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SOUTHERN CALIFORNIA JOB MARKET : CHALLENGES OF THE WORKING LIFE : COMMITMENT : FOR LEASE: HUMAN BEINGS : Some Firms Prefer Leasing Workers--for Years--to the Headaches of Hiring

September 18, 1988|JAMES BATES | Times Staff Writer

There was a time when all that companies leased were office space, houses and cars. Now add humans to the list.

An increasing number of employers don't want to employ their workers, so they lease them in much the same way a person might lease a Pontiac. Secretaries, accountants, engineers, data processing workers, nurses, 7-Eleven clerks and others are being hired through a growing number of "employee-leasing" firms, typically by small- to medium-sized employers.

Leasing an employee is not the same as using temporary workers, another exploding trend in the nation's service-oriented economy. Temporary workers usually work for a company for a few weeks, replacing workers who are on vacation or helping out when a company enjoys a sudden spurt in business.

Leased employees, in contrast, are in effect permanent workers who labor for a firm indefinitely, often for years, with no guarantee of a gold watch at the end. Critics say that kind of permanent impermanence discourages loyalty and can impair productivity, though leasing companies contend that morale and stability are rarely problems.

As impersonal as leasing sounds, employers note these advantages:

* Gone is the mountain of paper work that has to be maintained to keep the government's labor and tax agencies happy.

* Gone is the time it takes a company to recruit workers, administer benefit programs or handle payroll. Some companies lease all their employees.

* Gone also are liability problems that can come from workers' compensation cases, discrimination complaints or wrongful termination lawsuits filed by workers who feel they were unjustly fired.

Richard Gard, a partner in Mesa Management in Bellflower, estimates that it costs him $5,000 a month more to use leased employees for his bookkeeping firm than if he employed the workers. But, he adds, it's worth the extra money to avoid potential personnel and legal problems.

"Employees are your biggest asset, but they can also be your biggest liability. For me, it's a risk I don't want to assume. We have 85 people who are leased and zero employees," Gard said.

But is leasing a better deal for workers?

Big leasing companies contend that they can provide better medical and pension benefits than small employers offer and that leased employees are paid competitive salaries. They also note that employees who work for national leasing companies can easily move to a job in another state without losing benefits or seniority.

But union officials see employee leasing as a new twist to the old game of hiring temporary workers or contract employees to skirt paying decent wages and benefits that workers might achieve through collective bargaining.

Unions argue that leased workers are difficult to organize and to bargain for because they don't technically work for the companies that lease them. This means that if workers elect to join a union or ask for too much when bargaining, a company can simply switch leasing firms.

"They can terminate the employer to get rid of the workers. While it's illegal to fire one person (for union activities), it's not illegal to fire the employer," said Reuben Guttman, a lawyer with the Service Employees International Union in Washington.

An employer who leases workers typically pays a fee that ranges from 16% to 35% of each worker's salary. An employer, for example, would pay $80 to $175 a week to lease a worker who makes $500 a week. For the higher percentage, the leasing company provides a number of employee benefits, such as health insurance and a pension plan.

Employers contend that leasing isn't as expensive as it may seem. The reason: Benefits and pension plans are expensive to provide and often require several people to administer.

Employee leasing is nothing new, but it has grown dramatically in the 1980s, with the number of firms nationwide more than doubling to about 350 and the number of leased workers rising to 360,000.

Leasing has been around since at least 1972, when Marvin R. Selter, then a management consultant, leased 28 employees to a medical clinic in Los Angeles. Today, Selter's National Staff Network in Van Nuys, which is believed to be the industry's largest company, leases more than 30,000 people to employers in 32 states.

Small professional firms, such as doctors and lawyers, were among the first to lease employees. Increasingly, large companies--including General Electric, Hospital Corp. of America and Southland Corp., which owns the 7-Eleven chain of convenience stores--are leasing workers.

The industry boomed initially in part as a way for employers to take advantage of loopholes in federal tax laws. Companies set up lucrative pension plans for senior executives through tax-deductible payments. By leasing the rest of their workers, the companies avoided an obligation to set up equitable plans for the rest of their workers.

The loophole was closed by the 1986 tax reforms amid predictions that it would cripple the employee-leasing business. That hasn't happened, industry executives say.

Selter believes that leasing is growing mainly because firms want to avoid what he calls "employee hassles," such as lawsuits.

"We take employee hassles and put them on our shoulders," Selter said.

Micki N. Purcell, president of MNP Personnel in Beverly Hills, an employment agency that expanded into leasing nearly two years ago, said a growing number of leased employees are highly skilled workers in such fields as aerospace and computers.

She said it is gaining popularity among defense companies with short-term government contracts, large firms that are starting new divisions and start-up companies taking a risk on a new product. Those companies, she said, might have to eventually fire workers and don't want the problems associated with doing so.

"The main thing that employee leasing does is eliminate the hazards of having an employee," she said.

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