Employee leasing rolled out in Spokane market

A troubled economy and soft labor market can make it harder for a temporary-help agency to sell its services, but one agency here is offering a service that it contends can cut a client's costs in lean times.

Rather than just providing temporary workers to employers, the Spokane office of Portland-based

"It's for anybody who has employees and is tired of doing their payroll," says Jerry Dunn, branch manager here for Barrett. "The company is in complete control of the employees, but is free from all the paperwork."

Barrett began offering employee leasing, which also is know in temp-help circles as PEO (professional employer organization) services, in Washington state late last year. In Spokane, the agency currently is leasing employees to seven companies, Dunn says. He declines to disclose the names of those companies, but says they range in size from having 12 to 61 employees and in type from an automotive-repair shop to a physical-therapy clinic. Barrett also offers conventional temphelp services here.

Dunn predicts that other larger temporary-help agencies like Barrett, which has 41 offices nationwide and more than 600 employee-leasing clients, will begin offering employee leasing in the coming years, as a way to hold down costs.

Here's how employee leasing works:

Barrett rolls over a customer's current employees onto its own payroll - so that the workers become employees of Barrett even though they continue to work at and be directed by the client employer. Barrett then handles payroll and benefits for those employees, just as it does for the temporary-help employees it places with other clients.

The client writes a check to Barrett each month to cover the cost of payroll, the employer's share of employee benefits, and the agency's fee, which Dunn says typically ranges from 3 percent to 5 percent of the client's gross payroll. For example, if a company's monthly payroll totaled $50,000, the leasing fee would be between $1,500 and $2,500 a month.

Employee leasing isn't to be confused with a service other temporary-help agencies commonly offer called "payrolling." In that service, an employer selects an employee to hire, but then has an agency hire him or her on a temporary basis to work for the employer, with the understanding that the employee will be offered a permanent position with the agency's client if everything works out.

With employee leasing, Dunn contends that a company will save money, because it no longer will need to use its own administrative personnel to handle payroll-related tasks. Such cost savings, he asserts, make employee leasing an attractive option for companies that are trying to cut costs during lean times.

"For a company, there is no money to be made in running payroll," Dunn says. "It's a necessary evil, like paying for car insurance."

Barrett may be alone in the Spokane area in offering such a service, which apparently hasn't gained favor with other temporary-help agencies here.

"Washington state hasn't been very receptive to employee leasing," says Julie Prafke, president and founder of Humanix Personnel Services Inc., of Spokane. "It's not attractive for us to do that right now."

Prafke says that to her knowledge, Barrett is the only temporary-help agency that offers employee-leasing services in the Spokane area.

In the past, she says, the state's Department of Labor and Industries has been critical of any such procedure, because of issues involving workers' compensation.

Dunn says, however, that Barrett believes it has worked out those issues with the state. Basically, in an employee-leasing situation in Washington state, a company must continue to collect and report workers' compensation premiums even though it has rolled over all other payroll functions to a temporary-help agency, he says. The agency can keep track of workers' compensation payment deadlines and amounts due on, a company's behalf, which is what Barrett does for its current leasing clients, but the client continues to be the employer of record in the state's eyes, and that company - not the temp-help agency - is ultimately responsible for carrying the coverage and taking care of claims.

In other states, such as Oregon, where Barrett has offered employee leasing for many years, agencies that provide employee-leasing services handle workers' compensation directly for employees that it hires and leases out to employers.

In addition to employee leasing, Barrett has rolled out another new service it's calling co-sponsorship, which caters to companies that want to shift to employee leasing, but don't want to give up their own health-care programs.

Under a co-sponsorship arrangement, Dunn says, an employer can choose to roll over to a temporary-help agency all payroll functions except the required L&I insurance and health-care benefits, and the agency then signs on as a co-sponsor of the employer's health-insurance benefits plans.

Barrett introduced that product here earlier this month, but none of its clients here is using it yet.

In most cases, Dunn says, Barrett can offer competitive benefits, and he asserts that the retirement plan it offers is better than that of its typical client, primarily because the employees can take advantage of a larger company's retirement plan with many options.