Is Employee Leasing?

The leasing refers to an arrangement between two companies, the subscribing and the leasing one. Basically, it refers to workers who are employed by a professional organization. The latter specializes in solving HR functions. Briefly put, you don’t need to stress anymore with the administrative burdens, but let the leasing company take care of the wages and taxes.

How Does It Work?

The first step a business owner needs to do when deciding to lease an employee is to go to a PEO. The PEO is the company that offers outsourced workers for companies. You just have to choose the area you need help with and then you will get an employee. The legal employer of the worker is the PEO, but the employee needs to report daily to the client company.

Employee Leasing Advantages

  • Better Insurance for Employees

A small company cannot afford to offer the same insurance benefits for employees as a big one. The employee benefits programs differ a lot from company to company. Since the PEO handles lots of tasks and people, they can afford to offer a better health insurance, for example.

  • It Saves Money

As a small business, it’s important to save money from wherever you can. With employee leasing, you can save up money with the employment costs, for example. Moreover, the PEO will be responsible for unemployment insurance and workers’ compensation. According to various studies, you can save up to 40% of your expenses.

  • It Saves Time

If you don’t spend your time on administrative tasks, you can focus on more important things in your business. An employee leasing process offers you the freedom of taking care of your staff and strategy, for example.

  • Quick Access to Experts

On your own, it can take up quite a lot of time, effort and money to find the right expert for your job. Meanwhile, a PEO can bring you what you need in no time. Moreover, you can rest assured that the expert is indeed a professional since they usually hire people with a lot of experience.

Employee Leasing Disadvantages

  • Trusting a Stranger

This is perhaps the biggest disadvantage of this strategy. After all, you are letting a stranger take care of your vital tasks. There have been lots of cases where the PEO vanished and people were left without their insurance coverage and the payroll cash. The safest way is to check everything you can about the PEO before signing the deal.


Employee leasing is a strategy that can get many problems off your head. However, it’s a decision that can turn out to be bad for you quick, so make sure you choose the right PEO company. Nobody can guarantee you it’s a perfect choice, but at least you should be informed beforehand.

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Author: Amanda Knowles