Is a PEO a Good Idea?
Are you struggling with not having enough time, lots of paperwork, feeling less efficient running your business, etc.?
Now might be an excellent time to consider a partnership with a PEO (professional employer organization). The benefits of a PEO go far beyond saving you time and reducing tedious tasks—although they certainly do. PEO benefits help small-to-medium-sized businesses scale their company (7-9% faster in most cases!), keep their employees happy and well-taken care of, and help protect you from avoidable legal trouble.
That's up to you! Keep reading for helpful PEO information to help you decide.
The Benefits of Partnering with a PEO
When deciding if a PEO is right for you, it's important to explore the benefits of a PEO first. Here are the most significant to your bottom line.
There are many ways your small or medium-sized business can save with a PEO. For instance, a recent National Association of Professional Employer Organizations (NAPEO) report uncovered cost savings as high as $450 per employee, equaling a return on investment (ROI) of more than 27% in cost savings alone.
You may be wondering where these cost savings are coming from.
First and foremost, by outsourcing HR tasks to a PEO, a business can save on the cost of hiring and training in-house HR staff. Although it varies, a study on companies with 0 to 500 employees found hiring and training costs per employee to be as much as $7,645 on average. Others with less specific employee numbers in the business estimated $4,000-$4,129 per employee.
Other cost-savings include lower premiums for employee benefits that compete with large companies, with more indirect savings coming from:
- Retaining employees
- Decreasing employee turnover rates (NAPEO reports a 10-14% lower rate with a PEO)
- Reducing costly errors
- Preventing compliance issues
- Save employee time (and its associated costs)
A PEO can take care of many time-consuming HR tasks, freeing up business owners and managers to focus on other priorities. While this saves on the costs associated with the employees being paid for time-consuming and tedious tasks that are better suited to automation, it can help in other areas as well, such as spending more time on more important matters:
- Your employees
- Your company culture
- The specialized tasks they were hired to do (but were likely kept from due to trivial tasks)
- Day-to-day operations that are mission critical
For the business owner alone, studies report a day or more per week spent on HR issues (according to 45% of small business owners). By delegating these tasks to your PEO, you could focus on other areas of business that will help you scale. A PEO can take over some administrative tasks, and they can advise you on maximizing employee time with more efficient ways to complete tasks (i.e., manual versus automation).
Access to expertise
A PEO has a team of HR professionals with a range of skills and experience. This can be especially beneficial for businesses that don't have in-house HR expertise. Your small-to-medium-sized business can tap into a PEO's expertise to guide decisions on everything from the best ways to complete HR tasks to staying out of legal trouble and preventing your business from suffering massive penalties and fees.
In fact, most PEOs have teams of experts on topics such as:
- HR management
- Unemployment management
- Employer taxes and payroll
- Employee benefits
- Safety/risks and worker's compensation
- Workers’ Comp claims management
- Employment laws and compliance
- HR Strategy
- Retirement plans
- Wellness and company culture
A PEO can help a business comply with employment laws and regulations, saving time and reducing the risk of costly mistakes. There are dozens of important laws — on a federal, state, and local level — your business needs to be familiar with to ensure the proper steps are being taken to remain compliant and prevent issues.
A company grows from a handful to hundreds of employees, it can be very challenging to keep up with current laws—let alone changing laws. A PEO keeps you up-to-date on the latest laws while sharing risk management strategies.
A PEO can also offer a range of employee benefits, such as health insurance and retirement plans, which can be more cost-effective and convenient for a small business. You may wonder how this works, — we have the answer.
By partnering with a PEO, you become part of their larger organization in a co-employment relationship. As a result, you off-load many responsibilities, and much of the risk. Plus, you gain access to their larger employment model allowing you to offer your employees better benefits through its organization.
The co-employment relationship with the PEO means all those big insurance companies that offered you great employee benefits, which only came with premiums outside your budget, are no longer an issue — and now because of the PEOs economy scale you receive great benefits as though you were a larger company.
Is a PEO a Good Idea?
A PEO is a good idea for really any small or medium-sized business that wants to become an employer of choice, outsource HR tasks, access expertise and technologies, plus save time and money. Research also shows that those companies that partner with a PEO have 40% better revenue growth and are 50% less likely to go out of business.
That said, not all PEOs are created equally. It's crucial that you carefully research and evaluate different PEOs to find the one that best meets the needs of your business.
Each PEO will have different specializations that accommodate your business and industry. For instance, PRO Resources is an industry-leading PEO that works with many industries, yet have been the one source for manufacturers, trucking companies, and construction/builder. Their PEO model differs in that they offer “white glove” hands-on services along with cloud base technology with recruiting and applicant tracking platforms and for those that prefer — customized client portals that deliver a seamless user experience. Schedule a conversation to discuss your business needs and learn more about what PRO can do for you!