What is the difference between employee leasing and a PEO arrangement?
A PEO or co-employment arrangement involves all or a significant number of the client’s existing work site employees in a long-term, non-project related, employment relationship. The PEO brings services to the client, including the management of human resources, employee benefits, payroll and worker’s compensation. The PEO assumes employer responsibility for employment tax, benefit plans and other human resource purposes. Through the use of a PEO relationship, client companies make a long-term investment in their workers, because in most cases, the PEO provides access to health insurance, retirement savings plans, and other critical employee benefits for their work site employees. If a PEO relationship is terminated, the co-employees will cease to work for the PEO but will continue as employees of the client. By comparison, a leasing or staffing service supplies new workers on a temporary or project-specific basis. These leased employees return to the staffing service for reassignment
Although many still view these two staffing arrangements as the same, they are, in fact, quite different. The term “employee leasing” means different things to different people and has been, and continues to be, used in many diverse contexts. The confusion surrounding this terminology is one reason NAPEO has been active in defining and distinguishing the PEO concept; however, many commentators, regulators, and statutes use the terms interchangeably. The genesis of employee leasing envisioned a transfer of certain responsibilities from a client to the employee leasing company and spawned the concept of “fire, hire, and lease back,” which does not occur in a PEO arrangement. Some would define employee leasing as a supplemental, temporary employment arrangement where one or more workers are assigned to a customer for a fixed period of time, often for a specific project. This concept creates little long-term equity or investment between the worker and customer (much like leasing a car for
