Why Small Business Owners Need To Know The Difference Between A PEO Vs. Employee Leasing

Say what you will, but the way small businesses employ and retain top talent is changing. Some call themselves gig workers, others prefer to be hired to work remotely. Some prefer going through a staffing agency so they can pick and choose their jobs. Others would rather stick with one longer-term employer. How workers think about work and the autonomy in choosing what work looks like for them is interesting. With that, the conversation is swirling around what the difference is between a PEO vs. employee leasing. Isn’t it really just the same thing?

The term employee leasing does somehow get mixed up in the conversation about PEOs. However, there are some major differences to consider before you understand which one your small business would benefit from. 

2 Major PEO Vs. Employee Leasing Differences To Consider

Small businesses can choose how they would like to do the employing just like employees can. A PEO vs. employee leasing creates two very distinct yet equally interesting solutions for employing and employee management. We’ll take a look at the two and help you make the best choice for your management preferences as a small business owner. 

Employee Leasing Is Not Typically A Long Term Solution 

Employee leasing is a lot like leasing a car. You have to think of it from a common perspective; it’s not yours. Employee leasing and temporary staffing are one and the same. The employee might be in your office for a long period of time but in the end, they are not your employee. Employee leasing works best when there is a definite project with a start and end date in mind. Leased employees are hired for the skill sets they bring to a particular situation. 

Could you have an entire office of leased employees from a staffing agency? Well, yes, you could. The salesperson you would be dealing with from such an agency would be your new best friend. The problem with an office of leased employees just filling your hiring needs indefinitely is very expensive. Leased employees provided by a staffing agency are typically billed at TWICE their pay rate. If you want to pay double for every hour you hire someone, go right ahead. Sure, you might not have to deal with HR issues at all, but it won’t help you grow your business. 

The good news with leased employees is if you want to let them go you just call your staffing salesperson; end of the story. Leased employees are not a permanent or cost-effective solution to growing a small business. But they come in handy if you need extra hands for a definite amount of time. 

On The Other Hand, A PEO Is Not A Short Term Solution 

A PEO vs. Employee leasing has one distinct consideration; intent. Leased employees are not yours but a PEO solution is not providing you with employees either. You provide your own employees and they co-employ your employees in order to provide HR and payroll services in a relationship with a PEO. That’s it. The day-to-day operations of your small business, the hiring, the firing, the performance management, it’s all yours. 

A PEO is in a relationship with a small business, not to provide staffing solutions, but to provide HR and payroll solutions to them. A staffing company may or may not provide benefits to your leased employee and they do pay your leased employee but you have little control over anything else. A PEO works with a small business as a partner and a co-employer for the best interest of your small business and your employees. In short, it’s a win-win for you and your employees because they provide all the benefits of an HR solution without the enormous fees an employee leasing company charges. 

Understanding A PEO vs. Employee Leasing For Your Situation

It might be that you could see both scenarios in your small business. Maybe you have short term needs that would be perfect for employee leasing and you also need HR solutions for the permanent employees you have already. No worries! A PEO can walk you through how to employ in both situations. 

Talking to a PEO broker is one great way to decide which one of these solutions or both are more appropriate for your employment needs. A PEO broker will walk you through all of your employment challenges to help you weigh which choice is your best one. They are experts in the PEO industry so their knowledge is made readily available to a small business owner looking for HR solutions. If you’d like to find out more about a PEO vs. employee leasing, talk to us today and get your small business well on its way to positive growth this year.