Topic Outsourcing HR / PEO
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Over the course of 2021, the National Association of Professional Employer Organizations (NAPEO) interviewed over 500 business owners and decision-makers on their understanding and reactions to proven benefit statements. While the exact order of preference varied based on the age of the decision-maker and the size of the business, there was a clear trend among the top seven benefits.
What is a PEO?
A Professional Employer Organization (PEO) is an HR outsourcing company that provides support and services to help businesses achieve their goals. The best PEOs will provide you with access to HR experts who can ensure your business remains compliant while building an attractive company culture that helps you hire and retain great talent. From payroll and tax remittance to healthcare access and workers' compensation coverage, the right PEO for your company can handle the complexities of HR-related work, freeing you and your internal team up to focus on your core business needs.
What are the Advantages of a PEO?
There are countless advantages to partnering with a PEO. While every business is unique and your needs are different, a PEO can provide you with the following seven benefits that may convince even the most ardent skeptics.
1. The Average Annual ROI of Using a PEO is 27.2%
As a small business, you have challenges getting access to affordable benefits. But you also know that benefits are crucial to attracting and retaining top talent in your industry.
With a PEO, you can see massive cost savings. This frequently comes from the ability to offer high-quality benefits at affordable rates. Cost savings often come from workers' comp and health insurance, but savings also come from reducing invalid unemployment claims. Your PEO will review and defend your company against any unemployment claims which might be invalid, without the need to hire additional HR staff.
2. Expected Annual Median Revenue Growth for PEO clients is 40% Greater than Comparable Non-PEO Firms
HR is a necessary component of any business. But it's also an incredibly complex and legally tumultuous area of your company, requiring absolute precision. For many complex and mundane tasks, like payroll and tax remittance, even innocent mistakes can be met with costly fines and penalties.
By outsourcing these duties to a PEO, you can free up your internal team to focus on your core business needs, building a culture that puts employees first. A PEO isn't meant to replace your internal HR team but instead complement them. It's also more cost-effective since you don't have to hire just one person and instead get access to a team of HR experts.
3. 69% of PEO Users Reported Growth in 2020 versus 28% of Non-PEO Users
Part of growing your business depends on your ability to scale. Without a PEO guiding you, you may not have the systems and processes to scale effectively.
Your PEO can help you create and implement HR best practices. This enables you to scale faster than you could without this support.
4. With a PEO, You can Offer Fortune 500-Level Benefits at an Affordable Cost
One of the biggest challenges small businesses face is providing health insurance to their team. And it's important because it's one of the most sought-after employee benefits.
With a PEO, you gain access to their master benefits plan, negotiated at scale by experts. This gives you and your employees access to high-quality benefits at costs you can afford.
5. PEOs Provide the Peace of Mind of Having Experienced HR and Employment Experts to Help You Comply with Government Regulations
A constant and looming problem for small businesses is compliance. Having a small HR team will spread them thin, and you may find that none of your employees has the time necessary to ensure compliance.
When you partner with a PEO, they'll ensure you are in total compliance. They will monitor and address any changes in federal, state, and local laws and regulations.
6. Businesses Partnering with a PEO are 82% More Likely to be Operating Normally Despite the Pandemic
Small businesses face many hurdles. One unforeseen hurdle was the global pandemic, which unfortunately caused many companies to fail.
Businesses that partnered with a PEO, however, operated normally. PEOs were able to help companies access PPP loans and other relief methods to help them continue normal business operations.
7. Employees of Businesses that Use a PEO Have Higher Levels of Engagement and Job Satisfaction
A common concern is that employees will not like having HR outsourced to a PEO. The truth is that PEOs upskill your internal HR team and complement them by providing great services.
Employees generally prefer HR departments supported by a PEO. Turnover is 10-14% lower for PEO clients compared to similarly sized businesses without a PEO.\
New Findings for 2021
The NAPEO report had some benefit statements which were not tested because of how new they were. This includes:
- PEO clients were more likely than non-PEO clients to report business growth in 2021 (64% vs. 45%)
- 71% of PEO clients expect an increase in the number of employees in 2022 versus only 47% of non-PEO clients
- 81% of PEO users expect profitability to rise in 2022 versus 70% of non-PEO users
These data paint a clear picture. PEOs are the right move to help your business grow and weather unforeseen challenges.
