5 Reasons to Think Twice about Employee Leasing
Many companies for one reason or another either think about or decide to run payroll through an employee leasing company. Sometimes it may be for the purposes of just hiring temp workers and others because insurance claims have prevented the employer from acquiring their own insurance. These are valid reasons why to use employee leasing options in the short term but in the long term it is usually not advantageous and here are 5 reasons why.
- Company Dependency – Being in an employee leasing agreement means exactly that, the business is now “leasing” THEIR employees from the leasing company. In essence, the leasing company “hires” the businesses employees for the purposes of having them under their employment umbrella and allowing those employees to be covered under the leasing company’s insurance and benefit plans. While this may make things easier, everything comes at a cost. In this case the cost is being tied to those insurance and benefit options whether they are the company’s choice or not and could cause for a negative impact in employee morale.
- Employee Loyalty – Loyalty is important in the work place and all businesses strive to create an environment in which employees can be most productive. Loyalty and motivation are a big portion of this. Having checks cut from some unknown company will always have a sense of emotional detachment from the business who is actually paying the money to cut the checks to employees. While this is not quantifiable it is still important to make sure employees are as happy and motivated to create true loyalty in the workforce.
- Hiring Criteria – While the employer will always have the last saying on hiring employees, there will also be criteria which the employee leasing company has to maintain as requirements. This makes sense considering these employees are actually employees of the leasing company performing duties for the business. These requirements may not always meet the needs or hinder the business operations. With employee leasing companies a certain level of control must be relinquished by the business owner and control is usually very important to day to day operations.
- Unemployment Insurance – Is also something to think about. Since the employees will be under the leasing company’s umbrella, so shall their unemployment insurance. Many times, this means unemployment rates will be higher since the employee leasing company is more than likely established under certain categories in which they have to put the employees in. Often times when switch out of employee leasing the rate will be lower when the business switches since the unemployment insurance with the state will be newly established.
- All Out Cost – The most important part to the business, the bottom line. Convenience costs money, ALWAYS. In the case of employee leasing there are many reasons why the cost of this option is more expensive. In general businesses choose to go into employee leasing arrangements due to the lack of insurance options. In turn, this is seen as a last resort to acquire insurance by the business and allow for the leasing company to charge a premium on admin costs. To add to this most leasing companies charge a percentage of the total pay which means not all fees and charges will be transparent enough to decipher what the true cost of this option actually is. Generally speaking, NaviPay can beat these costs by 20-30%, this is often a substantial savings for the business and transparent enough to understand exactly what the business is paying for.
If you are thinking about entering into an employee leasing option these are definitely items to consider. Employee loyalty, efficiency, control, and cost are very important reasons to have a hard look at your options. If you are already with an employee leasing company. January 1st is the time to make the switch out. Time is of the essence since the company controls your unemployment insurance. The clock restarts for unemployment insurance at the beginning of the year and making the change mid-year could cause for double payment of unemployment insurance. In addition to this, NaviPay is offering new clients 50% off on the first 6 months of payroll service which will add to your bottom line. Remember, at NaviPay our mission is to be cost-effective, efficient and personal.