Employee Leasing: A New Trend in Personnel Services
It has worked well with offices, cars and furniture, and the 1980s looks like a growth era for leasing yet another workplace commodity--people.
Eager to get out from under an increasingly large volume of required forms, regulations and document-keeping, a growing number of companies are closing their personnel offices and turning over the keys to an employee leasing concern.
In leasing its workers, a company basically transfers its personnel functions to the outside concern, which then handles the paper work, payroll, benefit plans and other mundane administrative tasks. Workers actually become employees of the leasing concern but continue to do their job exactly as before. Normally, the company retains the right to hire and fire, although the leasing concern often serves as a buffer between employees and the company.
Particularly for small firms, leasing companies say they can get better benefit packages for employees because they can purchase these plans in bulk, and insurance companies often are reluctant to establish plans for employers of less than 100 workers.
‘Reduced Rate’
For small and medium-size concerns, “a leasing company can provide better and more comprehensive benefits at a reduced rate,” said Marcene Murrel, manager of the Orange County office of California Staff Management Inc.
According to the National Staff Leasing Assn., a trade organization for the country’s 400 or so leasing companies, there are 250,000 to 300,000 leased employees nationwide, 10 times the number just two years ago.
Figures are not available on just how many of those employees are in California but experts agree that leasing activity is vigorous in Southern California and particularly intense in Orange County because of the preponderance of small businesses, many of which are too small even to have a personnel officer on staff to handle the ever-increasing paper work.
Because Orange County is perceived as being particularly ripe for expansion of employee leasing, at least two out-of-town leasing companies are planning on joining the half-dozen companies already here.
Tri-Staff Inc. of Glendale and EmStaff Cos. of Dallas, one of the nation’s largest employee-leasing concerns, plan to open offices soon in the county. “There’s a lot of growth to be had out there,” said Mark Ashcraft, operations manager for EmStaff.
For a fee of 5% to 7% of the payroll, leasing companies promise relief from “the terrible headache of all that paper work.”
Freedom from such pains appealed to Jerry Kristensen, owner of Enterprise Electric Inc. of Anaheim, who opted to lease his employees five years ago.
Kristensen regards leasing as “a better way to do business” because it leaves a company’s officers free to do what they do best, which in his case is operating a retail and service electric business.
A Buena Park dental assistant, Julie Ladjevic, said dealing with a leasing company for pay and benefits is simpler and leaves the dentist, her boss, free to concentrate on repairing teeth.
Leasing experts say the bulk of growth in recent years has come through small medical and advanced technology companies because the principals in these companies are least inclined to deal with the ever-expanding personnel function.
For the 1980s and beyond, employee-leasing companies expect leasing to grow rapidly with small and large companies and enterprises of every industrial category.
Caution Advised
Despite the advantages, leasing experts and employers who have gone through several leasing concerns advise managers to do more than peek under the hood when choosing a leasing concern.
A number of companies apparently just kicked the tires of Tustin-based Contract Staffing of America and Long Beach-based Paystaff, both big leasing companies a few years ago.
Neither is now. Contract Staffing filed for protection from its creditors last year and Paystaff closed in 1984, leaving about 70 companies responsible for thousands of dollars in unpaid benefits.
Sometimes it is the leasing company that gets hurt, however. “There is a natural, built-in accounts-receiveable problem,” said Dave Thomsen, owner of Thomsen Cos. of Newport Beach. Thomsen, whose company leases employees and provides other business services, said that when a company gets into financial difficulty, it often neglects to apprise the leasing company, which may then complete a payroll or two before realizing that its funds are not going to arrive.
