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 follows is a brief discussion of the benefits of partnering with a Professional Employer Organization (PEO).
What is a PEO?
A PEO is a type of HR outsourcing solution. Not all PEOs are created equal and the PEO you choose should be able to help support your business. Generally, a PEO does the HR work you or your internal HR team don't want to do.
A PEO handles everything from payroll and compliance to risk management and performance metrics. The right PEO for your business is able to support you and provide you with guidance and support that helps your company grow in the best times and weather the storm in the worst.
What are the benefits of a PEO?
There are many benefits to partnering with a PEO. A good PEO can save your business money while increasing your employee productivity and engagement. In the end, your PEO should provide your company and employees with positive outcomes.
1. The Average Annual ROI of Using a PEO is 27.2%
When using a best-in-class PEO, clients find substantial cost savings, making for a positive ROI. These cost savings often come from:
- Savings on Employee Benefits
- Workers' compensation premium reduction and claims review
- Unemployment insurance claim review
The cost savings is also seen through your company's outsourcing of the HR work. Instead of hiring a new team member, a costly and time-consuming endeavor, you can take that money and reinvest it in your company.
2. Expected Annual Median Revenue Growth for PEO Clients of 40% Greater than Comparable Non-PEO Firms
When you outsource your company's HR needs to experts at a PEO, you free up yourself and your internal team to focus on your core business needs. Doing that allows your team the ability to focus on your company culture, a key component to attracting and retaining top talent.
3. 69% of PEO Users Reported Growth in 2020 Versus 28% of Non-PEO Users
PEOs not only support you in good times, but also in turbulent times. We've collectively seen no more turbulent time than that of early 2020. PEOs supported their clients during the very beginning of the Covid-19 pandemic by helping to implement policies and best practices that enable them to scale faster and weather the storm.
4. With a PEO, You can Offer Fortune 500-Level Benefits at an Affordable Cost
One of the most challenging aspects of being a small business is offering benefits to your employees. Aside from salary, strong benefits are the most requested item employees have of their employers.
For too many small businesses, however, it's just not affordable. Partnering with a PEO gives you access to their master benefits plan, negotiated at scale by experts. This allows you the chance to offer 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
Instead of needing to staff a person whose sole job it is to track legal changes, your PEO staffs regulatory experts who do that for you. They will monitor changes in federal, state, and local laws and update you as necessary, providing you with guidance about any changes you may need to make to stay compliant.
6. Businesses Partnering with a PEO are 82% More Likely to be Operating Normally in Spite of the Pandemic
Not only have PEOs helped companies scale during a global pandemic, their clients are more likely to have received access to Paycheck Protection Program (PPP) loans that helped keep them afloat during the worst of the pandemic. PEOs can also provide guidance and support for other relief methods, both during and after uncertain times.
7. Employees of Businesses that Use a PEO Have Higher Levels of Engagement and Job Satisfaction
A common concern of small businesses is that employees will not like having HR outsourced and have to speak with someone who's not part of the business. The truth is that PEOs help upskill your in-house HR team and complement them with great services.
Employees who work for companies that use a PEO actually prefer that relationship. Turnover in those companies is 10-14 percent lower than similarly sized businesses.
New Findings for 2021
The NAPEO report had some benefit statements which were not tested because of how new they were. PEO clients are more likely than non-PEO clients to report growth in 2021 (64% versus 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 go up in 2022 versus 70% of non-PEO users.
The data is clear: using a PEO gives your company benefits that go beyond your expectations. But not every PEO can provide you with access to all these benefits and reduce your costs. The only way for that to happen is to find the best PEO for your business needs. The right PEO will help your business give your employees what they want, while simultaneously keeping your costs down so you can grow and scale your business as planned.
