Short answer: No. Please don’t let this very common PEO myth stifle your business growth and success. 

 

One common misconception about professional employer organizations is that PEOs ‘own a business’s employees’ or ‘have total control over hiring and terminating employees.’ In reality, the business owner is fully in charge of who is onboarded and terminated. Unlike a staffing agency (where employee leasing may occur) our HR professionals do not recruit talent for you.  

 

At a glance: A PEO partnership helps small to mid-size companies scale – while remaining compliant, offering competitive employee benefits, and retaining your team. Despite these benefits, some businesses shy away from a PEO partnership out of the fear that co-employment is the same as employee leasing. The first is becoming more common in the HR industry and the latter is staffing agency related. Keep reading to see how and why they differ, and why choosing a PEO could be just what your company needs to take things to the next level. 

 

Despite the growth within the PEO industry and its increased popularity for businesses looking to scale, there are still some misconceptions about what experts like us at Vested HR do. One myth always seems to come up as we meet with small businesses: a PEO relationship and employee leasing are the same. 

 

This confusion may be caused by the name of our client/partner relationship, AKA co-employment. But the two are very different. Let’s dive into what “co-employment” really means, how they differ, and why a PEO is not the same as an employee leasing/staffing agency with our team of HR experts! 

 

Two men having a conversation with coffee in the break room of a business or office.

What is Employee Leasing? 

 

First, employee leasing is a temporary employment arrangement. Basically, it’s the practice of staffing firms supplying new, temporary workers or contractors to a client. It is generally used for work on a specific project that has a clear start and end date; once the job is done the team member moves on to another client (because the staffing company is their actual employer).  

Although it’s related to your staff, it’s not completely related to your company’s HR or your compliance and payroll needs. If you picture a Ven diagram, we overlap, but there are a lot of things that a PEO specializes in that employee leasing/staffing doesn’t do.  

Employee leasing is more popular for businesses that need new workers for a set time frame, and don’t want the stress or HR overhead of bringing on these temporary or contract workers.  

 

What is Co-Employment? 

 

Now, where we differ is in a co-employment relationship, employees are employed by two different entities—the client and the PEO (in this case, Vested HR).  

 

Co-employment is a type of PEO agreement in which the client and the PEO share employer responsibilities. Unlike employee leasing, the client remains responsible for hiring their own employees and is the employer on record. 

However, the PEO becomes a co-employer and takes on certain HR functions, such as payroll and benefits administration. The client retains control over its employees’ daily work routine, the PEO shares some employer rights, compliance risk, responsibilities, and other HR administrative tasks. Including: 

 

  • Taking care of payroll and remitting wages and/or withholdings  
  • Issuing a W-2 form for compensation under our Employer Identification Number (EIN) 
  • Accurately reporting, collecting, and depositing pertinent employment taxes with local, state, and federal authorities. (Great for teams with staff in multiple states.)  

 

Additionally, co-employment can help businesses save money on HR costs. By sharing responsibilities with a PEO, businesses can reduce their administrative burdens and focus on growing their business. Meanwhile, you as the client retain control over the ‘hiring and firing’ of your team (we’ll give you tips for how to handle the conversation; all part of how we’re in(Vested) in you. With us, you can truly focus on the day-to-day operating decisions for the company. 

 

Two people shaking hands in partnership

Partnering with a PEO and Employee Leasing are not the Same 

The biggest difference: we don’t provide you with staff. We help you retain who you find.  

 

As we hear often, many think that a PEO relationship is the same as employee leasing. But truthfully, employee leasing and co-employment differ greatly. Again, a PEO like Vested HR does not provide staff for your company; this falls on you as the business owner, as do any other staff-related choices for the company. 

Of course, in addition to retention strategies, our HR experts help with recruitment, interview assistance, offer letters, onboarding, and more all the way to should they choose to leave the company down the road.  

Remember, these are your employees, not leased or temporary workers. This staff ends up having two employers: the company who hired them (that’s you) and the professional employer organization (us). We as the PEO become the company of record for HR, payroll, benefits, employment taxes, and other HR-related needs. 

 

In a PEO partnership, business owners do not lose control of hiring and firing decisions.

We’re partners and you retain control over the business.

Our PEO is there to manage the administrative side of HR functions. 

 

Why a PEO Maybe Right for Your Business 

Are you overwhelmed by HR and payroll? Is your company growing and adding new staff? Do you work in a few states or nationwide? Then a PEO may be the right fit to help you focus on other business goals while we take on the HR administrative tasks.  

As businesses look for ways to streamline their operations and improve efficiency, many have turned to professional employer organizations (PEOs) for help. We offer a range of HR services, including payroll management, benefits administration, and compliance assistance. When you partner with a PEO, you’ll be granted peace of mind that anything thrown your way will be handled by experienced professionals, saving you time and the headache of solving HR-related issues on your own. 

With the right PEO agreement in place, especially one that has Employer Services Assurance Corporation (ESAC) accreditation, ensures small business owners stay compliant with all current HR- and employment-related laws and regulations. Instead of having to stress about HR, company leaders can take off one of their many hats and focus their efforts on other activities that grow the business. 

Leave HR functions to the experts: Contact us for a free evaluation and see how we can help you scale. 

 

Read More > Is it the Right Time to Bring on PEO Support?  

 

Don’t Let This Common Misconception Stifle Your Business Growth 

 

It’s a very common misconception that PEO and employee leasing are the same, which often causes organizations – that need HR help – to dismiss a PEO solution and miss out on the benefits that it can offer as you grow.  

 

A nationally recognized PEO, like Vested HR, offers the following features to help you scale and retain your key staff: 

 

  • Unparalleled benefits administration and management, giving your small business Fortune 500-level benefit plan offerings 
  • Payroll management and tax planning services 
  • Comprehensive HR risk and compliance services 
  • Accredited HR guidance, available at any time 
  • Recruiting and onboarding services, but unlike employee leasing, we aren’t hiring anyone for you.  
  • A mobile-first HR support platform for you and your team 
  • And more 

Plus, a PEO partnership also offers small businesses access to improved health insurance and top-notch employee benefits, which can help with both recruiting and employee retention. Remember: employee leasing with a staffing agency and partnering with a PEO are not the same. A PEO allows business owners to maintain full control of the company and hire new employees as they see fit. 

 

Ready to outsource your HR responsibilities? We are in(Vested) in your growth! Contact our nationally recognized, locally known HR team for a comprehensive business evaluation today.