Employee Leasing

Discussion in 'Business Operations' started by JimLewis, Oct 4, 2002.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Question for some of you with larger companies having several employees:

    Is it a good idea to use an employee leasing company? It seems like a no brainer. Let me explain;

    A local employee leasing / temporary company approached me recently and asked if they could run some numbers for me and give me a proposal as to what it would cost to have me use them for employees. They came up with a proposal for me that's very attractive. I added up what it costs me for just payroll, monthly tax deposits, worker's comp., and the cost that I pay my current payroll processing company. And this price is about the same as what I'd pay if I leased my employees from this new company. So I'd pay the same as I do now.

    Only now I'd never have to worry about worker's comp. rates going up. Never have to worry about worker's comp. claims. Never have to worry about unemployment claims. Never have to worry about making monthly deposits, paying worker's comp. premiums, etc. And one of the biggest benefits is that I am no longer liable. They are THIS companies employees now, not mine. So it relieves me from all liabilities that could happen from employees (lawsuits, etc.).

    Further, they'd throw in Medical Insurance and an 401K plan (neither of which I don't offer now).

    I'd still be able to hire and fire people at will if I wanted. Or I could let them handle that. It's all up to me.

    To make things even better, they'd give me a line of credit and I wouldn't have to pay them until 7 days after Payday. The owner of the company said that could even be extended once in a while if I just called and let them know.

    I can't see any down side to doing this. Comments???
     
  2. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    1 question...Would you lose some of your employee loyalty?

    Everything else seems attractive.
     
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    I thought of that but I don't see where I would. They'd still show up to work for me every morning. I'd still determine their pay rates, still oversee them as I do now. Everything would be the same except they'd have a few more benefits and the check would be written on a different company's name.
     
  4. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    If you could show them that it would benefit them and not hurt them in anyway, it might work great.

    It would also benefit you when you needed to hire other people. You could try them out beforehand.
     
  5. soccer coach

    soccer coach LawnSite Member
    from midwest
    Posts: 104

    JIm, Is this a temp agency that is wanting to contract out or something different? Are they saying they would use the guys you have already? I have used temp services before and contracted with them by the month. I wouldn't do it again if I had a gun to my head. They cost me more time waiting on them to show and work was poor to say the least. If I'm not seeing this right could you explain for me?
     
  6. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    No, this is an employee leasing company - totally different. Although they happen to also have a temp service as well. But with employee leasing you have the same people each week, permenantly, if you want. That only changes if you don't want an employee any longer. Otherwise, it's just the same as having your own employees, only someone else handles paying them and other employee financial matters.

    I'd keep the same employees I have now and when I wanted to hire someone new I could either have them assign a temp-to-hire person to my company for trial or I could go find and hire on my own and then when they were hired, take them to this company to get set up.
     
  7. Well, as long as you did not have to carry any insuranc, I guess that it would be allright.
     
  8. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    Employee leasing also known as PEO; Professional Employer Organization.

    There are certain hidden costs that you must consider.... Employment tax caps...do they continue to charge that same percent once the caps are met... i.e. State unemployment...you are liable in my state for a set % up to the first 7500 of each employee's payroll, after that you stop paying. Have you met those limits yet..if so do you start paying them with that company again? If so it's costing more...until the fiscal year begins.

    Insurance: is it a self funded plan? If so how good is the insurance and do they pay?

    Worker Comp: What happens to your experience Mod should you decide to go back on your own? Do you have to start over again? Are they classifying the employees just as your insurance did?

    With a PEO you are in control of the employees...all they do is assume the liability.. They will want to implement good safety training, drug testing, and all kinds of other programs should they begin to consider your business a risk to technically what is their employee.

    Keep in mind that this is Totally different than a Temp Agency...
     
  9. soccer coach

    soccer coach LawnSite Member
    from midwest
    Posts: 104

    What do they want to charge you per man per hour? The insurance deal for the workers sounds goos as it is something most smaller lco's can't provide. When we used a temp company last year we leased workers as well. None we wanted but none the less we did lease. We paid 12.75 per hour and they got pd only 7.50 I think it was. We always gave them money on top as I think 9 or so should be bottom dollar.
     
  10. heygrassman

    heygrassman LawnSite Senior Member
    Posts: 509

    Just a couple thoughts...

    As an employee of the employee lease co., why would I want to work for the Employee Leasing Co permanently as opposed to you. If I want to grow with the company, I can not (or you are paying more).

    I would seek the counsel of an atty if you are going to use this consistently as a pool for perm employees. I would have concerns regarding the liability surrounding a "leased" employee that has been on the books for a few years. I ran into a potential snafau on a temp in Fla that was looking for FMLA from us although we were using her through a temp agency for over a yr. On advice of counsel, we settled given some case law that was in her favor.

    I would ask for some records showing avg tenure for the total employee pool. I have would be concerned about high turnover.

    I also do not see how they can do some of the items cheaper than you, and also do not see a lot of profit in this for them if they are close to what you can manage your HR at.
    For example:
    Pay: Either way the employee is going to get $x.xx per hour eiter from you or them. If they are paying less, what are you really getting.
    Bene's: There is opportunity for savings here as they are covering a larger pool of people.
    Taxes: Taxes are taxes..Dollars * tax rate no savings here.
    Workmans Comp: Calculated based on skill type * money earned factoring in accident history. I have a hard time seeing how they can get workmans comp cheaper than you, unless they have an pristine track record, but given that have no experience and no training I am not sure how that can be.
    Payroll Processing: I can see some cost savings here.

    I guess I am kinda skeptical. I can not see how this can be profitable for the agency. Be very careful of a partner that is not profitable if they are integral to your operation. Worst thing that could happen is you count on the labor, market like crazy and the labor pool is dry..

    I could be way out in left field on this... Hope it works out.. I would to hear more as it progresses.

    jf
     

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