Quick look: Partnering with a professional employer organization (PEO) has been an increasingly popular business strategy over the past decade. Reports show the number of employers using PEOs has grown nearly 40% since 2008, and Guardian’s 11th Annual Workplace Benefits Study shares insights into why.
PEOs have been around for decades, but brokers and businesses are looking to them for support now more than ever. Though the number of companies using PEOs has increased across the board, two-thirds are small- to medium-sized businesses (SMBs) employing between 10 and 49 workers. That’s because SMBs have the extra challenge of competing with larger organizations but without the same resources or budgets to help them advance.
Therefore, one of the most recognized advantages of partnering with a PEO is access to premium benefits at a lower cost. Since employee benefits are a crucial factor for any workplace, this alone makes it a worthwhile solution. However, there’s far more a PEO offers, which helps to solidify its importance as part of an effective growth strategy.
Advantages of PEO resources for SMBs
A PEO handles all HR responsibilities, freeing up time for business leaders to focus on their company’s development. As a PEO broker, serving as a bridge to tailored services from a team of HR experts speaks directly to clients’ unique needs. According to Guardian’s 11th Annual Workplace Benefits Study, here’s what motivates SMBs most to choose this route:
Access to more benefits
72% of companies strongly agree having access to more employer-sponsored benefits is one of the many advantages of joining a PEO. Candidates choose jobs based on compensation packages, especially the value of the benefits offered. In fact, a Lexington Law study reveals nearly 70% of Americans agree they would take a lower salary in favor of better benefits. Thus, having access to extensive benefits through a PEO is crucial for recruitment and retention in order to stay competitive with larger organizations.
Increased business growth
More than 8 in 10 employers reveal using a PEO has enabled their growth over the past three years. And consequently, 50% of those implementing a PEO solution are less likely to go out of business. This is in comparison to only 5 in 10 employers who aren’t PEO members. Though there are a number of factors contributing to this, business leaders say using a PEO removes distractions relating to HR administration, allowing them to focus more on revenue-generating efforts.
In addition to experiencing business growth, the study also shows those who work with a PEO experience 10% to 14% lower employee turnover. In today’s competitive job market, quality employees are an asset and must be preserved. Employee retention saves on hiring and onboarding costs, sustains productivity, and supports a healthy company culture.
How working with a PEO better meets employee needs
A company is only as good as its employees, and it’s up to business leaders to ensure job satisfaction if they want to succeed. The industry has experienced a radical shift over the past few years with people making big moves to create a better work-life balance and take charge of their career paths.
Employees are voluntarily resigning, “quiet quitting,” and carefully evaluating their next job role. Consequently, it’s become the norm for employers to offer flexible schedules, remote work environments, and benefits extending beyond the standard route of care in order to retain quality talent. Guardian’s study addresses ways companies working with a PEO have succeeded in meeting market demands in ways those without a PEO solution have not.
Over half of the employers using a PEO see the importance of offering flexible hours and telecommuting opportunities versus 43% of those not using a PEO. This perspective makes a difference when recruiting new team members (and retaining current ones) since CNBC reports 76% of workers say they want permanent flexibility in terms of hours and/or location.
Over 70% of PEO members highlight the importance of providing generous paid leave compared to 58% of employers not using a PEO. Again, this prioritization can be a deciding factor as candidates narrow down employment options. With data showing over 50% of people wanting to leave their jobs altogether, it means employers must provide incentives for them to stay.
70% of PEO members are likely to prioritize assisting their employees to make better benefits decisions compared to 61% of employers not working with a PEO. This can be achieved by implementing HR technology which integrates multiple tools and resources to help inform decisions. Better benefits decisions lead to greater use and increased value, which essentially is a win-win for both employers and employees.
Value of a PEO partnership for brokers
PEOs are a proven tactic allowing SMBs to fulfill their growth potential. ExtensisHR supports PEO brokers by giving their clients access to its comprehensive suite of HR services tailored specifically to each company’s needs. Business leaders have specifically leaned on PEOs to help shape their companies through the following advantages:
- 37% appreciate the dedicated resources to support HR services such as cybersecurity needs and workforce planning
- 33% acknowledge the benefit of administration and compliance support from an operational and legal perspective
- 31% list access to more comprehensive benefits as a key advantage of using a PEO
- 30% say lower costs for payroll processing and accounting make a PEO solution valuable
The workforce has become increasingly complex with multi-state locations and a mix of full-time, part-time, and contract workers. By streamlining HR administration and implementation across the board, it gives SMBs a competitive edge. With ExtensisHR, there’s also a team of HR experts well-versed in gauging the next workplace trend, tracking new compliance regulations, and keeping companies growing at their desired rate.
Rather than offering clients a cookie-cutter approach, PEO brokers can deliver an option which provides a person-to-person approach and a 25+ year track record of success. Contact ExtensisHR today to learn how a PEO partnership can benefit your client relationships.