Understanding Employee Leasing for SMEs | INS Global

Employee Leasing for SMEs

Employee Leasing for SMEs

January 12, 2023


Picture of INS Global



Picture of INS Global



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Key Takeaways

  1. Employee leasing is when workers of a third-party company are sent to the client company to perform work for a short time.
  2. There are many ways that employee leasing can benefit small to medium-sized enterprises.
  3. Taking the time to find a partner who can provide talented, qualified leased employees is essential for making the most out of an employee leasing relationship


Maintaining a well-staffed team while not stretching company resources can be challenging for SMEs (Small and Medium-Sized Enterprises). Recruitment, hiring, and onboarding can take a lot of time and money. One study found that the average recruitment effort can take 42 days to find a suitable employee. The additional required employee benefits and HR services may be especially challenging for small businesses. Employee leasing is a cost-effective solution that allows you to have the talent you need without hiring a full-time worker.

It also reduces management expenses, as the third-party provider handles every aspect of payroll and HR security and efficiency.

In this article, we explore how employee leasing can benefit your business and discuss some disadvantages to be aware of. We want to ensure you understand all aspects of employee leasing so you can make the best decision for your situation.


What is Employee Leasing?


Employee leasing is when workers of a third-party company are sent to the client company to perform work for a short time. In a way, they are “borrowed” from the third party temporarily.

The client business owner has complete control in deciding how, when, and where the work is performed.

The third-party company covers payroll, management, taxes, workers compensation insurance, social security and medicare, and other administrative tasks.

The client company pays the leasing firm a fee for handling these employee engagement services.

A leased employee is officially an employee of the leasing firm, not the client company. Although there may be joint ownership of the employee in some cases, it is typically more efficient for the leasing firm to be the official employer. Done purely for payroll and tax purposes, it does not affect the client’s project performance management.

Employee leasing is not the same as partnering with a PEO. See our article here for the similarities and differences between the two.


How Can Employee Leasing Benefit an SME?


There are many ways that employee leasing can benefit small to medium-sized enterprises. The convenience and cost-saving benefits are a part of why employee leasing is a smart and effective solution for smaller companies’ staffing needs.

We’ve listed the top five advantages of employee leasing below:


Reduced Expenses

The leasing firm takes care of recruitment, HR services, and other costly aspects of bringing new staff into the company. Because of this, you can save both money and time and still have the right talent you need for the job.


Legal Security

Staying on top of employment laws can be another task that takes away resources from your company. A leasing firm has a professional legal team that will handle all the payroll needs of the leased employee, including benefits, tax, social security, etc.


The Right Talent for the Right Job

Instead of spending hours searching recruitment sites and conducting lengthy interviews, a leasing firm can immediately supply you with skilled professionals equipped with everything they need to complete a project.


An Improved Positive Employee Experience

Due to the size and efficacy of a leasing firm, it can often offer leased employees better-paid leave benefits and health care than a small company. This benefit to company culture makes for more satisfied employees, inspiring better results at work and smoother operations.


Fewer Complications

The hiring process can be tricky, especially if you want to add overseas talent to your workforce. A small company can quickly become overwhelmed by international requirements and employment laws. The experience of a leasing firm allows you to bypass the red tape and bring new staff to your team quickly.


Are there Disadvantages to Employee Leasing?


Being aware of the drawbacks of employee leasing is just as important as knowing the benefits. Knowing the challenges that might arise with leased employees in advance, you can be better equipped to handle them.

Some ways that employee leasing can be problematic are:


The Lack of Commitment


Leased employees don’t have a long-term connection to the company or its projects. Because of this, their dedication and motivation levels might be lower than your other staff members.


Dependence on a Third-Party


Good results with employee leasing rely heavily on having a good relationship with the leasing firm. Issues in communication or vision can add a layer of complication and negatively impact a leased employee’s performance.


Communication Issues


If the leased employee has concerns about their payroll or HR services, they have to contact the firm instead of you. Similarly, you would need to reach out to the firm regarding issues with the leased employee instead of addressing them directly. Finally, this can cause some communication delays and potentially waste time and energy.


employee leasing for SMEs