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What Are the Advantages of Employee Leasing?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 November 2016
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    Conjecture Corporation
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Employee leasing is a type of business strategy that involves a client company transferring certain employees over to a different firm that in turn will lease those same employees back to the subscribing client. While somewhat similar to utilizing an employment agency, this approach differs slightly in terms of the duration of the time that the employees will be leased to the client. Typically, the arrangement is planned to be more or less permanent, whereas with an employment agency a change can be made at any time. There are a number of benefits to employee leasing, most of them financial in nature.

One of the key advantages to employee leasing is that the subscribing client no longer has to be concerned with providing benefit packages to those leased employees. This is the responsibility of the leasing firm itself, since those employees are associated with the firm and not the client. By transferring those clients to the leasing firm and then leasing them back, the client frees up resources that would otherwise be spent on providing sick days, vacation time and health insurance among other common benefits.

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Another reason to make use of an employee leasing arrangement is to avoid the need to collect and pay taxes for the individuals involved. Since those employees are technically employed by the leasing firm and not the subscribing client, the firm is responsible for managing the payroll, handling the deductions, and reporting the activity and paying the taxes to the appropriate tax agencies. This saves the subscribing client a considerable amount of time and resources when it comes to keeping the accounting books up to date.

A third benefit to using employee leasing is that in the event a leased employee is ill or otherwise unable to report for work, it is the responsibility of the leasing firm to provide a temporary replacement. This means the subscribing client does not have to pay overtime to another employee to cover essential tasks or ask its employees to double up and take care of whatever the leased employee would normally manage. By providing this benefit, the employee leasing approach helps to ensure business moves on as usual even if a leased employee will not be able to make it in for a day or two.

While it is true that employee leasing normally requires tendering a payment to the leasing company that is larger than the salary or wages that would otherwise be paid to that transferred employee, the savings in terms of benefit packages and time spent on accounting processes easily offset that difference and allow the client to actually save money in the long run. By using a leasing strategy for various functions such as payroll and general accounting, human resources or even risk and loss prevention administration, a subscribing company still enjoys access to the expertise of the leased employee, but without the responsibilities involved in employing that individual directly. The end result is that both firms benefit from the arrangement, while the leased employee knows that should the assignment end suddenly, there is a good chance the leasing company will find another more or less permanent position with a different client as quickly as possible.

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