Employee leasing isn’t a new term for the HR fraternity. For the uninitiated, it is a business arrangement wherein a company outsources certain HR functions and responsibilities to a third party, which is commonly known as professional employer organisation or PEO services.
“For critical projects, at times, organisations put together a squad of employees leased from different sources within the organisation and then try to deliver the organisation’s agenda.”
Amit Sharma, head – HR, Zee Entertainment
This PEO assumes legal and administrative control over the company’s employees, and certain employer responsibilities such as payroll, benefits administration, and compliance with federal and state employment laws.
Amit Sharma, head – HR, Zee Entertainment, is of the opinion that in the near future, the employee-leasing model will be increasingly used.
“It’s simply because at the time of need, it is often difficult to find a subject matter expert within the organisation”. In such situations, the organisation can quickly hire a gig worker on a temporary basis, to come and finish the job and move on,” he says.
Mahipal Nair, managing director, VP/ head of HR, Tellix, who calls it a liquid workforce, shares that the popularity of this system lies in the fact that it’s easy to kind of get in and get out.
“Any company in the formation stage can make best use of employee leasing to keep their costs under control,” he opines.
“Any company in the formation stage can make best use of employee leasing to keep their costs under control,”
Mahipal Nair, MD, VP, head HR, Tellix
According to Ravi Mishra, senior VP-HR, Aditya Birla Group, “Globally, even the critical ones, are being leased out. In India, this practice is going to increase with time.”
Sharma of ZEE, says, “For critical projects, at times, organisations put together a squad of employees leased from different sources within the organisation and then try to deliver the organisation’s agenda. Such squads have become very common in the typical new-age organisations.”
However, the cost that an organisation incurs in doing so, is not viewed as an individual cost, it is always viewed as a project cost. Therefore, the time invested by the HR team or the finance team or anyone else is not as high as compared to a full-time employee at times.
However, one has to be cautious on certain fronts when dealing with employee leasing.
While PEOs can save companies money in some areas, the cost of using their services can be higher than handling employment tasks in-house.
It can be more expensive than other forms of outsourcing, as PEOs typically charge fees for their services.
“Globally, even the critical ones, are being leased out. In India, this practice is going to increase with time.”
Ravi Mishra, Sr. VP-HR, advanced materials business, Aditya Birla Group
Many companies have a hiring process which is very complex and time consuming. Such organisations depend on liquid workforce to fast track hiring. However, despite being a liquid resource, they fulfil the need of a full time worker. In the long run it can turn out to be expensive.
Besides it also means depriving the hired resource of the benefits enjoyed by a regular employee. “This is an unfair practice,” opines Nair.
Limited control and flexibility
Some companies may feel that they lose control over their employees while using a PEO, making it more difficult to manage the workforce. Companies may have less control over the day-to-day management of their employees when using a PEO. Sometimes, these PEOs may be unable to accommodate a company’s unique needs or requirements.
Mishra explains one of the main drawbacks of outsourcing employees. “It is a very calculative and statistical decision for any company to decide where and where not to use the services; and to make sure that the services do not impact the quality, privacy and confidentiality of an organisation’s processes, design and research.”
Complexity and lack of transparency
The process and agreements pertaining to employee leasing can be complex and may require legal and HR expertise to navigate. Some companies may also have concerns over the lack of visibility into the PEO’s operations and processes.
Whether the company is new or established, if the work is critical and the cost is uncertain, employee leasing is a sensible option.