Leasing drivers - or other employees - can solve some employment problems, but not all
Driver leasing and employee leasing are two industries that have been around a long time but have undergone recent growth spurts. Executives who haven't looked at them for several years may want to take another gander.
Driver leasing historically served non-trucking firms that had fleets of their own or that separately leased trucks but did not want to handle the responsibility of managing drivers. Although private fleets are still the core of the driver leasing business, an increasing number of for-hire carriers are also turning to driver leasing companies. Some carriers are doing so in the hopes that driver leasing firms are more successful than the carriers in recruiting, screening, and retaining drivers.
Other carriers are using specialized leasing or temporary agencies to satisfy seasonal demand or fill in for vacationing drivers. By serving a variety of trucking niches, the specialized agencies can keep short-term drivers fully occupied among carriers with differing peak seasons.
Employee leasing has a checkered history. Some executives may recall the practice as a way to lower worker's compensation premiums by using a leasing company with no prior claims history to supply drivers and other high-risk workers.
Other carriers still see employee leasing as a questionable attempt to get around the pension nondiscrimination laws. After enactment of ERISA, the Employee Retirement Income Security Act of 1974, some employee leasing firms offered to show doctors and others how to "lease back" the workers they had already employed but would "fire" and "rehire" in a leasing company they would control. This ruse would enable them to have a one-person company that provided rich retirement benefits for themselves, and a "separate" company for the rest of the employees, who would receive either watered-down benefits or none at all.
Congress reacted by tightening the tax treatment of leased workers. The Internal Revenue Service (IRS) then went a step further, issuing proposed regulations in 1987 that would have treated most owner-operators, as well as office workers who clearly were somebody's employee, as potentially leased employees. The trucking industry led an outcry that forced the IRS to withdraw those overly broad rules.
Nevertheless, there is still well-founded concern among carriers that any type of employee leasing carries a tax risk. Indeed, a recent IRS project to determine the appropriate tax treatment of "leased" company workers concluded that for both employment tax and benefits purposes, nearly all should be considered the employees of the clients.
Today, the upsurge of interest in employee leasing among fleets is driven largely by the host of other employment laws that have complicated life for employers everywhere. These include the endless details -and changes - that accompany pension and health benefits plans, the Family and Medical Leave Act, Americans with Disabilities Act, Age Discrimination in Employment Act, and sexual harassment law.
An employee leasing firm does not relieve carriers of all responsibility for these laws, but it can provide expert support in keeping up to date, as well as some peace of mind on compliance. Staffing agencies also can lessen the crunch in finding scarce or seasonal workers. But, as with driver leasing firms, the client needs to assess the agency's competence in matching workers, administering benefits, and understanding laws.
The bottom line: If you think driver leasing and other types of employee leasing have no place in your business, you may want to reconsider. Worker shortages, plus the never-ending changes in benefits and employment discrimination law, make the use of legitimate short- or long-term professional staffing organizations a sensible choice for many fleets.
However, nobody knows your business like you do. If you are good at keeping in touch with your workers and feel you are getting competent advice on employment and employment-tax law, keeping everybody in-house may still be the best solution.