HR companies kept afloat by staff leasing services

For Adecco, the world’s biggest recruitment service provider, employee leasing accounts for 80% of the 23.2 million euros turnover for 2008, while gross profit margin reaches 70%. Projections for first quarter 2009 indicate a significant reduction in staff leasing demand, said the recruiter.

The local subsidiary of Dutch-based Lugera & Makler, Romania’s second biggest player, booked 18.5 million euro turnover, where the staff leasing accounts for 70%. For this service, Lugera recorded a gross profit margin of roughly 10% in 2008.

For Aims Human Capital, where the aggregate turnover of its divisions (Aims Human Capital Romania, Aims Timisoara and Aims Services) stands in the range of 6.5 million euros in 2008, the leasing division grabbed a slice of 60%. In contrast with the similar period of last year, the first quarter of 2009 has seen an 8% increase in employee leasing demand, as Mihaela Perianu, managing director of Aims commented.

By definition, the “rented” employee is recruited by a professional employer organization. Practically, the staff leasing providers are those who “lend” employees to work for a company on an open-ended basis. For many companies – especially multinationals – staff leasing is an attractive solution when they need workers for additional activities or when their permanent workers are on vacation.

As the Labor Code states, a temporary employment contract meet the same conditions as a no-fixed term contract, imposing the same financial liabilities both to employer and employee.

Professional Services Agency, who offers staff leasing services posted 7 million euros turnover, largely driven by the personnel leasing operations, according to Cristina Pasat, managing director of the agency. “We can say that the demand for staff leasing remained at roughly the same level as a year earlier, even if the demand for recruitment services decreased”, Pasat stressed.

Although the workforce leasing operations have a major contribution to the company’s turnover, for a financially balanced business, the other recruitment services, calculation of wages, direct search or outplacement actually bring value to the profitability of a company. “If the leasing accounts for 60-70% of the turnover, it doesn’t mean it brings profit at the same extent. The contribution of the leasing services to the profit may as well be 30-40%”, Cristina Radulescu, country manager at Adecco Romania said.

The advantages of turning to employee leasing for staffing needs lies in the “borrower” being saved the hassle of conducting countless interviews and in the unloading of the accounting and payroll functions attached to the recruitment of new workers. The professional employment organization handles all the issues arising from an employment contract, while the “borrower‘s” responsibility is to cover the payroll, taxes, benefits and administrative fees.

Although at a first sight it seems an expensive service, an economic analysis of costs for a similar activity performed by a company in contrast with an offshoring solution pinpoints staff leasing as the most cost-effective solution. “Hence, the company will not have to cover the costs deriving from administrative support, training, candidate evaluation, and advertisements for vacant jobs. The companies will not have to cover the registration fees, calculation of wages, payment of monthly salaries and taxes”, Radulescu added.

Although the number of workers engaged in the temporary employment scheme dropped significantly from previous years due to the economic crisis, the demand from companies for leasing services dropped slightly similarly.

“Staff leasing services offer a great flexibility. It is a solution at hand for every company always struggling with fluctuating orders from clients, and this can be used as test for employees”, said Florin Ochiana, HR Operations Manager at Lugera &Makler.