How Does Employee Leasing Save Money?
The costs of direct labor are gross wages, FICA taxes, FUTS taxes, SUTA taxes plus workers compensation insurance and possibly general liability insurance premiums. All taxes are calculated as a percentage of gross wages. FICA taxes are 7.65%. FUTA taxes are 0.80%. SUTA taxes vary from client to client and from state to state. Insurance premium charges also vary in the same manner. The total of all these charges levied against gross wages is called the labor burden. An employee leasing agency with a large payroll spread over several clients can buy insurance in the private market at much deeper discounts than the average company can achieve on its own. By purchasing insurance in this manner the leasing firm can pass a portion of that savings to their client. For instance, a company paying a total labor burden rate of 25% on their gross annual wages would break down their costs in this manner: 7.65% FICA / MED 0.80% FUTA 1.0% SUTA 15.55% WORK COMP =25% TOTAL BURDEN RATE In this example,
