Topic Outsourcing HR / PEO

Why Do Clients of PEOs Grow Faster?

Why Do Clients of PEOs Grow Faster?

Your business may seem stagnant. You want it to grow faster and thrive. You have great ideas, but you’re constantly bogged down by administrative work. Luckily, there is a way to deal with those mundane duties so that you can focus on your core business needs. 

The National Association of Professional Employer Organizations (NAPEO) studies have consistently shown that Professional Employer Organizations (PEO) clients grow at a rate of 7 to 9 percent faster than similar organizations who do not partner with a PEO. There are several reasons for this growth boost provided by a PEO, but first we want to make sure we view the data correctly and not imply causation where none exists. 

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Correlation versus Causation 

If your company spends 25 percent more in marketing this month than the previous, and your sales increased, there may be causation at play. However, you would need statistical data to back up your hypothesis and establish that causation exists. If there is no statistical analysis, you can figure out if causation is likely by seeing if there are plausible ways for causation to occur. 

The same is true of PEOs causing businesses to grow faster. Without advanced statistical analysis, the best way to determine whether your business growth is correlation or causation is to see whether the PEO provides support that allows your business to grow faster.  

How PEOs Cause Faster Growth 

A PEO is by no means the only way to make your company grow faster, but it is one of the most effective. A PEO takes away HR administration duties from you and your internal team, letting you focus on what really matters—growing your business. 

Lower Turnover 

Reducing turnover helps companies grow faster. A study from NAPEO found that companies who partner with a PEO reduce their turnover by 10 to 14 percent more than companies who do not use a PEO. 

When your company lowers turnover rates, it reduces costs and increases productivity. When you don’t have to replace employees constantly, you can focus on your core business needs. Your attention and effort go into helping your employees become more efficient and growing your business. 

High turnover can serve as a disincentive for employees. It makes existing employees mistrust the organization and deters prospective employees from joining the team. 

More Engaged Employees 

When you have engaged employees, you have more loyal and productive employees. That comes from a positive culture, wonderful benefits, and low turnover.  

When your employees are engaged, they support your business and your mission. When they do that, they have more incentive to work efficiently and to remain with your company.  

Your employees also want to see your company invest in them. Partnering with a PEO tells your employees that you have confidence in them and, in turn, they develop more confidence in you. This serves to show your employees that you want to provide for them while they provide for your company by producing quality work.  

Positive ROI 

Any business decision requires an extensive analysis of cost. Some partnerships won’t always provide a positive ROI. But a PEO can provide you with best-in-class HR outsourcing services and a positive ROI. In fact, the average ROI of a PEO client is 27.2%.  

A PEO reduces your internal HR team’s focus on administrative duties, letting them work to build a better culture and provide you with support to reach your business goals. The most significant cost savings with a PEO come from: 

  1. Internal HR salary by eliminating the need to hire more employees 
  2. Health benefits 
  3. Workers’ compensation costs 
  4. Lower employee turnover 

A big area of savings for PEO clients is in benefits. When your company partners with a PEO, you gain access to the PEO’s master benefits package. This means that you can get Fortune 500 benefits at Fortune 500 costs. A PEO can negotiate these benefits at scale and give your company access to better quality healthcare options at cheaper costs than you could get on your own. 
A PEO can do the same for your workers’ comp costs. You join the PEO’s workers’ comp plan, giving you access to experienced modifier rates and premiums that may be less than what your company could get. Partnering with a PEO helps your business save costs in many ways while also providing your employees with benefits and your business with quality service. 

A PEO can Help Your Business Achieve Loftier Goals 

While all of the above data does not conclusively show that a PEO grows your business, but it does establish plausible causation that your business could benefit significantly from a PEO partnership. Your exact business cost savings will vary depending on your specific needs. But one thing is clear—a PEO partnership is one of the best ways to provide support to your employees and help your company grow faster than you imagined. 

How the Right HR Outsourcing Partner Brings you Closer to Your Dreams

Esther Ellington

Esther Ellington

Esther Ellington is the Director of Client Services at Questco Companies. Leading the Client Services and Onboarding Teams to deliver an exceptional client experience from the beginning of the client relationship and beyond.