If you’re looking for ways to cut costs and maximize efficiency then you might have considered outsourcing. According to a study conducted by the Economic Policy Institute and the National Employment Law Project in 2021, approximately 4.5% of jobs in the United States are outsourced annually. Although the country created a record of 6.4 million new jobs domestically in 2021, it also sent around 300,000 jobs to foreign countries. This means that out of the total of 6.7 million jobs created in the US in 2021, about 95.5% of them were given to American workers while 4.5% were outsourced. Depending on your needs, you might consider outsourcing specific business processes, such as accounting, customer service, or IT support, or you may opt for leasing employees. But what is a leased employee and why is it beneficial for your company? In this article, we’ll explore the answers to these questions and more.

Table of Contents

What Is a Leased Employee?
Difference Between Staff Leasing and Other Outsourcing Services
Benefits of Leased Employees
Success Stories of Leased Employees
Legal Considerations for Leased Employees
Industry-Specific Considerations for Leased Employees

What Is a Leased Employee?

A leased employee is a worker who is hired by a third-party company and then leased to your business. This means that the outsourcing company is responsible for recruiting, hiring, and managing the employee, while your business has the right to oversee the employee’s work. This is also known as staff leasing. Essentially, the outsourcing company becomes the legal employer of the leased employees, while the client company retains control over their day-to-day tasks and responsibilities.

Leased employees can be a cost-effective solution for businesses that need temporary or seasonal workers, or for those that don’t want to commit to hiring full-time employees. They can also be useful for businesses that want to outsource certain tasks or functions, such as payroll, human resources, or IT.

Furthermore, leasing employees can bring significant advantages to small businesses, including relieving them from being the direct employer. In addition to cost savings, this arrangement can reduce the amount of HR administrative work and minimize employee-related issues. 

Difference Between Staff Leasing and Other Outsourcing Services

Overall, the main difference between staff leasing and other types of outsourcing services is the focus on personnel and the legal relationship between the client company, the outsourcing company, and the leased employees. Aside from staff leasing, here are some different types of outsourcing arrangements that a business may consider:

Business Process Outsourcing (BPO)

In a BPO arrangement, a business contracts with an outsourcing company to handle specific business processes, such as customer service, accounting, or human resources. The outsourcing company takes full responsibility for managing the outsourced processes.

Knowledge Process Outsourcing (KPO)

Similar to BPO, KPO involves outsourcing high-level knowledge-based processes, such as research and development, data analysis, or market research. 

Information Technology Outsourcing (ITO)

This type of outsourcing arrangement involves hiring an outsourcing company to provide IT services such as software development, technical support, or network administration.

Manufacturing Outsourcing

In this arrangement, a company outsources the manufacturing of its products to an external manufacturer, often located in a low-cost country.

Facilities Management Outsourcing

This involves outsourcing the management of a business’s facilities, such as cleaning, maintenance, and security services.

Logistics Outsourcing

This involves outsourcing logistics and supply chain management functions, such as transportation, warehousing, and inventory management.

These are just a few examples of outsourcing arrangements available to businesses. Each type of outsourcing arrangement has its own benefits and drawbacks, and the right choice will depend on the specific needs and goals of the business.

Benefits of Leased Employees

Cost Savings

One of the main benefits of leased employees is that they can help you save money. When you lease employees, you don’t have to worry about the costs of recruiting, hiring, and training new employees. The leasing company takes care of all of that, which can save you time and money. Additionally, because leased employees are not technically your employees, you don’t have to provide them with benefits like health insurance or paid time off.

Flexibility

Leased employees offer a high degree of flexibility, which can be beneficial for businesses that need to scale up or down quickly. For example, if you run a retail business that experiences a seasonal surge in sales, you can lease additional workers to handle the extra demand. Once the busy season is over, you can return the leased employees to the leasing company without any long-term commitments.

Reduced Liability

Because the leasing company is technically the employer of the leased employee, it assumes many of the legal and financial liabilities associated with employment. For example, if a leased employee files a lawsuit against your business, the leasing company will typically handle the legal defense and any potential settlements. This can help protect your business from costly lawsuits and legal fees.

Access to Specialized Skills

Leased employees can provide your business with access to specialized skills and expertise that you might not have in-house. For example, if you’re a small business owner who needs help with bookkeeping, you can lease an employee who specializes in accounting. This can help you save time and money by avoiding the need to hire a full-time accountant.

Improved Productivity

Leased employees are often highly motivated and productive, since they know that their performance is being evaluated by both the leasing company and your business. Additionally, because they’re not permanent employees, they may be more willing to work overtime or take on additional responsibilities, which can help you get more done in less time.

Success Stories of Leased Employees

Outsourcing leased employees has become an increasingly popular option for businesses looking to cut costs and increase flexibility. Here are a few success stories of well-known companies that have benefited from leasing employees:

Amazon

Amazon, the world’s largest online retailer, has used leased employees to meet the demands of the holiday season. During peak periods, Amazon leases employees from staffing companies to work in their fulfillment centers. This allows Amazon to easily adjust its workforce to meet demand without committing to long-term hires. The leased employees are highly skilled and motivated, and Amazon is able to increase productivity while keeping costs under control.

