Staff leasing is basically the same as outsourcing. It’s a contractual agreement between a service provider and its client. This is what you do when you hire employees like cleaners and security guards from an agency. You’re not responsible for paying them and computing their taxes and monthly contributions, but it’s your responsibility to pay the professional employer organization (PEO) to cover those expenses.
If you’re thinking of staff leasing through an offshore outsourcing company as part of your business strategy, these are 5 things you need to know first before signing on the dotted line.
1. In offshore outsourcing, staff leasing is done remotely, but the setup is basically the same.
Employment responsibilities are typically shared between the leasing company and the business owner (you, in this case). You retain essential management control over the work performed by the employees. The leasing company, meanwhile, assumes responsibility for work such as reporting wages and employment taxes. Your main responsibility is writing a check to the leasing company to cover the payroll, taxes, benefits and administrative fees. The PEO does the rest.
2. Hiring staff from an offshore location, such as in the Philippines, saves you money.
When we say savings, we mean half or even one-fourth of the cost you would have spent on hiring someone with the same awesome skills from the United States. Many business owners and managers choose the less costly option when the quality of work is the same between onshore and offshore staff.
A huge gap in pricing makes a difference. Imagine what you can do with the extra money you’ll save. You may invest that into another business venture, or you may finally start planning your dream vacation with your family.
3. Staff leasing gives you the opportunity to hire the best people but takes away the headache of disciplining and firing errant employees.
Staff leasing operates as part of an actively managed services model of outsourcing. You have more control over the kinds of people you hire or fire.
Even if new employees are hired, the client company can participate in the selection process, but the employees will officially belong to the leasing company.
Some outsourcing companies offer shared services where a client takes advantage of getting a complete management team for a lower cost. For instance, a client can hire an HR manager, an accountant, and a legal consultant from a single provider.
4. Staff leasing allows you to concentrate on core business activities that bring you greater value.
Because your outsourced staff work in an offshore location, the overhead costs you’d normally spend in the United States will be slashed in half. Moreover, your outsourcing partner helps you mitigate the risk and liability issues with Human Resources.
5. Staff leasing allows you to hire a small team of professionals to augment your onshore staff.
You may want to hire a couple of staff or just a small team. Aside from the fact that it’s easier for you to manage a few people from an offshore worksite, it’s also advantageous for you tax-wise.
According to the 1986 Tax Reform Act, “if leased employees constitute more than 20 percent of an employer’s total workforce, they must be counted as employees for purposes of meeting ERISA’s qualification requirements.”
And so, you’ll have a better pension plan designed for your executives and managers under the Employee Retirement Income Security Act (ERISA).
It does not mean, however, that employees hired by the outsourcing company are left with nothing once they retire. On the contrary, they are paid handsomely for their services and they’ll have more money set aside for their retirement. Many outsourcing companies have also begun providing HMO benefits not only for their employees but also for their families.
An experienced and knowledgeable business partner makes a difference. It’s best to have an outsourcing partner that can handle your staff leasing needs with expertise and calm. For those who are new to outsourcing, it can seem daunting and overwhelming. But, having a partner with a smart staffing system in place can make your life easier.