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The Lowdown on Employee Leasing for Sweeping Contractors

Employee leasing firms can reduce responsibilities and increase productivity.

by Scott Peters

Leaseback Pros and Cons

Due to an onslaught of government regulations, employers today face numerous challenges. These include workers' compensation issues, health care administration, and human resource matters. In an effort to reduce costs and increase productivity, many businesses are turning to employee leasing to consolidate a wide array of employee administration tasks.

During the mid 1980s, approximately 10,000 employees across the country were leased. By 1995, however, that figure exploded to an estimated 2 million. Current industry projections estimate 12 million leased employees by the year 2000. This rapid growth clearly reflects the value and acceptance of employee leasing across the U.S.

In a typical leasing arrangement, a client company relinquishes all of its employees, which are then hired by the leasing company and leased back to the client. The client company owner retains responsibility for all operational decisions, direction, and the supervision of all leased employees. The leasing company assumes responsibility for filing taxes, processing payroll, and handling workers' compensation and unemployment insurance issues, as well as keeping up with updates on federal and state regulations. The leasing company also functions as an expert off-site personnel department for the client company. In addition, the leasing company manages all EEOC and workers' compensation claims, including unemployment hearings or mediation meetings. This results in more time the owners can focus on the business.

According to Larry Roberts of Certified Systems, Inc. (CSI), a national employee leasing firm, "There are numerous reasons for the growth of employee leasing, one of which is the ability of leasing companies to purchase medical benefits at rates lower than most small or mid-sized companies could purchase on their own. Others include the reduction of paperwork necessary for compliance with government regulations, and the benefits to the employees, such as better health care packages, including dental, vision, prescription cards, disability and accident insurance. Also, many of these benefits can be purchased under a Section 125 Cafeteria Plan, reducing the out-of-pocket expense for employees.

"CSI also offers a 401(k) plan and the services of a credit union to their employees. The majority of companies simply can't afford to offer, or may not have the time or resources to administer, these benefit programs."

To learn more about employee leasing, you can contact CSI at 1-800-878-3157, or visit their Internet site. Their website is located at:

Leaseback Pros And Cons

Here are some frequently asked questions and answers about the employee leasing concept. Keep in mind that such companies were initially formed because of numerous workplace changes, such as federal regulations, lawsuits against employers by employees, and the rising cost of workers' compensation insurance.

Parking lot sweeping does not have a designated classification to itself, and usually contractors must start out paying the street sweeping rate. Most in the industry contend that sweeping a parking lot is far less hazardous than sweeping a street. For example, there are no moving vehicles to contend with, and it's usually done at night off the street.

All agree workers' compensation costs are a confusing and expensive necessity of doing business. Leasing companies streamline compliance with that process, and at the same time have the ability to offer other benefits usually associated only with larger firms.

Most contractors now using a leasing firm are doing so because of their favorable pricing on workers' compensation insurance and the availability of a host of medical benefits. Once onboard, they cite a high value in the human resource assistance available to them. Most contractors using the services of a leasing firm felt they were paying the same amount or less, and getting many additional resource advantages as part of the package.

If you decide to use an employee leasing company, check them out to your satisfaction first, the same as you would investigate an accountant or attorney. Dun and Bradstreet is also a helpful resource. Another option is to check with one of the industry trade associations, such as the National Association of Professional Employee Organizations. You may reach them at 703-836-0466; their website address is


No Workers' Compensation Surcharges:

If a 'surcharge' is currently being applied against your firm, you may be able to eliminate it by utilizing a leasing company. Employee leasing companies look at loss history to establish what they believe is the right rating for your company. To do this, their analysts will study your sweeping firm's overall loss experience in terms of all types of claims you've had in the past.

Better Benefits:

Major medical, vision care, life, dental, etc., is often more affordable because your employees become part of a larger group. This translates into lower employee contributions. Typically, a variety of such programs are made available under a Section 125 program, in which all employee contributions toward medical benefits are deducted pre-tax. Also available are more benefit options, such as a 401(k) plan, an employee credit union, and a variety of medical coverages with choices of deductible levels.

Your Own Off-Site Personnel Department:

The employee leasing company will work with you to develop a customized employee handbook and job descriptions, as well as company policy and procedure manuals for your company. Many employee leasing firms will also help you develop clear policies on vacation time, sick leave, etc., and then incorporate these policies into your employee handbook. In addition, they will represent your interests at EEOC hearings and wrongful termination suits, among others.

Safety Inspections:

Many leaseback firms will provide an expert to inspect your company operation in terms of safety. Then, they will send a letter outlining the safety problems that were seen. They can also advise you in setting up safety training programs. It reduces the risk for both you and them.

Split Benefit Coverage:

An advantage under leasing programs is that you don't have to provide the same coverage for everyone on your payroll. You may change your guidelines of hiring, which allows the employer to have additional options on benefit packages.


Pre-existing Medical Conditions:

Because employees are technically terminated from your company and hired by the leaseback firm, pre-existing medical conditions can be a factor. Often there is a one year waiting period for pre-existings, and up to a 90 day wait for a new employee before they are covered by medical insurance plans.

Potential for Employee Confusion:

Explaining to employees that they will no longer work for you, but rather for a leasing company, can be confusing for them. Also, when employees apply for loans, tell others who they work for, etc., it's more difficult to explain. Even their payroll checks will have the leaseback company's name on them (although they may have both company names) so it makes items like home mortgage applications harder for employees, too.

No Payroll 'Float':

An advantage all contractors cited is they were no longer being responsible for doing payroll. The sweeping company deposits the amount of money needed to cover payroll into the leasing company account, from which it is disbursed. As a result, several cited as a disadvantage that any 'float' associated with payroll, from when checks are given out to when they are cashed, goes to the leaseback company. A plus is that incentive bonuses may still be offered without any penalty.

This article is reprinted from American Sweeper magazine, v5 n1.

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