Topic Outsourcing HR / PEO,

How Did PEO Clients Outgrow Their Competitors During the Pandemic?

How Did PEO Clients Outgrow Their Competitors During the Pandemic?

The National Association of Professional Employer Organizations (NAPEO) undertook a survey during the peak of the COVID-19 pandemic. According to the research, 69% of Professional Employer Organization clients witnessed growth, whereas just 28 % of non-PEO users grew during the pandemic. Over the past two years, PEO customers have had a 50% lower likelihood of closing down permanently. Additionally, PEO clients were more likely to keep their staff despite a labor shortage and suffered fewer adverse effects from the epidemic.  

Why was the discrepancy so pronounced? 

PEOs Increased Access to PPP and Loan Forgiveness 

The Small Business Association (SBA) managed the business aid program known as the Paycheck Protection Program (PPP). PPP loans were created to give direct benefits to small firms throughout the country to retain people on payroll even when they were not working. 

Businesses who took out PPP loans would be entitled to forgiveness under specific conditions. Throughout the pandemic, PEOs benefited their customers by analyzing and adhering to pandemic-related regulations, managing the shift to remote work, submitting PPP loan applications, and getting PPP loans forgiven. This allowed business owners the psychological space and time to navigate the many difficult choices and process changes they had to make. In comparison to similar small businesses, PEO clients were: 

  • 18% more likely to get their PPP loans forgiven; 
  • 82% more likely to resume normal business activities (or better) 

PEO Clients See a Positive Return on Investment  

NAPEO performed research on how PEOs reduce HR-related expenditures, and the findings are impressive. According to the research, the conservative estimate of the projected return on investment (ROI) for PEO clients is 27.2%

This estimate is based on the cost reductions for PEO clients in the following five HR areas:  

  • Lower HR staffing costs 
  • Access to affordable employee benefits 
  • Access to affordable workers compensation insurance 
  • Unemployment insurance (UI) 
  • Lower turnover rates and higher engagement 

To determine the predicted ROI, NAPEO estimated the PEO-related cost reductions per employee from the five expenditures listed and matched this figure with the PEO costs per worksite employee (WSE). 

PEO Clients Usually Grow Faster 

A PEO is not the only approach to accelerate your company's growth, but it is one of the most efficient. According to NAPEO, PEO clients grow 7 to 9 percent quicker than comparable organizations that do not work with a PEO. This is because business owners can devote their attention to growth activities such as product innovation, sales, and advertising rather than being bogged down in HR administration. 

Working with a PEO allows you to delegate: 

  • Payroll 
  • Workers compensation 
  • Administration and filing of taxes 
  • Onboarding 
  • Compliance 

PEO Clients Are Less Likely to Close 

Even before the pandemic, PEO clients were 50% less likely to collapse than comparable non-PEO firms. In the pandemic's early stages, company owners were inundated with information, policies, and legal requirements. And it often seemed like the regulations were evolving each week. It takes a significant amount of information, time, and effort to decipher legal jargon, determine which rules apply to their type of business, and keep up to date on new legislation. The capacity of a business to adapt to changing conditions determined whether it remained open or closed during these early months. 

PEO clients had a 58% lower chance of closing permanently, an 82% greater chance of returning to regular or superior business operations, and an 81% higher probability of employment growth since the pandemic compared to other small companies. 

Other Advantages for PEO Clients 

While no one could have anticipated the pandemic's upheaval, most businesses misjudged the protective benefit of outsourced HR.   

Here are some further reasons why you should patner with a PEO for your benefits and human resource requirements: 

  • Attract Top Talent - A high-quality benefits framework allows you to build and retain your team if you offer these attractive perks through your PEO. 
  • Improved Working Conditions - Working with a PEO helps you to establish a better work environment for your staff. 
  • Flexibility - One of the biggest PEO perks is the option to scale up or scale down depending on your current needs. 

Because PEOs help minimize liability and boost efficiency, you’ll have more time to focus on your company's core capabilities and be better positioned for growth. 

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