Microsoft

Microsoft, one of the world’s largest technology companies, has used leased employees to fill specialized positions. When Microsoft needed to quickly fill a position for a new project, they leased an employee with the required skills. The leased employee was highly skilled and motivated, and was able to integrate quickly into Microsoft’s workflow. This allowed Microsoft to start providing services to its clients without delay.

General Electric

General Electric, one of the world’s largest conglomerates, has used leased employees to reduce its legal and financial liability. GE leases employees from staffing companies to work in certain areas of its business. By doing so, GE is able to transfer some of the legal and financial liabilities to the leasing company. This gives GE peace of mind and allows them to focus on their core business.

In each of these success stories, outsourcing leased employees helped the businesses achieve their goals and stay competitive. By leasing employees, these companies were able to access specialized skills, increase flexibility, reduce liability, and save costs. They were also able to scale up or down quickly in response to changing market conditions.

Outsourcing leased employees can be a smart strategy for businesses looking to optimize their workforce and achieve their goals. Whether you’re a large company like Amazon, Microsoft, or General Electric, or a small business, leasing employees can provide you with a range of benefits that can help you stay competitive in today’s fast-paced business environment. So, if you’re considering outsourcing leased employees, be sure to evaluate your needs and find a leasing company that can provide you with the right talent and expertise.

Legal Considerations for Leased Employees

In the Philippines, leased employees are referred to as “contractual employees” or “outsourced employees”. The use of contractual employees has been a common practice in the country for many years, particularly in industries such as manufacturing, retail, and hospitality.

When it comes to legal considerations for leased employees in the Philippines, there are several laws and regulations that businesses must comply with. One of the most important laws is the Labor Code of the Philippines, which outlines the rights and protections of employees, including contractual employees.

Under the Labor Code, contractual employees must be provided with certain benefits, such as social security and health insurance. They are also entitled to receive minimum wage and benefits that are equal to regular employees who perform similar work. In addition, contractual employees cannot be terminated without just cause or due process.

Another important legal consideration for leased employees in the Philippines is compliance with the Department of Labor and Employment (DOLE) regulations. DOLE requires businesses that use contractual employees to submit a report detailing the number of contractual employees they have, the nature of the work they perform, and the duration of their employment.

Businesses must also ensure that they are in compliance with the requirements for issuing payslips, employment contracts, and other necessary documents for contractual employees. Failure to comply with these regulations can result in penalties, fines, and legal action.

In addition to the Labor Code and DOLE regulations, businesses that lease employees in the Philippines must also comply with other applicable laws and regulations, such as tax laws and data privacy laws.

Overall, the legal considerations for leased employees in the Philippines are similar to those in other countries. It is essential that businesses work with a reputable leasing company and consult with legal experts to ensure compliance with all applicable laws and regulations. By doing so, businesses can protect themselves from legal and financial risks and provide contractual employees with the necessary benefits and protections they are entitled to under the law.

Industry-specific Considerations for Leased Employees

In addition to general legal and regulatory considerations, there are also industry-specific considerations that businesses should be aware of when leasing employees. Here are a few examples:

Healthcare

The healthcare industry is heavily regulated, and leased employees must comply with a variety of federal and state laws and regulations. For example, leased employees in healthcare may be subject to HIPAA regulations that protect patient privacy. Additionally, leased employees in healthcare may need to be licensed or certified in their field, depending on the state in which they work.

Construction

The construction industry is also subject to a variety of laws and regulations, particularly when it comes to safety. Leased employees in construction may need to be trained on specific safety procedures and use of equipment, and businesses must ensure that leased employees are covered by workers’ compensation insurance. Additionally, some states have specific regulations around the use of leased employees in construction.

Technology

Leased employees in the technology industry may be subject to intellectual property laws and regulations, particularly if they are involved in software development or other proprietary work. Businesses must ensure that leased employees are aware of their obligations to protect confidential information and intellectual property.

Working with an outsourcing company that specializes in the specific industry can help ensure that leased employees are fully trained, licensed, and insured, and that the business is protected from legal and financial risks. 

What Is a Leased Employee and Why Is It Beneficial for Your Company?

By leasing employees, you can save money, reduce liability, access specialized skills, and improve productivity.  In summary, leasing employees can be a great way to reduce costs, increase flexibility, and access specialized skills. However, it’s important to remember that leased employees are not the right solution for every business. If you’re considering leasing employees, make sure to carefully evaluate your needs and the costs and benefits of leasing versus hiring permanent employees.

To learn more about outsourcing, you can read our 8 Questions About Outsourcing You Should Ask article. We invite you to follow us on social media and to visit our website to learn more about our services.

About Us: Sourcefit is a widely recognized US-managed business process outsourcing company based in Manila, Philippines. We proudly serve over 100 clients with a workforce of more than 1,300 employees. Our global centers can serve multiple markets, and our staff is highly proficient in English, Spanish, French, and Portuguese. Whether you need a few or many employees, we can help you achieve your business goals and build high-quality offshore teams.

Latest Awards

Sourcefit’s commitment to excellence has been recognized through numerous industry awards and certifications.

We recently received the Fortress Cyber Security Award from the Business Intelligence Group. Sourcefit was also honored with the prestigious recognition of Best Outsourcing Solutions Provider in the Philippines during the 2023 Business Excellence Awards.

Other awards include: FT ranking of 500 high-growth Asia-Pacific, The Marketing Excellence Awards, Inquirer Growth Champion,  HR Asia Awards, among others.

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