What Is Financial Employee Leasing?

Financial employee leasing helps banks and insurance companies address short-term temporary staffing problems.

Financial employee leasing is a business practice that helps a bank's or an insurance company's top leadership address temporary staffing problems. A leased employee is essentially an external worker or consultant who works on a company's short-term project or a long-term initiative. A leased worker typically has specific skills that corporate employees do not have.

Financial Employee Leasing Defined

Financial employee leasing means filling temporary positions with external consultants, also called leased employees. A bank or an insurance company may choose employee leasing, rather than hiring full-time staff, because management believes the role is temporary or it may be more expensive to hire a permanent worker. Let's say a New Hampshire-based small insurance company sees an increase in sales across the state. Company owners may decide to focus on sales activities by hiring more salespeople and outsourcing administrative tasks, such as payroll processing, to leased employees.

Significance

Staff leasing in the financial services industry is a critical activity because banks and insurance firms may have ongoing projects that need to be staffed without necessarily incurring costs associated with full-time staff. Going back to our New Hampshire-based insurer, the company's managers may note that current expenses stand at $10 million, whereas sales amount to $25 million. If they calculate that hiring additional staff may cost $2 million in payroll and benefit expenses, whereas worker leasing may cost only $1.2 million, they may opt for the latter.

Types

Employee leasing may cover practically any field of expertise that a financial institution needs. For example, an Idaho-based bank may lease an accountant to review the firm's financial records and ensure that corporate financial statements are accurate and in adherence with generally accepted accounting principles (GAAP). Alternatively, the bank may enlist an auditor's help to evaluate internal controls and provide recommendations for improvement. The sample bank also may hire a tax specialist to instruct staff on how to comply with federal fiscal rules.

Time Frame

Staff leasing may occur anytime during the year or at year's end. A bank may need external consultants throughout the year to help with accounting, audit, tax and financial analysis tasks. The company also may hire outside staff to work on temporary projects, such as new information technology (IT) platform implementation processes. A hedge fund may need external workers at the end of the year to aid in filing regulatory documents with the Internal Revenue Service (IRS) or the Securities and Exchange Commission (SEC).

Expert Insight

Occasionally, a bank or an insurance company may lease an employee to aid in implementing mechanisms in which corporate staff does not have expertise. Assume a bank wants to establish a new computer model that calculates automatically market risk in the bank's securities exchange transactions. The bank may hire, or lease, a university finance professor to provide insight into market risk calculation tools such as Monte Carlo simulation, VaR (value at risk) and stress testing.

References

• FFEL: First Financial Employee Leasing, Inc. Newsletter
• State of Vermont Department of Labor: Employee Leasing Companies- Final Rule