Risks of Leased Employees
While leasing employees through a Professional Employer Organization offers numerous benefits, there are also certain risks and considerations to be aware of, such as:
- Loss of Control: While the client company directs the day-to-day activities of leased employees, some degree of control over HR functions is transferred to the PEO. This can sometimes lead to conflicts or issues if the company’s and PEO’s policies or culture don’t align well.
- Dependence on the PEO: The client company relies on the PEO for critical HR services. If the PEO fails to deliver quality service, or if there are disagreements, it could impact the company’s operations and employee satisfaction.
- Employee Loyalty and Culture Fit: Since leased employees are technically employed by the PEO, there might be challenges in building the same level of loyalty or cultural integration as with direct hires. This can affect team dynamics and company culture.
- Quality of Benefits and Services: While PEOs often offer access to superior benefits, the specifics depend on the PEO’s offerings. If the benefits package doesn’t meet employee needs or expectations, it could lead to dissatisfaction.
- Cost Considerations: Although using a PEO can be cost-effective, it’s important to thoroughly understand the fee structure. In some cases, the costs might outweigh the benefits, especially if the services provided are not fully utilized.
- Compliance Risks: While a PEO generally assumes responsibility for legal and regulatory compliance, the client company must ensure that the PEO stays up-to-date with relevant laws and regulations. Any oversight or error on the part of the PEO could potentially impact the client company.
- Limited Customization: The solutions and services offered by a PEO may be somewhat standardized. For companies requiring highly specialized HR services, this could be a limitation.
- Potential for Disruption: If a company decides to change PEOs or bring HR services back in-house, this transition can be disruptive to operations and employee morale.