Downsides of Employee Leasing

So what are some key things you'll have to give up if you favor outsourcing or turning to an employee leasing solution to hiring a full-time, in-house HR department?

There are some definite drawbacks to not having an HR manager in-house. An in-house HR person handles perks that you can't necessarily count on an outsourcing service to carry out -- like looking into group offerings, building employee incentive programs, even taking care of recognition for employees' birthdays. And employees may want someone in-house -- an impartial co-worker they can trust and see daily -- to turn to if they have a work-related problem or dispute with another co-worker.

Because an in-house HR person interacts daily with your employees, they will likely have more of an interest in your employees. For example, employees often appreciate having someone on staff who will help negotiate in their favor for certain benefits that are critical these days for employee retention (like 401(k) plans and vacation policies).

Also, in the case of using a PEO, giving up the right to hire and fire your employees may not be desirable for your particular business. Most PEOs insist that they have the final right to hire, fire, and discipline employees. While having the extra time and not having to deal with the stress of this may be appealing, you may not want this responsibility out of your hands.

And if you decide to use an e-service, the same issues you'd have with any ASP remain. When everything is stored and handled online, there are concerns about security as well as potential crashes, both of which can be detrimental to your business.

Common complaints about HR outsourcing range from payroll mix-ups to payroll not being deposited on time to denied medical claims.