How Staff Leasing Improves Your Profits

By: David Schek
Published in the Fall Edition of the Capital Area Staffing Newsletter

All temporary staffing managers and owners know that payroll costs, especially workers' compensation and unemployment costs, escalate every year. Many temporary staffing professionals have heard of staff leasing. What is news is that, by using staff leasing, temporary staffing companies may lower their payroll costs by 3-5% or more. That is like adding $30,000 to the bottom line of a million dollar staffing business. Traditionally, staff leasing firms have targeted small companies that want to offer a broader array of employee health benefits. Administaff, the largest staff leasing company in the country, boasts over $1B in revenue. Although more than 300 staff leasing companies operate in the U.S., most mimic Administaff's marketing approach and target small companies with stable payrolls that seek access to more sophisticated health benefit programs.

In the last few years, some staff leasing companies have expanded their marketing efforts to include working with temporary staffing companies. With this new application, staffing leasing companies provide payroll services to temporary staffing companies whose employees are typically added and taken off the rolls each week. And because the staff leasing companies work with private insurers,their workers' compensation rates are usually a few points less than the state workers' compensation funds. To a temporary staffing company--where payroll costs usually consume 70-80% of the total sales--saving 3-5% of total sales is significant
business expense reduction.

More and more temporary staffing companies are noting the advantages and benefits of partnering with a staff leasing company: (1) no large upfront deposits are required like with many state funds; (2) employer liability is either shared or completely assumed by the staff leasing company; (3) back office personnel and resources are reduced, sometimes dramatically.

When exploring cost reduction options with a staff leasing company, here are a few points to consider:

1. Who are the company's other temporary staffing clients? A staff leasing firm should be willing and able to give you one or two references, and represent that they have at least 20 temporary staffing clients.
2. Is the company multi-state or operating in a single state? Insurance requirements are usually more stringent for multi-state insurance providers so they tend be more stable.
3. Who will provide your workers' compensation insurance? Ensure that the company is reputable--do not just accept the lowest rate.
4. Talk to the service representatives. Find out who will be handling your account on a daily or weekly basis.

Since effective cost-management often drives the success of temporary staffing companies, careful consideration of staff leasing your temporary employees is a powerful advantage in today's competitive business world.