PEO Employee Leasing. What does it mean?

If you’re a global business, or are on the cusp of expanding internationally, then hiring can be a complicated and legally perilous activity. Especially when you consider classification issues, compliance, pay rates, entitlements and benefits and differing Government regulations. So is there a better way?


PEO Employee Leasing? It’s a corporate structure that’s becoming increasingly popular with businesses around the world looking to streamline their hiring processes and lower administration costs.

But what does it mean exactly?

Appointing an employee represents a big commitment in terms of time and money. Whether the position is full time or part time, casual or contract full-time or part-time position, there are a multitude of tasks involved – including interviewing, recruitment, training, remuneration, entitlements, administration and more.


A Professional Employer Organization (PEO)?

That’s where the services of a Professional Employer Organization (PEO) can make a real difference. A PEO is a company that technically employs the workers of other companies or businesses and oversees all their HR-related functions on your behalf.


Employee Leasing?

Employee leasing is a contractual arrangement in which the (PEO) or leasing company becomes the official employer of your staff. Employment responsibilities are typically shared between the leasing company and the business owner (you). You retain essential management control over the work performed by the employees; whilst the leasing company takes on all the time-consuming HR functions associated with their employment.

In addition, by combining the employees of several companies into one large pool, professional employer organizations can also offer business owners far better rates on health-care and workers’ compensation coverage.


Advantages of Employee Leasing

In these pandemic-stricken times, with remote employment becoming increasingly commonplace, many businesses are turning to PEO employee leasing when they want to strategically expand their team. With employee leasing, the PEO handles all the administrative services involved, from recruitment through to remuneration. Other advantages for employers include:

  • Access to local top talent As an employer you don’t need expertise in finding high-quality talent. The PEO or the leasing agency will do it all for you..
  • Expertise in compliance. PEOs are experts in coordinating with tax agencies and other offices and complying with their required paperwork needed for new staff.
  • Legal protection. In case an employee sues t for alleged discrimination or wrongful termination, a PEO can help provide the legal requirements required.


Disadvantages of Employee Leasing

However, employers need to bear in mind that there may be a downside, and the disadvantages of PEO Employee leasing include:

Less control: Since the employees are hired by a leasing agency, the company lacks a degree of control over them.

Lack of communication: Employee leasing adds another level of bureaucracy to the overall employment procedure. When employees have certain questions regarding benefits, payroll or other HR-related functions etc, then they communicate directly to the leasing agency and not to the company.

Staff commitment: If you hire an employee for a long-term working relationship, then the process of employee leasing may not ideal for you.

Impersonal: Entities that utilise the services of employee leasing agencies are often not able to offer an equivalent level of personalized engagement afforded other employees. In most cases, companies treat employees hired by external agencies as ‘lesser’ employees and this can sometimes lead to problems.


Leased employee vs. independent contractor

At first glance, leased employees and independent contractors appear to share some key similarities. Neither are technically employed by the company or business they are performing work for, but there are some significant differences.

Independent contractors, as the name suggests, operate independently of any employer. Typically, independent contractors provide a service to a client who pays them directly for those services. The client has no power or control over how the work is accomplished, and the independent contractor manages their own taxes etc.

Leased employees though are officially employed by a professional employment organization. This means that the PEO handles their taxes, insurance and benefits so the leased employees don’t need to.


PEO, GEO or EoR?

In the United States, the PEO ‘co-employment’ model is recognised by law. Throughout the rest of the world however, things are not that simple. In most cases, you won’t have your own an entity in the host country – and this is why most companies choose to leverage a GEO third party model along with EOR firm(s).

Similar to an ‘international PEO’, GEO is an acronym for Global Employment Outsourcing. Popular in Asia, it’s a comprehensive international solution that’s ideal for hiring employees abroad when you don’t have a branch or subsidiary in the foreign location.

The GEO structure utilizes ‘employers of record’ (EOR) in each country of employment – already set up and ready to onboard and payroll new employees.  This streamlines the hiring process and ensures that employers are in compliance in the host country, where the GEO partner relies on their local partners and experts.

The GEO service is a perfect fit for you if:

  • You don’t have a local entity set up already in the country
  • Your company is just testing out a new foreign market
  • Compliance and cost are major factors for your HR strategy
  • You want to have global access to recruit top talent
  • Managing risk is a priority

In addition to payroll and onboarding, and extensive local knowledge, a GEO/Employer of Record structure can also support you with:

  • tax administration
  • Ensuring all employment contracts meet local standards
  • Foreign exchange and in-country money movement
  • Insurance, local laws and regulations

To decide which model best suits your precise needs – PEO, GEO or EoR –  it is recommended you consult with an experienced global provider like CXC to ensure you make the right decisions from Day One.

CXC offers a range of international PEO, GEO and EOR services to ensure a streamlined approach to all your workforce management issues, including employee leasing. For more information about which might be best for you do not hesitate to contact CXC today!