As your small business grows, HR services will likely be one of the first functions you look into. Fortunately, there are outsourcing companies that can manage certain HR services on your behalf.
Both SMBs and large corporations have been partnering with Professional Employer Organizations, or PEOs, in managing their HR operations, as well as cultivating culture within the company. There are also Employee Leasing companies who can assist in providing your business with the workforce as needed, often for project-based contracts and temporary staffing.
You may have seen the two terms used interchangeably, as both PEOs and Employee Leasing are in the business of managing a company’s workforce needs. However, they each provide different services for their partner businesses. Learn more about the difference between PEOs and Employee Leasing and how they can each benefit your business.
Table of Contents
Employee Leasing vs PEO: What Is the Difference?
At first glance, PEO and Employee Leasing can be easy to confuse. They both function to support your business with its HR needs, but each in a different approach.
An Employee Leasing service provides businesses with temporary workers for project-based contracts. PEO partners with companies to manage its HR processes, including hiring employees or coordinating with contractors. This interrelation may be the root of the confusion between the two services since both aim to support your business as it grows.
What Is Employee Leasing?
Employee Leasing is a service provided by staffing companies as a means to grow your workforce with temporary employment agreements. This is an excellent option for both small businesses and large enterprises looking to take on contractors for a set period, to work on a particular project or to fill in the gaps in staffing until permanent hires can be made.
Partnering with a staffing company makes it easier to take on workers to assist in short-term projects without the commitment of employing them yourself since the staffing company employs the workers instead of your business. As recruiting a new employee covers not just their monthly salary and benefits but also background checks, training, and workplace integration, leasing employees from a staffing company makes for less cost to your company.
How Employee Leasing Can Help Businesses Grow
For fast-growing businesses, there's a challenge in recruiting enough people to take on the work. Employee Leasing offers a convenient staffing solution that can be beneficial to your company:
- Skip the long-winded hiring process – Staffing companies have employees that are ready to work on your projects as needed.
- A cost-effective workforce – The hiring process is a costly process for any company, so working with a staffing company with the right people allows you to get straight to work on what you do best.
- Delegate workplace operations – Small businesses can benefit the most from this, as growing teams can focus on their work and delegate contractor management to the staffing company they’ve partnered with.
What Services Do PEOs Offer?
PEOs, also known as HR outsourcing companies, can offer a variety of services, but generally provide small to medium-sized businesses and larger companies assistance in human resource management. In working with a PEO, businesses enter a co-employment agreement wherein both parties take charge of finding the right hires and supporting their needs. Depending on the PEO, these services typically range from the following:
- Payroll and taxes
- State and federal regulations
- Employee recruitment and training
- Benefits and 401(k) plans
- Health, dental and life insurance
It’s worth considering partnering with a PEO if you’re the kind of business that looks forward to focusing on the work they do best. Since PEOs make it their job to manage human resources, you can rely on their tried and tested processes to assist you in company operations overall. This is especially beneficial for small businesses looking to grow quick while also not expending resources to worry about operations.
How PEOs Can Support Their Co-Employment Partners
- Polished HR processes – With human resource management as their main focus, PEOs are able to establish and refine their business practices.
- Highly effective recruitment strategies – Find the right HR outsourcing company with tried and tested procedures in recruiting on behalf of their partner businesses.
- Onboarding new employees – Work with a PEO who can help new hires get started and settled into the groove of the company.
By partnering with a PEO, you’re choosing to work with a company whose focus is solely on making sure the people and culture in your business is thriving.
PEO and Employee Leasing: How They Can Benefit Your Business
As PEOs and Employee Leasing companies run their businesses in their particular niches, they can focus on improving the services and processes they have to offer their co-employment partners. This benefits your company the same way, since you’re able to focus time and effort into developing your own business, and less on micromanaging company operations.
If you’re a small to medium-sized business, working with a PEO can be highly beneficial. PEO clients were 16% more likely to report an increase in profit. About 98% of businesses who’ve partnered with a PEO would give a positive recommendation to their peers about doing so. Managing HR operations will be less of a hassle, when you have a partner who you can delegate such processes to and trust them to do a good job. Larger enterprises can also opt to with PEOs, especially if they’re looking to improve their own internal HR processes.
As for Employee Leasing, while their services are more focused on providing your business with temporary employees, both small and large companies can find the right workers for their projects quicker than they would if they hired new people themselves.