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Why Buy a Staff When You Can Lease One? : Local Firm Claims Leadership in Fast-Growing Field Handling Workers, But Faces New Rivals

August 23, 1994|JILL LEOVY | SPECIAL TO THE TIMES

VAN NUYS — If you work for a small company, Marvin R. Selter, or someone like him, may someday be your boss.

Selter, the CEO of Van Nuys-based National Staff Network, runs one of hundreds of firms in the fast-growing business of employee leasing. The idea is simple: Rather than wrestle with tax forms and other payroll hassles on their own, companies unload their workers to a staff-leasing company, which then leases them back for a fee.

The practice has been around for decades, but since the early '80s it's been catching on in a big way. The leasing industry has been growing at 30% per year recently and currently 1.6 million employees nationwide are working under lease agreements, according to the National Assn. of Professional Employer Organizations, which represents 230 leasing firms.

National Staff Network is viewed as a forerunner in the industry, if not quite a leader. Selter, 66, a former business consultant in the medical industry, began experimenting with employee leasing in the early 1970s, and National Staff Network grew out of a company he established in 1972. But today, it faces a host of new, large competitors.

Leased workers generally occupy permanent positions. Unlike temporary firms, which recruit their own workers and then provide them for temporary positions, most leasing companies do not hire their own workers, but rather solicit employers to transfer their work forces on paper to a leasing company. Executives in both businesses say the two do not compete directly. Temporaries are used for vacation replacements and special projects, while leased employees are longer-term, and continue to be trained and supervised by the company that leases them.

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National Staff Network is privately held by Selter, who is notoriously secretive about its operations--he steadfastly refuses to discuss the company's revenues or earnings. He contends he created the concept of leasing, a claim that others in the industry contest.

National Staff Network's leased staff includes workers in 26 states, with many in the insurance, medical and real estate fields, Selter said. About half are clerical workers. The others are professional or blue collar. He said their salaries range from $16,000 per year to over $100,000.

Selter contends that National Staff Network is one of the top five staff-leasing companies in the country, another claim that elicits skepticism from competitors. "I really don't think they are that large. . . . We all keep track of each other," said Buddy LeTourneau, CEO of Staff Leasing Group in Bradenton, Fla. Selter also claims his company has grown steadily. The number of leased workers in its employ shot up 22% last year, he said.

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Like most staff-leasing firms, typical customers of National Staff Network are firms with only five to 15 employees, although the company serves clients with up to 200 employees, Selter said.

For small firms, staff leasing offers freedom from burdensome paperwork, and better economies of scale when it comes to obtaining benefits for their employees.

"Negotiating a good health insurance plan is very time-consuming and very costly," said Millie Courtway, partner in Unitco Management Co., a Sherman Oaks property-management firm. "The bigger you are, the better package you can get."

Courtway's firm has leased all 10 of its office employees from National Staff Network since 1987. Leasing meant the employees could get better benefits, she said. Although the office staff had health benefits before, they did not have retirement plans. Now they do.

And Courtway says her own job is simpler. Rather than deal with payroll on her own, she simply writes periodic checks to National Staff Network. Moreover, when one employee appeared to have a drug problem, Courtway had somewhere to turn. National Staff Network provided counseling. "It made it easy for me," she said.

Courtway said doing her own payroll, taxes, insurance and benefits cost her 50% over the cost of the salaries she was paying out. With leasing, the excess cost is about 30%, she said.

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Leasing advocates such as Selter say that leasing also promises a better world for employees. A leased employee may have access to big-business services that are often denied to workers in small businesses, such as direct deposit, 401(k) retirement plans and life insurance.

Tawny Wattles, a leased employee and bookkeeper at Unitco, said that at first being leased "felt awkward." But she said she likes the benefits, and finds other aspects of her job identical to being employed directly.

But it's also the case that many leased employees are provided with bare-bones packages hardly better than those typically provided to temporary workers.

About 40% of the leased employees of National Staff Network, the company concedes, have no health benefits included in their compensation.

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