NAPEO Study Shows How Valuable PEOs Are for Small Businesses

Sep 26, 2017
| Jan Kaupas
NAPEO shows value of PEOs to Small Business

It’s an exciting time for the PEO industry. The rise of professional employer organizations over the last two decades has helped thousands of small and mid-sized businesses realize their goals and achieve success. It’s now becoming more and more known just how valuable a PEO partnership can be to small business leaders (and to the benefits brokers who work with them).

Earlier this month, a new study from the National Association of Professional Employer Organizations (NAPEO) took a look at the relationship between SMBs and PEOs. The survey uncovered some amazing statistics that further show the value of professional employer organizations.

What makes this study even more impactful is that not only did NAPEO survey small business client administrators, but they also surveyed the employees of these businesses. Let’s take a closer look at the results from this report, and what they mean for your small business.

1) 98% of Clients Would Recommend a PEO to a Small Business Colleague

One part of the study was directed specifically to business owners, which asked about three aspects of their experience as a PEO client. The most exciting result from this part of the survey was that 98% of respondents said they would recommend a PEO to their small business colleagues.

Needless to say, this is a great endorsement for PEOs. It shows the value and benefits a partnership can provide (we’ll get into specific benefits shortly) to small businesses and their leaders. These endorsements also help to spread awareness of PEOs, which only helps the industry.

2) 70% of PEO Clients Reported Revenue Increases

In order for 98% of businesses owners to recommend using a PEO, their partnership must have yielded some incredible outcomes. The survey results from NAPEO prove just that. 70% of surveyed business owners reported revenue increases since they became a PEO client. There’s not much that needs to be said about this statistic, it speaks for itself, as does this next one…

3) 66% of Clients Reported Increased Profitability

Like the previous stat, you can start to see why PEO clients would be extremely happy with their partnership. The importance of revenue and profitability increases being tied to a PEO relationship cannot be understated. Not only does it show that a professional employer organization can help with a small business’ HR burdens, but PEOs also help companies reach new financial heights.

4) PEO Clients Are Less Concerned About Recruiting New Employees

Recruiting is one of the biggest concerns all companies face. For small businesses, attracting and hiring new talent can be one of the biggest roadblocks to growth. However, partnering with a PEO can ease this burden by allowing SMBs to offer the same benefits as larger organizations.

The NAPEO study asked business owners (both PEO and non-PEO clients) how concerned they were about hiring employers. 45% of PEO clients reported recruiting was a “moderate” or “major” concern, whereas 70% of non-PEO clients said the same. This significant difference shows the wide-range of benefits a PEO can provide to a client.

5) PEO Clients Have Higher Quality HR Practices (As Told by Employees)

As mentioned earlier in this article, NAPEO didn’t just survey business owners. They also surveyed the employees of PEO clients. One area in particular where employees favored PEO partnerships is how they impact the quality of HR practices.

Employees were asked the following three questions:
  • “Our company has clear HR policies”
  • “I know who to contact to get help if I have questions about my company’s benefits”
  • “I feel comfortable I have someone to talk to if I have an HR problem”

For each of these questions, employees of PEO clients had responses that were higher than those of non-PEO clients. According to NAPEO, “these findings confirm that PEOs help their clients do a better job on the ‘people side’ of their businesses.”

6) Employees of PEO Clients Describe their Businesses More Favorably

One of the many benefits a PEO provides to small business leaders is the ability to focus all their time and attention to making their company competitive and successful. Instead of having to worry and spend time dealing with HR administration, SMB owners can take this time and use it for bettering the business.

Because of this, it should come as no surprise that PEO employees more frequently described their small business as:
  • Competitive
  • Innovative
  • Enabling Growth
  • Delivering Superior Service

HR can be a time-consuming function, especially for those who aren’t specialized in the area. This is another example of how a PEO can assist small businesses.

Small Business Owners AND Their Employees Can Benefit from A PEO

Studies like this prove time and again that professional employer organizations can provide tremendous value to small and mid-sized businesses. Whether its growing the business, making it more successful, or improving employee engagement and happiness, working with a PEO could be a decision that pays off in the long run.

Want to learn more about PEOs? Check out our eBook, How Well Do You Know PEO? This eBook provides an overview of the PEO industry as well as helpful information for brokers and employers!
How well do you know PEO