Compare Prices on Employee Leasing and PEO - BUYERS GUIDE 2017
A Guide to Buying PEO Services, Employee Leasing Pros and Cons, and Best Companies - Compare The Cost
While less for smaller companies, employee leasing typically cost between $1,000 - $5,000 for set up plus ongoing fees according to your payroll needs, typically averaging 4%. It is entirely possible that you are brand new to the world of PEOs and employee leasing. Today, we’re going to teach you about the ins and outs of these valuable services. To start with, an introduction to exactly what these services are will be provided. This will be followed up with some buying tips to keep in mind when trying to find the right PEO for your organization. Finally, we’ll touch on the costs that you can expect to encounter when looking to utilize employee leasing for your company.
What is Employee Leasing?
Employee leasing is a specific type of legal arrangement where a separate organization, the “PEO” actually becomes the official employer for the people that in practical terms work for you. So why might this be a good idea?
“PEO” stands for Professional Employer Organization. This means that they are a company that specializes in hiring employees that will then be put to work by other companies. Every time you hire a person to perform a service for your company, there is a mile-long pile of paperwork that awaits you, and numerous legal and financial hurdles that have to be properly traversed. When you use a PEO to employ your staff instead, they take care of all of those administrative details for you. They are the employer for all legal purposes, and then you lease the staff that you need to complete work at your business.
This is a great idea for many different types of companies. For instance, small businesses often lack the HR expertise to properly staff their organization, and often fumble their way through the hiring process. This can leave you vulnerable to a variety of liability issues.
With a PEO, the employees along with the liability are tied to the leasing office rather than to your company. Not only does this afford you a certain amount of protection from various legal complications, but it also can save you a great deal of money. If you can’t justify the cost of an entire full-time HR specialist or department, a PEO leasing agreement can be a way to enjoy all the benefits of professionals with HR expertise without having to create a completely new position within your business.
This may sound similar to another service that you might have encountered: “HRO” or, human resources outsourcing, is another way that you can offload the workload of managing staff to a qualified outside provider. The difference however, is that when you utilize an HRO you are essentially hiring someone to provide guidance and oversight to your HR activities. When you use a PEO, the employment of your staff is officially under the banner of their organization, not yours.
What to Look for in a PEO or Employee Leasing
When you’re searching for a PEO to assume the official hiring of staff that will ultimately provide services at your organization, there are several important things to look for. First and foremost, you want to find a company with the legal expertise to make sure that all of your regulatory and legal requirements are met in full. You also want a provider that will take the lead in filling your posted position. The best case scenario is that the provider will take care of all the preliminary recruiting activities, leaving final interviews and decisions in your hands.
It is also important that you find a company that is going to take responsibility for the safety of the workers. This means that they will make sure that safety regulations are being complied with, and will take care of ensuring that all property workplace standards are enforced. Payments to cover all liability and safety related issues should also be handled by the PEO.
Finally, payroll and benefits services should be included in your employee leasing service. A company that doesn’t take care of these services is not covering all of your bases, and you will end up paying more, either internally or externally, in order to meet all of the requirements needed to keep your organization staffed. The best providers will offer a full suite of payroll services and benefits management.
Top Tips when Hiring a PEO or Employee Leasing
- Get a full list of all the services offered by your provider and make sure that you’re making the most of them. The lists of services are often quite complex but it is important to ensure that you’re not taking care of something, or paying for a service that is already provided by your PEO
- Look for a provider that allows flexible benefits packages that allow your staff some flexibility and choice. This is often the best-case scenario for many employees and can help attract and retain the best staff
- Get a clear explanation of exactly how much liability is assumed by the PEO. In certain situations, it will not be 100%, so always understand what you’re going to be responsible for before agreeing to do business.
How Much Does Employee Leasing and PEO Cost? Compare Pricing
The first thing you’re going to have to pay for when contracting a PEO is the setup of the service. This will cost anywhere from between $1000 and $5000. The good news is that you will only have to pay this fee once for the duration of the time that you do business with the organization. After that initial fee, your payments will be based on the size of your payroll. The PEO will bill you a percentage of your payroll for the services they provide each month. Normally, this is going to be around 2%-6% of the amount that you are paying your staff for a very basic employee leasing program.
For a complete program that incorporates managed benefits, payroll services and hiring programs, the fee may be as high as 15% of your gross payroll. Also keep in mind that for companies that pay very low salaries or that only hire a few employees, the percentages are likely to trend towards the higher end of the margin.