Employee Leasing: Definition, Pros & Cons

Is your organisation going through a difficult time now, or do you want to meet some new goals set by the management, but are unsure how you would be able to achieve them? Is the reason for this confusion the fact that you are overwhelmed by HR tasks, or do you not know how to achieve them with the current in-house team? Employee leasing is a popular term in the HR space in India. It could be the solution you are looking for. Let us now define employee leasing.

What Is Employee Leasing?

Employee leasing, as defined in HRM, is when an HR consulting company hires temporary or project-based help on behalf of an organisation and includes them on their payroll and pays them their salaries and benefits after discussions with the organisation.

What are the advantages of Employee Leasing?

Employee leasing is becoming immensely popular with several top organisations, and they have saved costs and reduced time to hire when working with the right staffing agencies. Employee leasing has several benefits:

1. No direct relationship with employees

The organisation goes through an HR consultancy that interacts with the employees, providing the support they need at the right times. Providing support to employees can be a stressful routine if not done by the right people.

2. Reduce your HR workload

All salaries and benefits would be handled by the third-party HR service provider. This will reduce the workload of the HR department in your company.

3. Get the best hires

An HR consultancy will get you the best hires. This is because of the network and the hiring resources that they already have.

4. Satisfy a temporary work requirement

A temporary work requirement can be satisfied by hiring on a third party’s payroll. They will also handle the training and development of the candidates to make them suitable for work.

5. Negotiate a lower salary

Employing an agency that leases employees to you also allows you to negotiate a lower salary for the candidates. They needn’t be paid the compensation you offer your regular employees.

6. Get more benefits for each employee

On the other hand, due to the large size of employee leasing companies, they may be able to negotiate more benefits from service providers for the employees they lease out to you.

7. Remove complex paperwork

There are a lot of regulatory and compliance requirements, which involve getting a lot of paperwork done when you have employees on your payroll. By outsourcing this, you can focus more on your organisational goals.

What are the Disadvantages of Employee Leasing?

There are a few disadvantages to employee leasing, most or all of which can be overcome by employing a stellar HR consulting company like Alp Consulting. Some of the disadvantages of employee leasing are:

1. Lack of employee relationships

There is a lack of proper relationships between the actual employer and the leased employee. This could create confusion on certain matters when leased employees consider the information that is given on portals to actual employees. A proficient HR consulting company can find ways around this by being more transparent with the leased employees.

2. Lack of motivation

Employees are not always tuned in to the job responsibilities and there could be a lack of motivation. The only way to overcome this is by going through an HR consulting company that is reputable and knows how to manage employee productivity well.

3. Lack of loyalty

Employees may not be loyal to the parent company. They may be looking to jump ship at any moment, unless the HR consulting company they are working with leaves no stone unturned in providing benefits to their employees. This can ensure sustained loyalty from the employees.

4. Cost of employee leasing

You need to pay the employee leasing company a due, and though this can be seen as a disadvantage, it is balanced by the reduced cost of hiring and hence lower total overhead.

Employee Leasing vs. PEO Services

We have already seen what employee leasing services are and how leased employees work. Let us now look at PEO or Professional Employer Organisation. A PEO shares some co-employer responsibilities with the client. How it differs from employee leasing is that the original relationship of the employee and the employer is preserved even after the contract with the PEO is severed.

This means that the employee can continue to work with the employer on the same terms, and they need not look for another job.  One major downside is the legal liability that you must fulfil. Even though a PEO will look after regulatory and compliance issues, it may not take care of legal liabilities. Typically, PEOs may also cost more than employee leasing.

Employee Leasing vs. Joint Employment

Under joint employment, which can be of two types, employees work for two different entities at the same time.

All forms of staffing and contracting roles come under vertical joint employment because here the person may be working on the payroll of the staffing company, but is an employee of the client.

There’s also a horizontal kind of joint employment where the employee’s services are shared by two business entities that work for the same organisation.

When to Use Employee Leasing

There are many benefits to employee leasing, as we have seen before. So, should you lease employees, and how can it help? Employee leasing is useful when you:

1. Want to hire people for a project on a temporary or contract basis.
2. Do not want to hire people directly on the company payroll.
3. Do not have an HR team in-house that can handle the hiring.
4. Want the best people onboarded in the shortest time possible.

How to Find the Best Employee Leasing Service Provider?

Before you can find the best employee leasing service provider, there are some questions that you must ask. Some of these questions are:

1. Is your business a start-up, and would you like support specifically for this business model?
2. Is your business heavily regulated, and do you need someone who can manage compliance for you?
3. How low can you keep the expenses you will incur from HR if you go with an XYZ employee leasing company?
4. How proactive is the employee leasing company, and what are the interactions with their consultants like?
5. What is the number of employees you would like to lease, and how suitable are they for that number?
6. What is the reputation of the employee leasing company? Are there any reviews on how good they are?
7. Do they also manage tax deductions when leasing employees?

By answering these questions, you can determine which employee leasing service provider is best for you.

Where the Search Ends and Why

The search for the best employee leasing service provider ends with Alp Consulting. In addition to significantly reducing the cost of a new hire and having a system of great transparency and support to every employee on its payroll, Alp Consulting also handles the regulatory headaches for you. Alp Consulting also tracks employee productivity and satisfaction, keeping you always informed of any change. Looking for other HR solutions like recruitment? That is possible as well. Talk to us today for more information.

Frequently Asked Questions

1. What is an employee leasing company?

An employee leasing company is an HR consulting services company that provides employee leasing services to its clients.

2. What are examples of employee leasing?

Examples of employee leasing are hiring for a project through a staffing agency, virtual staffing to accommodate more remote workers, etc.

3. What is the difference between employee leasing and outsourcing?

Employee leasing is the procurement of employees for a project in your company. HR Outsourcing involves, in addition to employee leasing, hiring for permanent roles as well.

4. What is a leased employee?

An employee who is leased to a client on the basis of a contract is referred to as a leased employee. Employee leasing is generally done for temporary roles, such as those for a project in a company.

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Rajkumar Shanmugam

Head of HR

Rajkumar Shanmugam is the Head of HR at ALP Consulting, bringing over 19 years of comprehensive HR leadership experience across India and international markets. His expertise spans talent acquisition, employee relations, performance management, compliance, and HR transformation. Rajkumar has a proven track record of driving people-centric initiatives, enhancing workplace culture, and aligning HR strategy with business goals. With extensive experience in US staffing operations and global mobility, he continues to lead organizational excellence through innovation and employee engagement.