How Much Does Employee Leasing Cost?

Every employee that is hired is one more commitment that the company makes. Regardless of whether that new recruit works full time or part time, a whole cycle of human resources activities and processes are carried out at the back end including interviewing, training, payroll taxes and administration of benefits.

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For businesses that are just starting out, the hiring process can be straining especially on a limited budget. Therefore, it is recommended to go for human resources employee leasing right from the get go so that the business owner is able to save time, resources and precious money that would have been spent on in-house HR department otherwise. There are multiple professional employer organizations (PEOs) that can easily meet the HR requirements of the business successfully and ensure better operations in no time at all.

HR Employee Leasing Cost

Determining the Cost of this POE service

There are multiple payment models that the POEs use. Some of them go for a flat fee for a fixed package while others prefer a more flexible mode of payment such as a la carte or per employee.

Business owners should get the figures straight before signing any contract with POE. The percentage of net payroll that they charge as a fee and per month per employee fee should be marked clearly.

Benefits of HR Employee Leasing

Competitive benefits rates for the employee

· Health insurance

· Life insurance

· 401(k) plans

Cost control

· Small businesses (> 500 employees) ~ $5,000 per annum per employee

· Services include tax compliance, policy regulation, and paperwork

· Reduction in cost from one-third to about two-thirds

Reduced liability and Full Compliance

· Checks and Benchmarks to ensure that the business is in compliance with local laws, state laws, and regulations

· Responsibility for safety

· Risk management

· Resolve cases of workplace injuries and harassment

· Federal tax obligations

· Focus, the managers' time on important issues

· Keep the workers happy

· The workplace attractive

· Recruit fresh talent

· Place policies that benefit both parties

Average Cost of Employee Leasing

· Upfront Cost and one-time charge for ~ $1,000 and $5,000

· Fixed percentage of the net payroll (per pay period) ~ 1.5% to 8% or 2% to 6% of every worker's salary

· Cost of leasing for Large Corporate companies (per pay period) ~15% of the net payroll

· Cost of screening tests, background checks for every employee ~ $50 to $100

Sample Costs of Employee Leasing

· Start-up business in North Carolina ~ 12.5% of the net payroll

· IT company in California ~ $600 per annum per employee

· Manufacturer in Texas ~ $100 per employee per month

· Consultant firm in New Jersey ~ $125 per month for every worker plus an initial fee of about $3,000

· Additional costs of regulation, tax compliance, and paper work for a year (> 500 employees) ~$5,000 per employee

Typical Costs (Per Year)

In-Sourcing Model

· Small business (30 to 100 employees)

· HR Manager (5 to 7 years' experience) ~ $70,000

· HR Payroll manager ~ $45,000

· Legal Consult for HR issues~ $12,000

· Consulting fees and training for HR ~ $10,000

· Total: $137,000 annually

This price can range from $300,000 to $350,000 for a year for a business with 400 to 500 employees