How PEOs Create Value for Small Businesses

A Professional Employer Organization (PEO) is the key to many small businesses’ successes. Managing operations such as payroll, worker’s compensation, HR administration, and retirement benefits, PEOs give smaller business owners more time to focus on vital company goals while benefiting from high growth rates and better employee retention. Here are some additional ways PEOs help create value for small businesses.

Retirement Benefits

One of the most valuable services provided by PEOs are the opportunities they provide for employer-backed retirement plans, such as 401(k) packages and various others. Such plans are more readily available and accessible to companies that choose to use a PEO as compared to a group that does not. PEOs offer benefits to both the company and its employees that would otherwise not be possible.

Retirement plans play a major role in answering one of the most crucial questions businesses ask: How can a company not only retain their current employees but also attract new ones? A 2013 survey conducted by Towers Watson concluded that 45 percent of workers believed retirement benefits were an “important” reason to remain working for their current employer, and 29 percent of employees considered retirement benefits an influencing reason they chose to work for their current employer in the first place. Surprisingly, retirement benefits are uncommon among most small businesses, which exemplifies the large gap between PEO users and non-PEO businesses. Almost all PEOs (97 percent) offer some form of retirement plan to their customers. Comparatively, only 13 percent of employees in small firms (those employing less than ten employees), 32 percent of workers in companies with 10 to 29 employees, and 36 percent of employees at firms with 50 to 99 employees work for businesses that promote some form of retirement plan. (Employee Benefit Research Institute (EBRI)).

By giving smaller companies more options to provide their employees with retirement packages, PEOs create value for the business itself as well as for its employees. PEO clients see direct advantages in return – the ability to retain and attract better-qualified employees allows businesses to grow more quickly.

HR Administration Services

Besides retirement plans, PEOs offer a range of various HR administration services, such as Paid Time Off (PTO) tracking and reporting, performance review assistance, and telephone consultation. Like retirement plans, many of these HR benefits provided are more accessible to PEO clients than non-PEO businesses, particularly in regards to smaller employers.

More Services for Less

Although PEOs can provide customers with an assortment of services, PEOs still have the ability to administer these services to their clients at a lower cost than the price the client would pay for simpler HR administration. Looking at data from various surveys comparing PEO and non-PEO clients, it’s been shown that businesses with PEOs save approximately 35 percent on HR administration services compared to non-PEO businesses, even though they are still benefitting from the additional services provided by the PEO.

Interested in learning more about how PEOs can give your company more value? Get in touch with StaffScapes to find out more.

Written By: Jim Thibodeau