Why Should Small Business Owners Consider PEO?

Mar 05, 2019
| The Extensis Team
Why Should Small Business Owners Consider PEO?

Being a small business owner today is no easy task. The amount of time and dedication that goes into the company each day can be overwhelming.

But what can be extremely frustrating is when HR tasks take up a large portion of this time. Not only does this mean less availability for high-value activities, but failing to properly administer all HR responsibilities could cause issues for the business.

When HR becomes too challenging for a small business to handle on their own, working with a professional employer organization (PEO) could be the perfect solution.

Consider these PEO statistics:
  • A PEO Can Help Small Businesses Grow 7% to 9% Faster
  • Partnering with a PEO Lowers Employee Turnover by 10% to 14%
  • Companies Who Use a PEO Save 35% on HR Administration Costs

Besides these stats, there are other reasons why small business owners might want to use a PEO. Here are 7 examples:

1) Compliance with Employment Laws

One of the most important HR responsibilities is maintaining compliance with employment legislation at the federal, state, and local levels of the government.

Small businesses tend to lack the in-house resources needed for HR compliance. Often this task falls on the owner, which can be time consuming and stressful due to the complexities involved with today’s employment laws.

Working with a PEO provides business owners with access to compliance and risk management professionals who help ensure their clients stay up-to-date with all legislation.

Given the frequency of employment legislation updates (New Jersey just recently announced a new minimum wage law for example), a PEO partnership can help small business owners worry less about compliance and potential penalties that can come from violating employment legislation.

2) Healthcare Costs Continue to Rise

A concern that is shared between employers and employees is the continuing rise in healthcare costs.

Small and medium-sized businesses (SMBs) are seeing some of the largest average increases from year to year as carriers reduce the quantity of plans in this market or decide to leave it all together.

PEOs can help overcome this challenge by providing small businesses with access to healthcare options that are similar to those offered by large employers, and often at a reduced cost than what they could find on the open market.

Additionally, most PEOs will be able to tailor healthcare plans to the individual business based on the location, industry, and employees. Considering how important healthcare benefits are for recruiting and retention today, this is one of the main benefits to a PEO partnership.

3) Employee Learning and Development

Workers today, especially younger generations, place substantial value in learning and development. In fact, many expect employers to offer some type of formal L&D program to help in their career progression.

Some professional employer organizations offer learning and development services that small businesses can offer to their employees.

In some instances, this is done through the PEO’s HR technology, which provides on-demand courses that workers can take when they choose. But a PEO could also provide materials to business owners to help them with other forms of L&D activities such as live training courses and guides.

Having a learning and development program can be a great differentiator that can help smaller businesses attract and retain talent.

4) Offer Modern, Enhanced Benefits

As employers of all sizes struggle with recruiting and retention, many have turned their focus to improving current benefit offerings to meet the expectations and demands of today’s worker.

In doing so, employers make themselves more attractive to not only potential candidates, but also current employees which helps to reduce turnover.

But enhancing benefits plans can be challenging for smaller employers, especially when it comes to selecting the appropriate benefits and the costs associated with them.

Working with a PEO enables small businesses to offer the same quality and quantity of benefits as large employers. These can include:
  • Personalized health insurance plans
  • Retirement benefits
  • Voluntary benefits (identity theft protection, pet insurance, legal assistance, etc.)
  • Complimentary benefits (employee assistance programs, employee discounts, etc.)

A recent report found that 61% of small businesses plan to offer more generous benefit packages than their competitors. One way to do this is by looking into a PEO partnership.

5) Problems with Recruiting and Retention

So far we have hinted at this major HR challenge that employers are facing today. But working with a PEO can help small businesses overcome the problems associated with recruiting and retaining today’s top talent.

Offering modern, competitive benefits is one way accomplish this, and having great health insurance options is a major component that workers look for.

Additionally, things like a learning and development program helps to teach current staff new skills that can boost their happiness and engagement – two critical aspects of retention.

Both recruiting and retention will likely become even more difficult in the years ahead as the talent market grows for competitive for employers. Small businesses can set themselves up for success by partnering with a PEO and improving many of their HR practices.

6) Add HR Technology

In today’s Digital Age, technology is included in almost every aspect of daily life, and that includes work. In year’s past, HR technology was associated with mainly larger employers.

But as technology use became more widespread, small employers also started to implement it into their HR strategies – often through the use of outsourcing solutions.

Many PEOs offer their clients access to HR technology that helps business owners, managers, and employees handle many day-to-day HR activities. These include:
  • Payroll
  • PTO requests
  • Compliance
  • Reporting and analytics
  • Employee management

Business owners and leaders can simplify their HR responsibilities through the use of technology, which a PEO partnership can provide!

7) A Strategic Partner That’s with You as You Grow

Perhaps the biggest benefit small employers gain through a PEO is a strategic partner that is there to help your business as it grows.

A growing business has its own challenges associated with it, but a PEO can ease this burden. If a small employer outgrows its current benefit offerings, the PEO can make recommendations and provide new options that satisfy the needs of the business in its current growth stage.

Additionally, as a business grows, so too does its payroll and certain legal requirements. A PEO partner can help prepare business owners for these changes and ensure compliance as the company moves forward.

And should business leaders (or employees) have questions at any time, team members from the PEO are there to assist and help find solutions that ultimately benefit the company.

PEOs Help Employers with More than Just HR

Statistics like the ones above and others from the National Association of Professional Employer Organizations (NAPEO) show that PEOs help their clients with more than just their HR needs.

By addressing HR concerns, PEOs help their clients achieve business growth and longevity.

It’s these outcomes that explain why the PEO industry has been booming over the last few years and shows no signs of slowing down.

One area of HR is becoming increasingly more difficult for small employers to properly handle — maintaining compliance with employment laws. Download our eBook, Guide to Employment Law: Topics Employers Must Know to Stay Compliant, to learn more about some of the biggest trends and topics in employment law.

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