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The Benefits of a PEO Can Give Your Business a Competitive Advantage

  • Human Resources
  • Article
  • 6 min. Read
  • Last Updated: 01/13/2017
PEO benefits for business
As your small business looks to grow, using a professional employer organization (PEO) could free up resources and help expand your benefits offerings.

Table of Contents

As your small business looks to grow, using a professional employer organization (PEO) could free up resources and help you offer competitive benefits so that you can focus on taking your company to the next level.

A PEO allows businesses to outsource some of the key aspects of their HR and business operations: benefits, payroll, recruiting, and training and development, for example.

Could your business benefit from a PEO? Let's take a closer look at some of the advantages of using such a resource:

Expand your employee benefits without increasing costs

In today's increasingly competitive talent market, employers are often looking for ways to offer value-added services to their employees without dramatically increasing costs. Top job candidates often pay attention to the benefits that companies provide and whether they're competitive with other offers they may be considering. For small and mid-size businesses, it's not always feasible or cost-effective to administer multiple benefits programs in-house.

By becoming part of a PEO, your benefits may get a significant boost — without adding to the bottom line. With a PEO, small businesses may be more easily able to offer employer-sponsored retirement plans, robust healthcare options, and more diverse benefits versus a company that administers all their programs in-house. According to Monique Jennings, Paychex HR generalist, small businesses employing a PEO typically get the most benefit from lower insurance costs because their employees are listed under the PEO's federal ID number for payroll purposes. This advantage extends to other areas such as group insurance costs, workers' compensation discounts, and, in most cases, a lower state unemployment insurance (SUI).

Improve employee service options

One of the many advantages of a PEO is assistance with the benefits selection process — whether you're working to ensure the plans you offer meet minimum regulations or you're actively searching for the best packages to offer your team. Your assigned HR professional can help you find competitive quotes for all kinds of insurance programs, from health to disability insurance. You can also contract for additional services through a PEO like background screenings and customized employee discount programs. Whether you're seeking ways to streamline your operations or add value for your employees through additional benefits, PEO services can help.

For small businesses, it can be a challenge to offer employees the service and flexibility that they desire in processing the multitude of transactions associated with HR services. From expert answers to retirement benefits questions to the ability to provide self-service portals for routine information updates, your HR infrastructure needs to be stronger than ever before. Working with a PEO can help you provide a modern and effective human resources experience to employees. Reducing frustrations and making individual transactions more effective can benefit individuals throughout the company.

Reduce employee turnover

Consistent and effective employee management plays a key role in maximizing productivity, minimizing risk, and offering employees the best experience possible. A PEO helps you manage your employees in several ways. By developing and customizing an HR handbook for your business with legally reviewed policies, for instance, can ensure your company is protected. An integrated human resources management system (HRMS) allows employees to access self-service information 24/7 and gives managers access to important business data. A PEO can also help with your employee training needs – whether in-person or via streamlined online delivery.

Employee turnover is costly. Replacing an employee can be expensive, time-consuming, and disruptive to workflows and client services. A PEO can be a secret weapon in attracting and retaining your company's most important talent with more competitive benefits and efficient service. The National Association of Professional Employer Organizations reports that PEOs help reduce employee turnover by 10 percent to 14 percent below the industry average, which can have a significant impact on your business and competitive position.

Eliminate the clutter to focus on your business

Managing human resources tasks — from processing payroll to administering employee benefits plans — can take a significant amount of your staff's time. It's a process that requires attention to detail and ongoing diligence to ensure accuracy. With a PEO, you're able to completely outsource the process to ensure that your employees are paid, offered the appropriate benefits coverage, and that all recordkeeping is completed with ease.

Paychex HR consultant Linda Martin adds that a Paychex PEO offers HR professionals dedicated to clients, providing that personal touch absent from call center environments. Additionally, they provide guidance on best practices and help proactively address areas of concern. Further, Martin says, larger businesses can also benefit from the convenience of using the technology that a Paychex PEO offers, versus having to research, purchase, and support equivalent technology internally. HR knowledge and the latest in integrated human resource management platforms can be a powerful combination for businesses.

Stay updated on regulatory and compliance matters

Staying on top of changing regulations was an often-cited concern of HR professionals in the most recent Paychex Pulse of HR Survey. One of the primary benefits of a PEO, according to Paychex HR consultant Michelle White, is that companies are able to reduce the risk of potential non-compliance with mandatory complex payroll regulations.

Specifically, a PEO can assist you with staying on top of changes that affect your business, including the Affordable Care Act, COBRA and state continuation coverage, minimum wage regulations, safety/OSHA requirements, workers' compensation, and state unemployment insurance. White notes that when using a PEO, businesses gain peace of mind knowing they are in compliance, since their PEO manages federal and state regulations.

Focus on what you do best to power growth

The 2018 Market Research report compiled by NAPEO notes that companies using a PEO reported higher business growth in 2017 (82 percent users vs. 66 percent non-users) and also expected higher growth in the current year (90 percent users vs. 75 percent non-users). According to Paychex HR generalist Mike Davenport, small businesses can benefit from a PEO by gaining support in areas including tax pay administration, benefits (usually for over 5 employees) support, employee assistance plans, employee handbooks, workers' compensation policies, and safety programs.

If you're a busy small business owner who wants to provide more consistent service and a better range of benefits to your employees, a PEO may be the right option. Determine your needs and work to find a PEO that provides custom solutions that can scale with your business over time. Thinking ahead may allow you to capture the benefits of a PEO, from greater employee satisfaction to more time for your HR team to focus on key value-add business activities.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.