Employee Leasing- Meaning, Positives, Negatives, When to Use
The success of a project depends a lot on the employees working on it. As such, you must have the best workers on a particular project. Here, depending on the work's complexity, sometimes, your regular employees may not suit well for a specific project.
Here, you must acknowledge the lack of a competent workforce and look for hiring alternatives. In this case, getting new hires for a single project can get costly at times. After all, once the project is over, those designated workers remain untasked and sent to the bench. In this case, employee leasing is a life-saver.
What is Employee Leasing?
In plain English, employee leasing is the lending of a worker for a specific time frame.
These are workers of a third-party organization that you can call upon for a certain period. They are trained for individual client companies (you) to do a particular work. You can think of these as gig workers employed by a third-party employee leasing company.
You can employ their services for a particular project and end their contract after completion of the work.
Positives of Employee Leasing
1. Low HR Management Work
You can avoid a lot of management work while working with leased employees. It means not having to look for job satisfaction, employee engagement levels, etc. Having no burden of these aspects can free up an HR department to a vast extent. Doing so allows them to concentrate on the more important things.
Leasing is particularly beneficial for small businesses that don't have much workforce in their HR department.
2. Low Risk
Since these workers are third-party employees, they are mostly looked after by the leasing and professional employer organizations (PEO). It means the risk management involved with hiring new employees is substantially low.
The PEO's take care of the legal requirements while hiring, employee health and risks, etc. It means you operate with a free mind, evasive of most of the risks.
3. Saves Hiring Costs
Hiring costs a lot of money and time. These can be money spent on the vacancy advertisement, interviewing and shortlisting candidates, making the final hire, doing the background checks, etc. Hiring leased workers cut out all these costs as they are already looked after by the leasing companies.
4. Control of the Work
Though these are third-party employees managed by other companies, you still have control over them for the work. This means you're the reporting manager who will oversee the entire work as you see fit. It gives you the control you need to get the job done well.
5. Expert Knowledge on Call
The biggest advantage of these workers is having expert help on call whenever you require it. It gives you the benefit of taking any project head-on whenever needed.
These were some of the advantages of employee leasing.
Like in every aspect, employee leasing too has some disadvantages as well. Let's have a quick look at these in brief.
Negatives of Employee Leasing
1. Commitment Issues
Since these are leased employees, they do lack commitment at times. It is because they know that there is no future with your company. This sense of indifference does bring out a certain lack of utmost commitment towards the work compared to your in-house workers.
2. Lack of loyalty and motivation
Here, because these employees are part-time workers, they lack the desired employee loyalty and motivational levels. You will encounter these workers who just want to do the job and move on to the next client. It does diminish their dedication and motivation.
It may also result in some sensitive details that you taught them to make their way to other companies. In issues like these, you need to be careful.
3. Dependency on third-party
This concept solely depends on the competency of the PEO's to deliver the best results. It means your dependency on these third parties is at its peak, and any unavailability of their services can cost you dearly.
4. The cost of leasing
If a PEO delivers you the workforce, you have to pay for the labor no matter the results. It means that even if the worker is not useful or efficient enough, you still have to bear the workers' compensation. This becomes rather inconvenient if you don't get the desired results and pay the cost.
5. Lack of interpersonal relationships
These were some of the disadvantages of employee leasing.
Now, to the main question, is it a viable option for you?
When To Use Employee Leasing?
The use of these employees depends on particular situations. As such, you can consider using employee leasing in the following scenarios.
- If you have a one-off project, it will be beneficial and cost-effective to use employee leasing.
- Employee leasing is beneficial for startups with a low budget. It is on a stage of trying out the different markets for their best fit.
- Suppose you're operating with a sub-par human resources department with trouble getting new hires. In that case, leasing can be an option.
- In specific industries like construction and manufacturing, wherein you need to produce different products with diverse expertise, employee leasing can be beneficial.
- Companies with less than an adequate amount of infrastructure can benefit a lot from leasing workers as well. You don't need to have proper hiring strategies, resources to do background checks, etc.
These were a few of the situations where employee leasing is effective.
In today's corporate world, where hiring and firing are pretty standard, employee leasing can be beneficial. It removes many complications, gives you control, and turns out to be very cost-effective. So, whenever the opportunity arises, you should make fair use of it.
To help you do so, we hope this piece gave you a good idea of which scenarios you can use it.