Why Does Partnering with a PEO Lead Small Businesses to Success?
Too many small and mid-sized business owners are trying to run daily operations while juggling HR administrative duties: payroll, insurance claims, and benefits. Instead of trying to do it all or hire a costly HR team, a professional employer organization, or PEOs, take these responsibilities off your plate. PEOs are a full-service human resource outsourcing organization that performs an array of employee administration tasks for your company under a joint employment relationship.
So, what are the benefits of a PEO and the advantages of HR outsourcing? Some of the top reasons are observed in research. Not only have PEOs helped small businesses grow 7-9% faster with a 50% less likely rate to fail, but economist Laurie Bassi reported that businesses with a PEO experience 40% better revenue growth and 14 to 16% lower turnover rates.
Moreover, the report also found that 15.3% of all firms with 10 to 99 workers are already working with a PEO. To learn more about why that is, take a look at the PEO advantages and benefits of outsourcing HR services you need to know to make the switch!
The Demands of Running a Business
As you likely already know from experience, the demands of running a business can often become too much to bear, especially when you have many other obligations as a business owner.
Just to name a few, here are some of the most time-consuming HR tasks that every business is required to do:
- Recruitment and New Hire Information
- Onboarding / Offboarding
- Employee Performance
- Timesheets and Attendance Tracking
- Daily Reporting
- Email Management
- Tracking Compliance and Other Legal Issues
- Employee Benefits
And that's just a piece of the pie. HR takes care of your business by taking care of your employees in every way possible to ensure they're happy with your company. This way, turnover is low, loyalty is high, and your business can run at its maximum potential.
The problem is that these important HR tasks can come with an array of frustrations:
- Uncertainty about Laws and Regulations
- Trying to Run the Business and Tend to Customers along with HR Tasks
Small and Mid-Sized Businesses Need HR But Don't Have an HR Team
Despite being an integral part of every company, the cost of hiring an HR team is much more than most small and mid-sized businesses can afford. Just covering the basics, there are hiring costs, training costs, salary, and benefits, along with the productivity costs as your new hires learn their way around the office and work environment.
To put that more into perspective, here are some numbers we discovered through research: first and foremost, the average hiring cost per employee is estimated to be around $4,129, when it takes more than 40 days to fill the position and costs go higher in some cases. Training costs can average about $400, and salaries can add up quickly.
You'll have at least one HR manager on the team (salaries average around $91,000-$120,000), and that's not including the other team members, such as an HR specialist ($61,920 average annual salary) or even an HR assistant ($41,430 average annual salary). Finally, the average cost of benefits per employee varies by what you offer. With health insurance averaging between $5,000 and $30,000, Health Savings Accounts ranging between $500 and $1,500, retirement plans equaling 2-6% of the employee's salary, and dental insurance ranging between $1,500 and $4,500 annually.
Many small and mid-sized businesses can't afford these HR costs —yet they can't do it all by themselves. So, where's the middle ground?
This is where a PEO comes in – an outsourced HR team that provides a wealth of services. In fact, your business will benefit from PRO in the following ways:
- It makes your business more cost-effective by connecting you with an expert team. You don't need to spend precious time finding and then hiring, onboarding, training, paying salary, benefits, bonuses, and more.
- Improve recruitment and employee retention with a PEO that ensures only the best fits (cultural fit, skill, qualifications, etc.) are being inducted into your team.
- Pay less for benefits when you enter a co-employment relationship with a PEO. This allows you to compete against the big guys with salaries, benefits, and other important incentives top talent seek.
- Boost employee wellness and improve safety by partnering with a PEO that can help you design the right safety and return-to-work program while offering employees more incentives to improve their health and overall wellbeing.
How a PEO Works
When you partner with a PEO, the PEO takes on certain responsibilities and risks associated with you as their client. This partnership is called a 'co-employment' relationship. For more reference, the National Asssociation of PEOs defines co-employment as "a contractual allocation and sharing of certain employer responsibilities between the PEO and the client."
What Doesn't A PEO Do?
First and foremost, a PEO partner does not replace your entire internal HR team (if you have one) or control any part of your business. It is a common misconception that a PEO can dominate your whole business by making critical operating decisions – but this is not the case. A PEO is by your side, helping and assisting but never taking over.
Moreover, PEOs aren't tax and legal advisors. While a PEO can undoubtedly help you get all your documents and filings to help you stay in compliance, it's still important for you to remain familiar with applicable laws.
The Benefits of a PEO for Small and Mid-Sized Businesses
With the right PEO, your business can experience a host of benefits that will allow you to compete in your industry and thrive.
The top benefits of a PEO for small and mid-sized businesses that lead to success are:
- Removes all HR-Related Tasks off the Plates of Business Owners or Other Employees
- Better Insurance Costs
What Does Working with PRO Resources Look Like?
What can PRO Resources accomplish to make your small businesses better? For starters, you'll see more growth, save money, and raise ROI. We understand that building and maintaining a successful business takes a lot. PRO is here to take care of the HR tasks you don't have time for, so you can take care of other important matters. Reach out to learn more about our services and how they can benefit your small to mid-sized business.