November 17, 2023 | By Questco Companies
Retention is critical for business success. The cost of voluntary turnover can range from 90-200% of an employee's annual salary, according to research by the Society for Human Resource Management (SHRM). High turnover hurts productivity, morale, and institutional knowledge. As a 2017 NAPEO White Paper on PEOs shows, partnering with a Professional Employer Organization (PEO) can help companies craft effective retention strategies.
The 2017 NAPEO White Paper compiled survey data from over 1,500 employees at PEO client companies and non-PEO companies. It found higher engagement, loyalty, and satisfaction among employees at PEO clients. For example, the percentage of employees who expected to work for their company until retirement was 8 points higher at PEO clients compared to non-clients.
Similarly, a 2014 NAPEO White Paper used IRS data to show 10-14% lower turnover rates for PEO clients versus non-clients.
This data demonstrates how PEOs positively impact retention. But how exactly do PEOs impact employee retention?
A leading contributor to employee burnout and turnover is work overload. Many small and mid-sized businesses lack robust HR and administrative support. As a result, team members and leadership experience reduced flexibility, wellness and morale due to getting bogged down handling non-core tasks. This can limit work-life balance initiatives. It also reduces time and resources that could be invested into the employee experience.
By providing comprehensive HR services, PEOs lift these burdens that drive turnover. They handle payroll, benefits, compliance, and other administrative HR functions. This alleviates time-consuming paperwork and complex regulations from the employer's plate. It also allows leadership to devote more focus to business strategy and people management. With extra time and money freed up, companies can implement more programs that boost employee health, flexibility, and morale.
With PEOs managing administrative tasks, employers gain greater capacity to directly support their workforce. This enables a positive cycle of improved wellness, work-life balance, flexibility, morale, productivity, and retention.
PEOs help create a positive work experience that engages employees and earns their loyalty. For example, the 2017 NAPEO survey found that engagement scores averaged 5 percentage points higher for staff at PEO clients compared to non-clients.
By elevating hiring practices, PEOs enable companies to effectively recruit and onboard top talent. With PEO guidance, employers can optimize training programs to continually develop employees' skills. PEOs also provide HR expertise to help structure competitive compensation, recognition programs, and advancement opportunities that motivate staff.
Additionally, PEOs supply useful workforce analytics and metrics on key factors like satisfaction, turnover rates, and career growth. This empowers leadership to make data-driven decisions to further improve the employee experience. For instance, they may implement more mentorship initiatives, flex scheduling, or peer-to-peer recognition.
With enhanced HR programs and data-driven insights from their PEO partner, employers can tangibly boost employee engagement, culture, and satisfaction. This greater satisfaction directly translates into improved retention.
The direct effect of PEOs on turnover can be clearly seen in employee loyalty metrics and turnover rate data.
As noted earlier, the 2017 NAPEO survey found employee loyalty significantly higher at PEO clients. For instance, the percentage of staff who expected to stay with their company until retirement was 8 points higher at PEO clients compared to non-clients. This demonstrates greater retention resulting from PEO partnerships.
The 2014 study uncovered markedly lower turnover rates for PEO clients. Analyzing IRS data from over 20,000 small and mid-sized businesses, this research found employee turnover rates were 10-14% lower for PEO clients compared to non-clients. This competitive advantage in retention is a key employer brand benefit of PEO partnerships.
By boosting employee loyalty and engagement, PEOs directly improve retention. This retention-enhancing impact generates considerable cost savings and productivity gains for employers.
Forward-thinking companies can leverage PEOs as a strategic partner for maximizing employee retention. By elevating HR capabilities, reducing burdens, and improving satisfaction, PEOs provide holistic solutions to keep great talent. Partnering with a PEO can transform an organization’s retention outcomes and fuel sustainable success.
PEOs offer a multifaceted approach to transforming retention strategies and outcomes.
First, they elevate HR capabilities with expertise in areas like compensation, training, and data analytics. This empowers strategic retention efforts.
Second, PEOs lift burdens like compliance and payroll off employers' plates. This frees up leadership resources to focus on enhancing the employee experience.
Additionally, PEOs directly boost satisfaction by improving hiring, development, recognition and workplace culture. Greater satisfaction drives higher engagement and loyalty.
Finally, metrics clearly demonstrate PEOs' concrete impact on retention. Studies confirm significantly lower turnover rates among PEO clients compared to industry averages.
In total, PEOs take an integrated approach to retention. By enhancing HR competencies, reducing administrative burdens, and improving the employee value proposition, PEOs enable employers to curtail turnover and build an engaged, productive workforce. Partnering with a PEO can help any organization transform retention challenges into sustainable success.