Introduction

A leased employee is an individual engaged by a business through a staffing agency or a PEO for a temporary duration. They are typically brought in for specialized projects or to fill in for permanent staff on leave. In this setup, the employee works for the client while the staffing agency or PEO manages payroll, benefits, and other administrative tasks.

Distinguishing Leased Employees from Freelancers and Temporary Workers

Leased employees differ from freelancers and temporary workers primarily in administrative handling.

When a business brings on board a leased employee, they remain formally employed by the staffing agency or PEO with which the firm has a partnership. These agencies oversee all aspects of the leased employees, including compensation, insurance, benefits, leaves, and taxes.

Freelancers, conversely, operate independently and are not officially employed by any organization. They manage their own taxes and insurance. The hiring organization is responsible for timely payment and tracking of their work hours.

Temporary workers, or temps, may sometimes overlap with leased employees, but they serve a distinct purpose. They are engaged for short durations and usually support internal teams in specific projects. They are also hired through agencies, which handle payments, benefits, and taxes.

Advantages of Leased Employees

1. Swift Recruitment: Onboarding leased employees through an agency circumvents the time-consuming process of candidate selection. This is particularly advantageous for critical and time-sensitive projects.
2. Access to Expertise: Staffing agencies typically maintain a large pool of qualified professionals across various industries, enabling businesses to request specialists for their projects.
3. Reduced Administrative Burden: Employers are relieved of concerns regarding payroll, benefits, and taxation, as these responsibilities fall under the purview of the staffing agency or PEO.
4. Enhanced Productivity: Leased employees integrate seamlessly into the company, akin to full-time staff, allowing for greater control over their working hours compared to freelancers.
5. Morale Boost for Permanent Staff: Temporary onboarding of leased employees can uplift the spirits of existing staff, demonstrating the company's commitment to supporting them during peak workloads.

Transitioning a Leased Employee to Common-Law Employee

A leased employee can be designated as a common-law employee of the client organization if the following conditions are met:

• The leased employee has worked full-time for the client company for at least one year.
• They have worked more than 1500 hours at the organization or 75% of the average hours of a permanent employee.
• The client company has decision-making authority regarding hiring, firing, wages, and supervision of the leased worker.

Tax Reporting for Leased Workers

While staffing agencies or PEOs typically handle payroll and taxation for leased employees, some agencies may not offer this service. In such cases, the client organization becomes responsible for tax reporting and payroll, similar to their regular employees.

Hiring Leased Employees: A Step-by-Step Guide

The most effective method to employ leased workers is through a staffing agency or a PEO. These entities streamline the hiring process, ensuring minimal administrative burden on HR teams.

Staffing agencies offer a wide range of candidates, from novices to seasoned professionals, and may provide a trial period for assessment.

PEOs, like Remoly, can assist in global hiring, handling payroll, insurance, and benefits for employees. The client sources the candidate, and the PEO facilitates onboarding and administrative tasks.

Conclusion:

Prior to hiring leased employees, it is crucial to ascertain business requirements and the desired skill set. Due diligence on the selected staffing agency or PEO is advised, particularly regarding the extent of administrative services they offer.

FAQs

• Who is the legal employer of a leased employee?

The staffing agency or PEO remains the official employer of leased employees, even while they provide services to the client company.

• How do I process taxes for a leased employee?

Typically, taxes for leased employees are handled by the staffing agency or PEO. If not, the client must manage tax processing as they would for a regular employee.

• Are leased employees eligible for benefits?

The staffing agency or PEO oversees benefits and insurance for leased employees. If they transition to common-law employees, the client must establish a retirement plan.

• When should I hire leased employees?

Companies often turn to leased employees when they need additional workforce but lack the capacity to manage administrative tasks associated with regular hiring.

• How does a PEO impact my role as an employer?

A PEO handles backend administrative tasks including payroll, taxation, compliance, insurance, and benefits, while day-to-day management and task allocation remain in the client's control.