PEO and Employee Leasing: Know the Difference

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PEO and Employee leasing are two aspects of business that help in growth. PEO can manage employees, whereas Employee leasing provides employees to the business for a time period.  The confusion is about how to differentiate between Employment leasing and PEO. With the rising and growing business work culture, PEO Employee leasing has been into confusion with different terms. Most companies have adopted the PEO and Leased employees with the new work environments.

Despite the factor, employee leasing PEO  is helping the business modules to work with different backgrounds. Perhaps the confusion still remains as employee leasing and PEO are the same. With this gap, understanding PEO and Employee Leasing is the best way to signify it and use it for the seamless development of the business.

Understanding PEO Employee Leasing

PEO employee leasing is accepted by most employers for better management of the employee who is on temporary terms or on permanent terms. The Professional Employer Organisation (PEO) operates as a co-employer by managing the employee based on the terms and conditions of the client/employer. The PEO stands out to manage the employee to ensure the client is more focused on revenue and work growth.

Based on the project, the employer hires a temporary employee for a specific period of time, where the employee is appointed on employee leasing. If the employer is associated with a PEO, the employee is managed as PEO employee leasing.

However, there has been a lot of misunderstanding and confusion between the PEO and Leased Employees. Also, how are they different and similar. This article comes with all the necessary details and information about Employee Leasing vs. PEO and how it can be implemented for business purposes.

Difference Between PEO and Employee Leasing

PEO Employee leasing is often misunderstood as co-employment and employee leasing; however, both differ on another level. “What is the difference between employee leasing and a PEO?” is a very common question that people look forward to. The Professional Employer Organization (PEO) provides a number of possibilities for the client and employee leasing options. Here, the difference between PEO and Employee leasing is mentioned for a better understanding.

Professional Employer OrganizationEmployee Leasing
  • PEO Services is the allocation and sharing of employment of an organization with another employer. This correlates the organization with another employer’s employee and so creates co-employment.
  • PEO primarily handles the management of the employee based on various aspects such as compensation, liability management, payroll, and benefits. PEO ensures that the client can focus on the operations, employee hiring, and optimum growth.
  • It does not associate with the hiring processes; the employees will either be from the client organization or be hired by the client organization.
  • Employee leasing is the temporary arrangement between the client and the employee for a particular project.
  • Employee leasing ensures that the employee is hired for that particular period of time and given all the benefits and compensation as per the requirements. This is significantly helpful in business when the client is looking for particular project-based employees.
  • This is mainly put into action when the client wants to hire and manage employees for a period of time based on the duration of the project.

PEO and Employee leasing are significantly different from each other, as elaborated above. Employee leasing is a part of PEO, to manage the leased employees for a particular time period according to the client. However, the client has to hire that employee and manage the day-to-day work and the compensational benefits of the employees. Employee Leasing PEO manages the employee based on the demand of the clients.

PEO and Employee Leasing Agreements: How Similar are They?

Both the PEO and Employee Leasing have different aspects of it. A PEO agreement is a document that legally binds with both the client/employer and PEO. Once signed, the PEO organization is enforced as the co-employer based on the terms and conditions. On the other hand, upon signing the Employee leasing, the employer is provided with temporary employees for a certain period of time.

PEO agreement provides the right to manage the employee as a co-employer; oftentimes, it is misunderstood to be employee leasing. Both the agreements have different aspects of purpose. The employee leasing agreement is given for a specific period of time, based on the project. However, the PEO agreement is mainly on the mutual acceptance of the time period to get the service.

PEO manages the employees, be it temporary or permanent, for payroll, benefits, and compensation, and also as per the agreement by the client. Employee leasing is just a temporary agreement based on the project period for the employer/client.

PEO Agreements: What not to miss

It is important for the employee to understand the significance of the PEO Agreement. The PEO agreement offers the employees a co-employer for their management. There are specific important factors that the client should be aware of while signing the PEO agreement.

How are PEO and Temporary Agreements Different?

PEO and Temporary agreements are different from each other as the PEO is enforced by the employer to manage the employee on terms and conditions. On the other hand, the temporary employee is authorized to work for the employer within a period of time. In general, the temporary employee is associated with the PEO based on the terms of the employer.

While managing the temporary employee, the PEO serves as a Co-Employment. The employer/client sets the terms and conditions of employment management to the PEO. Once signed the agreement by both parties, PEO gets the authority to be the co-employer for the employees.

PEO Co-Employment Process: Hiring and Termination of the Leased Employee

Even if the employer is associated with a PEO, the hiring and termination process are to be handled by the employer. There can be a misunderstanding if the PEO services offer hiring and termination of the employees. Most of the PEO services offer management of the employee based on payroll, compensation, benefits, and liabilities.

Therefore, hiring and termination, as well as the day-to-day tasks of the employee, are managed by the employer. Similarly, the process is the same for leased employees, the ones who are appointed for a period of time. The PEO also manages employees temporarily based on the terms and conditions of the employer/client.

PEO vs. Leased Employee: Ways to Differentiate

The above sections have mentioned all the aspects of both PEO and Employee Leasing. As the PEO is not associated with any hiring and termination process, there are other benefits to get from a PEO. PEO can majorly provide the below-mentioned with respect to terms and conditions.

  • Payroll: PEO acts as the co-employer and handles the payroll for the employees of the client; both permanent and leased employees.
  • Benefits: Managing the benefits, mainly the statutory benefits that the employer must provide to the employee. Also, the benefits can differ based on the mutual agreement between employee and employer.
  • Compensation: This is to ensure that the employee, be a permanent or temporary one gets all the compensational benefits from the employer via co-employer.
  • Employee Self Service: This is a self-service from the employee’s side to ensure that the individual applies for reimbursements and bonuses. However, in some cases, it is managed by the PEO and mainly for leased employees.
  • Liability Management: This is to ensure that the flow of the finance is measured to the employees are done significantly.

In some cases, also the PEO is often misunderstood as Employee Leasing Company. The difference is that an Employee leasing company will help in hiring before the employer signs the agreement, whereas the PEO starts action after signing the agreement. When an organization offers PEO and employee leasing both, it is a PEO employee leasing company.

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