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Employee leasing has been around for about 15
years. The basic concept is that employees
don’t technically belong to you. They belong
to the employee leasing firm, which handles
payroll, benefits, taxes and worker’s
compensation insurance. You pay the leasing firm
the gross cost of payroll, benefits and taxes plus
a percentage of that gross amount. Depending on
your number of employees and the size of your
payroll, that percentage can range anywhere from 2
or 3 percent to more than 5 percent.
If you incur the higher percentage cost, a
little number crunching will show that the cost of
employee leasing can be fairly steep for a small
business, especially if you’re simply looking
to get rid of payroll administration headaches. If,
on the other hand, you’ve encountered some
nasty worker’s compensation claims and
employee leasing offers a better insurance rate,
you could save money. Before making a final
decision, compare your current costs to employee
leasing costs. Then, determine if the services
being offered are worth the expense involved.
If you’re just trying to eliminate the
hassles of payroll checks, tax calculations, tax
deposits, quarterly 941 returns and year-end
reports, consider outsourcing those tasks to a
payroll processing firm. Some processors operate
regionally. Others, such as Paychex and Automatic
Data Processing, are nationwide. These professional
services handle all aspects of payroll
administration for much less than the cost of
employee leasing. Payroll processors welcome small
businesses that have only a few employees and their
services are surprisingly affordable.
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