PEO & Leasing Company

[Guest Sieve]

I always thought PEO was just a fancy name for a leasing company, but apparently there are significant difference between the 2 entities. Can someone describe briefly (or not so briefly) how they are different and how each operates?

[ERISAnut]

Sieve,

I am with you on this one. I have always though of them as the same; similar to an apple being a fruit. I consider a PEO to be a leasing organization where the entire staff is being provided instead of just a few employees. But, inherently the same.

I am curious to see what others may think.

[JanetM]

I think the same thing you do nut & Larry. The only thing I can find that is different is that PEO is more long term solution where you outsource/co-source the employees and leasing is more short term in nature.

Anyone disagree, if so please explain.

[GBurns]

A PEO like Administaff re-labels the client's employees while providing payroll services etc.

A leasing company provides it own employees and will move those employeees from client to client subject to a contract covering a specific job or time. Temporary short term or long term. Manpower, AccountTemps (Robert Half) come to mind.

Then there are the Spherions who seems to be a little of each.

[Guest Sieve]

So a leasing company actually considers itself (& may actually be) the employer of the employees, while a PEO is more-or-less sharing them with their true employer, right? In any event, would it be safe to say that the rules of 414(n) apply whether it's labeled as a PEO or a leasing company?--i.e., the employees who perform services for others are not considered employees of the PEO/leasing organization?

[Kevin C]

The PEO's we are seeing are companies that for a fee will process your payroll, benefits etc. for your employees. The paychecks are from the PEO, but the employer still controls the employees and does the hiring and firing. You are basically outsourcing most HR functions. One big advantage is that you become part of a larger group for insurance purposes. Other PEO's may be set up differently, but that is what we are seeing.

A a few years ago, the IRS cracked down on PEO's that were claiming that common law employees of the participating employers were actually employees of the PEO. Each PEO set up a large single employer plan covering everyone. Now, they have to operate as a multiple employer plan. Each employer has the option of participating in the multiple employer plan or having their own plan.

I've spoken with several doctors who intially said they have no employees. When you ask about the receptionist, nurses, etc. they say those are paid by *******, so they are not my employees. When you ask who hires and fires, sets salaries ..., the doctor says he does. Those doctors all used PEO's.

[Don Levit]

You may want to look at:

http://www.irs.gov/pub/irs-tege/epchd704.pdf.

Specifically, look at pages 7-90 thru 7-103.

Don Levit