PEOs and Employee Leasing (1)
Employee leasing is a common and growing phenomenon. The WCIRB tracks several hundred labor contractors, or “professional employer organizations (PEOs),” which provide workers compensation coverage to thousands of employers, many of which are themselves experience rated in California.
Leasing offers significant potential advantages, including reduced administrative time and headaches for the business owner, improved benefits packages for employees, and cost-effective access to legal and practical labor management expertise. The business owner can spend time on marketing, production, or other core revenue-producing activities, rather than on routine personnel and related administrative matters.
For many employers, however, all other advantages are secondary to the potential for re- ducing workers compensation insurance costs. There are both legitimate and illegitimate potential workers compensation cost reductions in employee leasing and significant risks to the employer if the arrangements are not entirely proper.