Disadvantages

       Business Administrative Services, Inc.
www.bas.cobiz.com

WARNING!

Outsourcing Solutions may also have Disadvantages!

 

Outsourcing one or more employment related tasks to professionals may provide a business owner an opportunity to have the service provider report the costs of employment under the service provider’s Federal Employment Identification Number (FEIN), rather than under the business owners FEIN.  This outsourcing option is generally known as “Employee or Worker Leasing”.

Under an Employee Leasing arrangement, the service provider hires the business owner’s employees and then “leases” that employee to work on the business owner’s site as a “lent servant”.  As “employees” of the service provider, the service company reports employment related obligations under its FEIN, not the business owners.

Reporting employment related obligations under a business owner’s FEIN documents that all public trust funds have been deposited and credited for the business.

This shields a business owner from a potential double liability for unpaid employment related obligations in the event that a service provider’s assets following bankruptcy are insufficient to cover delinquent taxes, wage withholdings, benefit premiums and other obligations.    

As a result of legal decisions and financial failures in worker leasing arrangements, business owners NOT reporting employment related obligations under their own FEIN should also expect to encounter increasing exposure to unintended higher costs and liabilities in the following areas:

    Limitations on access to or lack of lower cost voluntary workers compensation insurance and/or work site experience rated unemployment rates.

    Work sites normally exempted from ADA, FMLA, EEO, WARN, etc. reporting under a worker leasing company’s FEIN may have to maintain compliance if the total number of service providers “leased workers” exceed the regulatory compliance threshold

     

For these reasons, BAS reports all employment obligations under the business’s work site FEIN to properly document deposits and credits, enable work site unemployment experience rating, access voluntary workers’ compensation rates and avoid onerous Federal/State regulations that add costs and exposures to additional legal obligations.


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