Employee Leasing vs P.E.O.

What is a PEO?

What is the difference between employee leasing, and a PEO? Nothing, and everything.  First let’s identify what kind of company you are working with. A PEO, or Professional Employer Organization is a specially licensed company that enters into a co-employer relationship with a client, whereas an employment service provides the labor to the work site for a predetermined period.  A Co-employment relationship means that both the PEO, and client have responsibilities to the employee. The client is responsible for the hiring, training, and daily duties of the employee. While the PEO becomes the employer of record and is responsible for things like tax withholding and reporting, and paycheck preparation.  The PEO may also manage employee benefits like health insurance and retirement plans. The co-employment arrangement is referred to as employee leasing by many state licensing agencies. The confusion started when the term “employee leasing” started being used to describe Temporary employment, and staffing agencies. Most states still separate the two types of companies into one of two categories, professional employer organizations, PEOs, and employment agencies.

Employee Leasing vs. Temporary Employee

In the case of temporary agencies, the agency would send an employee to a job site for a short period of time or for a specific job. The client does not select the employee for the job.  When the assignment or job is complete the employee reports back to the temporary agency to be sent out again. This is not a co-employment arrangement because only the agency has responsibilities for the employee.  The temporary employee reports only to the employment agency. You can think of it in a different way. If the PEO, and client stop doing business together, the employees would continue to work for the client at their worksite.  It would be very unlikely that anything would change for the employee on day to day basis. If an employment agency and client stop doing business together that employee would be reassigned to a different worksite by the employment agency. 

PEO vs. Temporary Agency

The real question should be “what is the difference between a PEO, and a temporary agency?”.  While these companies may seem similar they will not provide the same services. The co-employer relationship is the most important difference between the two types of services.  When both the PEO, and the client have responsibilities to the employee they are co-employers. If the employment agency is providing the labor, and training then there is no co-employment relationship.  

PEO Advantages

How can using a PEO help your business?  By outsourcing your payroll, and human resource headaches, you free up your more of your valuable time to focus on what makes you money.  Payroll does not make you money, it costs you time. In addition once you start using a PEO, and enter in to a co-employment relationship, you gain added peace of mind.  Don’t be in the employment business, be in your business, and trust the professionals at Employ/Ease to help take the worry out of being in business. Call us today to schedule an appointment to discuss your business service needs at (435) 674-0478