Leased Employees Vs Independent Contractors

Leased Employees vs. Independent Contractors

When it comes to filling vacancies in the workplace, employers have the difficult task of finding the right person for the job. The person must possess the skill set required to get the job done and the right attitude to fit into the corporate culture of the workplace. For some companies, hiring independent contractors, leased employees or seasonal help makes the most sense for their productivity. But what is the difference and how do you know what kind of help makes the most sense for your business? Some businesses may have a leased employee, and an independent contractor hired to do the same job. The difference is in the relationship and control that the employer has with each.

Leased employees, by definition, are “employees that have been attained from a professional employer organization (PEO). The PEO is the official employer of the leased workers and handles payroll, tax reporting, and benefits. However, the employees complete the work for the leasing company or business owner.”

An independent contractor is “a person or business who performs services for another person under an express or implied agreement and who is not subject to the other's control, or right to control, the manner and means of performing the services; not as an employee.”

Labor Laws

A leased employee is covered by numerous state and federal laws labor and employment laws, while independent contractors aren’t.

Hiring Practices

When it comes to hiring, leased employees allows you to hire the help you need without bogging you down with the administrative side that goes with it. You remain in control of who works for you and oversee their daily job performance, but the leasing agency handles payroll, workers comp and other behind the scenes issues. Independent contractors usually interact with one individual or group that needs a specific task accomplished. The contractor submits a proposal to be accepted by the client, and a contract is written up.

Tax Reporting

Leased employees re/port all of the money they earned throughout the year using a W-2. This is taken care of by the leasing company. Independent contractors report when they make $600 or more and use a W-9.

Compensation and Benefits

A leased employee earns either a salary or an hourly wage, depending on their position and the company policy. They are paid through the leasing agency. An independent contractor is usually paid per project/task completed. Leased employees are provided with all of the benefits (retirement plans, medical benefits, etc.) as a traditional employee. Independent contractors are not.

Employer Control

A leased employee is very similar to a typical employee in that they are expected to comply with the rules and regulations of the workspace. They have a specific responsibility within the company and are expected to fulfill their duties on a day-to-day basis. The employer has more control over the employee than they do an independent contractor. An independent contractor has is responsible for reporting his/her taxes and sets the groundwork for the way the service is provided. They still answer to the client but have more control over how the work is completed.

Every business is unique when it comes to the makeup of employees that it needs to run successfully. Having alternatives to hiring traditional employees gives business flexibility in creating a strong team that increases productivity.

Great Hire Human Resource Solutions

Los Angeles, CA