The desire to contain HR costs and alleviate HR administrative burdens lead approximately 175,000 businesses to use the services of Professional Employer Associations (PEOs). In 2017, the National Association of Professional Employer Organizations (NAPEO) published results drawn from its collected survey data. The study queried 1,588 employees that work for both PEO client firms and non-PEO firms. The survey found significant differences between PEO client companies and non-PEO companies regarding employee job satisfaction, employee engagement, and employee retention.
The report clarifies that the intention to stay with an employer for the long-term favors the PEO client businesses rather than the non-PEO businesses. For example, in response to whether the survey responders were likely to leave employment in the next year, only 8% of employees working for PEO client businesses expected to leave within the following year. Nearly double that percentage (14%) of employees of non-PEO businesses expected to leave so soon.
In addition, 28% of employees who work at PEO client companies responded that they were likely to stay at their employer for the next few years. The percentage of employees of non-PEO companies (31%) who said they were likely to stay a few more years was greater by 3% than the PEO client firm employees. In contrast, however, 29% of the PEO client businesses' employees responded that they were likely to stay with their employer until they retired. Only 21% of employees at the non-PEO companies said they were likely to remain until retirement. That's a 9% increase of intent to stay for PEO client firm employees compared to firm non-PEO employees.
Survey respondents scored the employees' intent to stay on a 0-100 scale, based on the number of years their employer was a PEO client. The average lowest score (64%) went to the employees of firms that were never PEO clients. Employees who worked for firms that were PEO clients for less than a year earned a score of 66%. Companies that were PEO clients for up to five years earned a score of 69%. The highest average score (71%) belonged to companies that were PEO clients for six years or more. These scores indicate that employee intent to stay with an employer increases with the firm's number of years as a PEO client.
In addition to employee retention, PEOs provide Fortune 500 level employee benefits at a price that small businesses can afford.
How do PEOs Improve the Employee Experience?
The NAPEO report reveals the differences in the average scores between PEO clients and Non-PEO companies in the following areas:
Formal Learning
Survey respondents indicated that PEO companies provide a greater opportunity for employees to learn new skills or improve skills employees already have. On a scale of 0-100, PEO companies earned average scores of 73, while non-PEO businesses earned average scores of 68. That is, non-Peo firm earned 5 points lower average scores than the PEO businesses.
PEO clients also earned 7 points higher average scores (67) than non-PEO companies (60) when valuing and rewarding learning and professional development opportunities.
Informal Learning
When asked how their companies rate on providing quick access to information employees need to do their jobs effectively, survey respondents graded PEO companies an average score of 73, five points higher than non-PEO employers (68).
Accountability
The survey indicates that accountability is essential to employees. The employees of PEO clients gave their employers an average score of 70. Non-PEO businesses received an average score of 64, 6 points lower than PEO clients. Survey respondents indicated that employees want their employers to hold employees responsible for producing quality work.
Commitment to Employees
With regard to a company's commitment to employees manifested in terms of job security, the survey respondents gave a score of 69 out of 100 to PEO client companies. Survey respondents gave a score of 62 out of 100 to non-PEO concerns.
When researching a company's commitment to employees in the context of generous employee benefits, survey respondents awarded a score of 66 out of 100 to PEO clients. Non-PEO concerns received a score of 56 out of 100.
Hiring Practices
The survey also inquired into whether the two types of businesses differed on the adequacy of employee orientation. Survey respondents awarded a score of 59 out of 100 to PEO client firms. Non-PEO firms received a 10 points lower score of 49 out of 100.
Human Resources
The survey asked three separate questions when it comes to employee perceptions of their employer's Human Resources Department. PEO client firm employees gave a score of 68 out of 100 concerning feeling they about the usefulness of HR. Non-PEO businesses received a score of 62 out of 100.
With regard to knowing who to contact with questions about employee benefits, the PEO client firm employees awarded their employers a score of 82 out of 100. Non-PEO employees scored their employers 77 out of 100 points.
Finally, concerning clear HR policies, PEO client firm employees were awarded 70 out of 100 points while Non-PEO businesses received an average score of 61.
Job Design
Employees of PEO clients gave their employers an average score of 67 out of 100 for clearly defining the skills necessary to succeed in the company. Employees of Non-PEO businesses awarded their employers an average score of 61 out of 100 in the same category.
Work Processes
When it comes to well-defined work processes for getting work done, PEO clients received average scores of 64 out of 100 while non-PEO concerns received average scores of 57 out of 100, a drop of seven points.
Employee Engagement
The survey asked participants to score their company's employee engagement as shown by their desire to remain with the company for years. PEO client companies received average scores of 69 out of 100, while non-PEO businesses only received average scores of 63 out of 100, a difference of six points.
Business Success
The survey asked employee participants three questions about their employer's business success. PEO clients consistently scored higher than non-PEO businesses.
The first question asked whether the employer was taking the right steps to compete in the employer's marketplace successfully. PEO client businesses received average scores of 71 out of 100. Non-PEO companies received an average score of 63 out of 100, 8 points lower.
The next question asked whether the employer's work environment helped employees provide superior customer service. PEO clients received an average score of 73 out of 100. Non-PEO companies earned an average score of 66 out of 100, lower by seven points.
The survey questioned whether the participants thought their employer was innovative. PEO clients received an average score of 72 out of 100. Non-PEO businesses received an average score of 66 out of 100, lower by six points.
How do Employers Rate PEOs?
It is evident from the survey results that employees think highly of their PEO client firms. Employers also have high praise for the PEO experience, as indicated by the following:
- 98% of business owners would recommend a PEO to a small business colleague, and
- PEO client firms experience an average 10% to 14% lower turnover.
The lower turnover assessment often results from better employee benefits and overall employee experience in firms that contract with PEOs. In addition, PEO support frees up in-house HR staff time to focus on employee engagement incentives and employee satisfaction efforts that then reduce employee turnover rates.
Moving Forward with PEOs
The NAPEO report shows that employers and employees agree on the value of PEOs. The advantages of PEOs are evident in the responses of both employees and employers.
In summary, the major advantages of PEOs for employers and employees are:
- Provide comprehensive solutions to small and mid-size businesses including payroll, tax filings, HR administration, and compliance with regulatory guidance.
- Help businesses increase productivity and profits.
- Grow 7-9% faster.
- Help companies concentrate their energy on growing their businesses.
- Provide Fortune 500 employee benefits at a price small to mid-size companies can afford. Benefits include 401(k)s, health, life, dental, vision, dependent care, and other benefits.
As restrictions from the pandemic start to ease, your business may join the list of companies rethinking their policies toward remote workers and outsourcing HR administration. Without question, PEOs are the way to go.
