Instead of hiring workers directly, many companies lease or rent them from outside leasing companies. Such workers may be referred to as temporary employees, temps, contract employees or contingent or casual workers. This chapter refers to them as leased employees.
Using leased employees is sometimes referred to as outsourcing or outside staffing. Whatever the practice is called, leasing employees has become an increasingly popular method for hiring firms to obtain the services of outside workers.
Worker leasing arrangements take a variety of forms. For example, you may lease workers from an employment agency that locates the workers for you or already has them on staff. This is what temporary agencies do. In other cases, the leasing company may hire your employees and lease them back to you for a fee.
Employee leasing can give you many of the benefits that can be obtained by hiring ICs directly. You use them only when needed and then dispense with their services without going through the trauma and expense of laying off your own employees. You do not have to pay and withhold federal and state payroll taxes for leased workers or provide them with workers’ compensation or employee benefits.
It can cost more to lease workers through leasing companies than hiring them directly since leasing companies have to pay the leased employees salaries plus earn a profit, but many companies feel it’s worth it.
You can obtain the services of highly trained and experienced workers who have been screened and selected by the leasing company. Also, you have reduced exposure to government audits.
Although employee leasing arrangements can work well, there are some serious pitfalls you should be aware of that require careful planning to avoid.