[aa_subtitle_display]Sometimes, the terms professional employer organization (PEO) and employee leasing are used interchangeably, but they are not the same thing. Each one offers different services for different purposes, so it is important to know the difference so that you can find the right services for your company.
When a company works with a PEO, their existing employees become employees of the PEO. It’s a co-employment relationship: while the PEO is the employer on paper, the client company is still in charge of the worksite. The PEO employs their clients’ staff so that they can have the large employee pool they need to get discounts on insurance and the other perks that they can pass along to their clients.
An employee leasing company is different in that it provides their employees to client companies. This is usually on a temporary basis for a specific task. These companies may also be known as temp agencies or staffing companies. The employees are not co-employed by the client, but they may work in the client’s workplace for a length of time. Once that time is up, the leased employees may move on to work at another client company.
Unless recruiting is one of the services a PEO offers, PEOs typically don’t have anything to do with hiring or firing clients’ employees. In a PEO relationship, client companies bring their own employees to the relationship and can make staffing decisions. If a PEO and a client company part ways, the clients’ employees stay with the client. With employee leasing, the employees work for the leasing company. Once the leasing company and the client company part ways (or once a specific contract is up,) the employees stay with the leasing company.
In short, PEOs don’t provide on-site labor to their clients, but they do provide administrative services. These services may mean that a company doesn’t yet have to hire human resources staff, but they won’t provide human resources staff to work in your office.
Things can get confusing because there are some PEOs that offer recruiting, interviewing, and training services when their clients are looking to hire more staff. Though the PEO will eventually be the employer of record for each new employee, it is still the client company that makes the hiring decision and will guide that employee’s work.
If your company needs help with human resources and administrative tasks, a PEO could be the answer. However, if your company needs staff for specific tasks, you should look into employee leasing. Talking to a PEO advisor may help to make the decision clearer and to find the right partner for your company.