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4 Small Business HR Challenges PEOs Can Solve

Team of women entrepreneurs discussing startup ideas at a small business office.

Quick look: While leading a small business is incredibly rewarding, it also has its hurdles. Luckily, professional employer organizations (PEOs) specialize in helping these companies not just resolve problems but perform better than before. This Small Business Saturday, review small employers’ top HR issues and how a trusted PEO partner can guide and empower them every step of the way.

Small Business Saturday is right around the corner! The initiative, which falls on November 25 this year, aims to celebrate and support small businesses and the many ways they contribute to their communities.

Founded in 2010 by American Express, Small Business Saturday has become a pillar of the holiday shopping season. According to the American Express’s 2022 Small Business Saturday Consumer Insights Survey, U.S. consumers spent nearly $18 billion at independent retailers and restaurants on Small Business Saturday that year.

While small business is booming—99.9% of U.S. businesses are small companies, and small professional and business services created over 1 million new jobs in the last year—due to changing market conditions and shifting employee expectations, small employers face significantly greater challenges than ever before.

From adapting to emerging technologies to providing engaging work environments, there are numerous human resources (HR) challenges that small- and medium-sized businesses (SMBs) increasingly turn to outsourcing to solve. Professional employer organizations (PEOs) are one type of HR outsourcing partner that can help SMB clients overcome these problems and achieve their desired growth and bottom-line results.

While PEOs help with numerous HR issues, there are four common challenges that cause many small business leaders to seek this solution.

1. Cost efficiency concerns

Inflation continues to affect organizations nationwide, including small companies.

According to a recent PwC Pulse Survey,  87% of chief human resources officers (CHROs) are evaluating new methods of delivering HR value at a lower cost, and more than half of them are either actively changing or planning to change employee benefits to reduce costs.

Recent market challenges have limited the number of benefit options available to small employers, impacting their ability to provide affordable, high-quality health insurance for employees and their families.

This is one area where a PEO can prove valuable. By leveraging a PEO’s economy of scale, SMBs can potentially save money on employee benefits and redirect funds into workers’ salaries to help them compete with larger organizations when recruiting talent and prevent current high performers from leaving. Funds may also be relayed to other HR and organizational initiatives.

PEOs also provide risk and compliance expertise to keep clients compliant with all federal, state, and local HR and employment laws and regulations, including ACA, COBRA, ERISA, and more.

2. Adoption of artificial intelligence (AI)

It’s estimated that AI can be incorporated into 80% of jobs, including HR roles. The PwC Pulse Survey mentioned above reiterates these points. According to the data, 74% of HR leaders expect to use AI to support new business models in the next 12 to 18 months, and 83% state they’re hiring talent with these specialized skills.

PEOs can help SMBs take advantage of the latest AI tools in multiple ways. On one hand, they can aid in recruiting top talent with AI competencies. And on the other hand, they may have AI-based recruiting tools to help small businesses attract and hire the workers they need the most (whether those roles involve utilizing AI or not). Some PEOs, like ExtensisHR, offer DEI-focused sourcing from AI technology that can extract candidates from over 45 platforms and 800 million profiles.

As companies begin incorporating AI into their processes, they must remember technology performs best when paired with a human element. Qualities like empathy, creativity, and critical thinking are essential in a business’s customer service, complex problem-solving, and relationship building capabilities.

3. Developing employees’ skills

Teaching employees new skills is a hot topic. According to LinkedIn’s 2023 Workplace Learning Report, the top way organizations are working to improve retention is by providing learning opportunities. Additionally, PwC found that 84% of CHROs are increasing investments in skills-based talent architecture, and 80% either plan on or are already training existing employees on new technologies.

PEOs can assist small business leaders on this journey by helping them design professional development and learning and development (L&D) pathways. Certain PEOs may also offer discounted access to industry-leading employee engagement and performance platforms.

4. Engaging and retaining their workforce

While the job market has recently cooled down, engaging and holding on to talent remains a priority for businesses.

Per a recent Gallagher study, organizational leaders must keep an eye out for “company seekers,” or those who are content in their roles but may still seek other opportunities if they’re not satisfied with their level or pace of career development. It’s estimated that “company seekers” comprise 20% of each company’s workforce.

To mitigate potential loss, business leaders should regularly revisit their engagement strategies and focus on the top drivers of employee engagement, which, according to Gallagher, include:

  • Sound career development pathways
  • High confidence in the organization’s products/services
  • Trust in senior leadership
  • A culture of respect and inclusivity
  • Relationship health and overall connectivity with manager/supervisors

Partnering with a PEO can simplify this process. PEOs can help dive deeper into what employees want and what is needed for them to stay. From there, they can create a personalized strategy to “re-recruit” staff and highlight a company’s value, including elements like consistent communication, customized employee benefits, and establishing a re-onboarding program.

Additionally, PEOs can provide additional resources (such as guides and best-practice materials) to help small business leaders with workplace culture and engagement initiatives.

How to pick the right partner to solve your small business HR issues

For many SMBs, HR challenges and issues can prevent companies from reaching their full potential.

Tightening budgets, inadequate employee benefits offerings, recruiting difficulties, and compliance issues can result in problems for any employer, especially small ones.

However, seeking an outsourcing solution, such as a PEO, can help overcome these challenges and turn them into competitive advantages that help an SMB stand out in the crowded recruiting landscape while achieving bottom-line growth.

Researching PEOs and other forms of HR outsourcing can help a business owner better understand how these solutions work, what this type of partnership will mean for an organization and its employees, and whether a partnership makes sense.

But, with hundreds of PEOs in the country, how do business leaders choose a potential partner? Some factors to consider include:

  • Comprehensive HR solutions: Does the PEO offer customizable benefits packages, risk and compliance services, and dedicated HR Managers?
  • Level of customer support: Does the PEO rely on support ticket systems and automated phone trees, or do they have a dedicated customer service model including in-house experts that can help resolve issues same-day?
  • Recruiting capabilities: Does the PEO provide recruiting services, and if so, is there a fee for them? (Most PEOs charge for this if they offer it, but ExtensisHR provides complimentary recruiting services!).
  • Employee development offerings: To drive success, PEOs should have an on-demand knowledge base, give guidance on mentorship programs, and offer optional services like access to industry-leading employee engagement and performance platforms, such as 15Five.
  • Qualifications: Choosing a trusted PEO is important. Only 1% of PEOs hold all top three industry credentials: ESAC Accreditation, Certification Institute (CI) for Workers’ Compensation and Risk Management, and IRS Certified PEO (CPEO) designation. Does the PEO you’re evaluating maintain those?
  • Positive reputation: HR providers’ average net promoter score (NPS) is 37%. Where does the PEO fall relative to that?

ExtensisHR is proud to help SMBs conquer their HR issues by offering all the above and much more. With a full suite of HR solutions, an array of credentials, an NPS of 82%, and a customer service team that answers the phone in 11 seconds, we have what it takes to help small businesses succeed on Small Business Saturday and beyond.

Are you interested in learning more about how a PEO can help solve your HR issues? Contact the experts at ExtensisHR today.

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