Why Buy a Staff When You Can Lease One? : Local Firm Claims Leadership in Fast-Growing Field Handling Workers, But Faces New Rivals

If you work for a small company, Marvin R. Selter, or someone like him, may someday be your boss.

Selter, the CEO of Van Nuys-based National Staff Network, runs one of hundreds of firms in the fast-growing business of employee leasing. The idea is simple: Rather than wrestle with tax forms and other payroll hassles on their own, companies unload their workers to a staff-leasing company, which then leases them back for a fee.

The practice has been around for decades, but since the early ‘80s it’s been catching on in a big way. The leasing industry has been growing at 30% per year recently and currently 1.6 million employees nationwide are working under lease agreements, according to the National Assn. of Professional Employer Organizations, which represents 230 leasing firms.

National Staff Network is viewed as a forerunner in the industry, if not quite a leader. Selter, 66, a former business consultant in the medical industry, began experimenting with employee leasing in the early 1970s, and National Staff Network grew out of a company he established in 1972. But today, it faces a host of new, large competitors.

Leased workers generally occupy permanent positions. Unlike temporary firms, which recruit their own workers and then provide them for temporary positions, most leasing companies do not hire their own workers, but rather solicit employers to transfer their work forces on paper to a leasing company. Executives in both businesses say the two do not compete directly. Temporaries are used for vacation replacements and special projects, while leased employees are longer-term, and continue to be trained and supervised by the company that leases them.

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National Staff Network is privately held by Selter, who is notoriously secretive about its operations--he steadfastly refuses to discuss the company’s revenues or earnings. He contends he created the concept of leasing, a claim that others in the industry contest.

National Staff Network’s leased staff includes workers in 26 states, with many in the insurance, medical and real estate fields, Selter said. About half are clerical workers. The others are professional or blue collar. He said their salaries range from $16,000 per year to over $100,000.

Selter contends that National Staff Network is one of the top five staff-leasing companies in the country, another claim that elicits skepticism from competitors. “I really don’t think they are that large. . . . We all keep track of each other,” said Buddy LeTourneau, CEO of Staff Leasing Group in Bradenton, Fla. Selter also claims his company has grown steadily. The number of leased workers in its employ shot up 22% last year, he said.

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Like most staff-leasing firms, typical customers of National Staff Network are firms with only five to 15 employees, although the company serves clients with up to 200 employees, Selter said.

For small firms, staff leasing offers freedom from burdensome paperwork, and better economies of scale when it comes to obtaining benefits for their employees.

“Negotiating a good health insurance plan is very time-consuming and very costly,” said Millie Courtway, partner in Unitco Management Co., a Sherman Oaks property-management firm. “The bigger you are, the better package you can get.”

Courtway’s firm has leased all 10 of its office employees from National Staff Network since 1987. Leasing meant the employees could get better benefits, she said. Although the office staff had health benefits before, they did not have retirement plans. Now they do.

And Courtway says her own job is simpler. Rather than deal with payroll on her own, she simply writes periodic checks to National Staff Network. Moreover, when one employee appeared to have a drug problem, Courtway had somewhere to turn. National Staff Network provided counseling. “It made it easy for me,” she said.

Courtway said doing her own payroll, taxes, insurance and benefits cost her 50% over the cost of the salaries she was paying out. With leasing, the excess cost is about 30%, she said.

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Leasing advocates such as Selter say that leasing also promises a better world for employees. A leased employee may have access to big-business services that are often denied to workers in small businesses, such as direct deposit, 401(k) retirement plans and life insurance.

Tawny Wattles, a leased employee and bookkeeper at Unitco, said that at first being leased “felt awkward.” But she said she likes the benefits, and finds other aspects of her job identical to being employed directly.

But it’s also the case that many leased employees are provided with bare-bones packages hardly better than those typically provided to temporary workers.

About 40% of the leased employees of National Staff Network, the company concedes, have no health benefits included in their compensation.

Florida’s Staff Leasing Group, one of the nation’s largest employee-leasing concerns, offers health benefits as part of its compensation to only about a quarter of its 43,000 leased employees, according to CEO LeTourneau.

One National Staff Network employee who does not have health benefits remarked that, in that sense, being a temp is better than being leased, since temporary workers at least have the hope of someday being hired permanently, and with benefits.

Many employee-leasing companies say they are moving toward providing more extensive benefits and services to remain competitive.

This trend has favored bigger companies, and a host of consolidations are now afoot. Notable are efforts by large temporary-employment companies to expand into leasing.

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For instance, in January, temp giant Kelly Services Inc., based in Troy, Mich., acquired Woodland Hills-based Your Staff Inc., a leasing firm that claims to be among the state’s largest, with about 5,500 employees. Kelly’s aim is to expand into the employee-leasing business.

“Small (leasing) firms are going to have to merge and grow. They can’t make it on their own,” said Patty Bradberry, director of the Orange-based leasing firm Shaw & Shaw Inc. Shaw & Shaw is a newly created subsidiary of Volt Information Sciences Inc., a half-billion-dollar company in the directory-publishing and temporary-employment businesses, which now hopes to expand into employee leasing.

Where all this leaves National Staff Network is hard to say, since so little is known about its size. Staff Leasing Group’s LeTourneau said he doubts whether National Staff Network’s work force numbers more than a few thousand.

He also questioned its competitiveness, noting that many firms in the industry are growing at rates of 30% to 50%, much faster than the 22% National Staff Network said it grew last year.

Selter retorts that he’s selective about his clients, and added that Staff Leasing Group is probably inflating its own numbers.

Employee-leasing entrepreneurs are endlessly quarrelsome on the earth-shattering questions of who’s biggest, who really invented employee leasing and who founded the first industry organization.

Selter is a respected figure, but because of his secrecy and the pains he takes to distance himself from others in the industry, he’s viewed as a bit of a renegade, said T. Joe Willey, a San Bernardino industry consultant who has written books on leasing. “I don’t trust anything they (National Staff Network) say,” he added.

The industry must also contend with laws in 12 states that regulate employee leasing, including Florida, which goes so far as to fingerprint employee-leasing firm executives.

For his part, Selter rails against so-called “blue-suede shoe” companies whose lax ethics have given employee leasing a bad name.

He says it’s the reason for his secrecy and aloofness from the masses of employee-leasing companies.

He doesn’t want to compete with firms that make false claims and doesn’t even belong to the main industry association, he said.

“I created this industry. I believe in this industry,” he declared. “If people only would be honest . . . it could go through the roof.”