Small Businesses Using PEOs on the Rise

According to research sponsored by NAPEO, 14 – 16 percent of small businesses are now using Professional Employer Organizations (PEOs). What factors are driving businesses to outsource HR and how does using a PEO benefit them?

Increasingly complex regulatory environment

Many small companies are equipped to only handle basic HR functions. Even the bare minimum can be time-consuming and open companies up to unforeseen liabilities. Rapidly changing legislation starting with the Affordable Care Act (ACA) and more recently new state level labor- and employment-related bills complicate matters further. Since PEOs specialize in managing every aspect of HR, client businesses can avoid the stress of compliance issues.

Higher employee retention

Employee turnover rate is 10 – 14 percentage points lower for companies using PEOs compared to similar companies not using a PEO. Skilled and motivated employees represent a critical asset in the tight global economy. From helping facilitate new hires to handling onboarding and training, services provided by PEOs provide far-reaching benefits including higher growth rate, lower employee turnover rates, and higher rates of business survival.

Broader benefits offering

Retirement benefits play a crucial role in attracting and retaining top talent. Employees rank it as third most important must-have benefit. A key difference between PEO clients and other companies is access to employer-sponsored retirement plans (401(k) or similar). Sorting through plan options, administration requirements and fiduciary responsibilities are the top reasons why small businesses don’t offer retirement plans. By handling these functions, PEOs make this important benefit attainable for small companies.

Lower costs

With economies of scale, PEOs can offer a broader array of services at a lower cost than basic HR administration. These services allow senior management to focus on the growth of the company, which leads to higher business survival rates and lower employee turnover.

More companies than ever understand the win-win opportunity of working with a PEO. MidwestHR is a top Illinois PEO that’s been helping companies focus on strategy and growth instead of daily HR demands for almost 20 years. Our unique approach allows companies to pick and choose which services best fit their needs without long-term contracts. Give us a call to discuss your company’s HR needs.