Posted on May 17, 2014

The Differences Between Worker's Comp And Employee Leasing

Many employers become frustrated with the significant human resources and insurance requirements necessary for running their businesses. Workers compensation insurance is a particular coverage that has become a hot topic nationwide among business owners who feel the burden of continued cost increases, additional administrative requirements and substantial use of employee time and resources. Employee leasing was developed to help take that burden away from companies.

Workers Compensation Insurance

Most states (except Texas) require that employers purchase workers compensation insurance for their employees. The coverage provides medical benefits and wage replacement for employees with on the job injuries or illnesses. Workers comp rates are determined by industry classification and experience. Employers must report their employee payroll on a monthly, quarterly or annual basis in order to pay the appropriate premium for their class rate. When injuries occur, they must make sure to provide the appropriate paperwork to employees, report the claim and then monitor the claims process. Businesses must also stay up to date on the latest workers compensation laws and requirements so that they stay in compliance with changes made by the state they are located in.

Employee Leasing

Employee leasing companies came into existence to assist business owners with human resources, payroll, taxes, employee benefits and insurance. Employee leasing frees up time for busy business owners and management so they can tend to taking care of their business while the employee leasing company handles paperwork administration and employees.

When a business chooses to use an employee leasing company that company hires the employees and then leases them back to the business. The leasing firm then handles payroll and benefits along with covering those employees on their own insurance policies. Because the employees no longer work for the business, the leasing company also handles payment and claims for workers compensation purposes.

What?s the Difference?

The difference between these two programs is that with workers compensation an employer must pay for and administer the program on his own. With employee leasing services, the company operates on behalf of the business owner to handle all employee administrative issues including payment of workers comp insurance, payroll reporting and claims filing. Since employee leasing companies also assist in human resources and hiring, they essentially take the headache out of handling workers comp and other employee benefits.

While employee leasing is attractive to many companies, the main disadvantage to using a leasing agency is that a business owner loses communication and control of employees including the hiring and firing. Properly weighing the advantages and disadvantages of carrying private workers compensation insurance or using an employee leasing agency is an important consideration before making any changes to existing insurance policies or purchasing new ones.

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