Quick look: The National Association of Professional Employer Organizations (NAPEO) recently released a market research survey illustrating the substantial rise in firms partnering with PEOs. Of those surveyed, PEO visibility increased 44% since 2018. The key factors supporting this shift provide insight into where the industry is headed and the part brokers will play.
Conceptually, professional employer organizations (PEOs) have been around for decades. Serving mostly small- and medium-sized businesses (SMBs), put simply, a PEO solution provides HR services at an affordable cost. These services include payroll, benefits, tax and legal compliance, and more. At the same time, it also gives SMBs access to premium employee benefits comparable to their larger competitors, such as 401(k) plans, medical insurance, and other perks necessary to attract and maintain quality talent.
Though a known strategy for many business leaders, as the NAPEO survey reflects, the familiarity and interest in PEOs has increased significantly over the past several years. The awareness and integration of PEO solutions has risen 44% since 2018. And, over 15% of all SMBs with 10 to 99 employees, specifically, partner with a PEO. Rather than a nice-to-have option, a PEO has become a vital resource.
Therefore, brokers who partner with a PEO have a competitive advantage. By working as the bridge between their clients and a well-rounded HR solution, it supports continuous SMB growth and goals. In 2022, specifically, survey research shows PEO awareness jumped to 65%, with an added 20 percentage points since the initial findings. Meanwhile, a record 33% of business leaders reported using a PEO last year, reflecting a 9% increase year over year, and more than double what was reported in 2018.
This spike is reflective of deeper changes within the industry which will affect businesses going forward. Here’s a look at other telling statistics from the survey, as well as information from the NAPEO 2023 Q1 Small Business Snapshot, reflecting where things are headed, and what actions brokers should take.
81% of SMBs not currently using a PEO report interest going forward
PEO awareness and demand go hand in hand as many SMBs strategize for scalability, and in many cases, stabilization due to the lingering effects of the pandemic. PEOs provide HR expertise and resources, save on administration costs, and lower employee turnover. With a PEO solution in place:
- 50% are less likely to go out of business
- 33% have lower employee turnover
- 40% upgrade their benefit options
- More than double increase 401(k) plan participation
42% of PEO users fall into the younger demographic of decision makers
Younger decision makers (ages 25-34 years old) and younger companies (in business less than 10 years) represent the strongest base of PEO users, making up 42% and 40% respectively. They are evaluating how things are currently done and looking ahead to what changes need to be made.
This demographic is reliant on mobile-friendly software and applications, inclusive benefits and accessibility, and adaptation to remote working environments. By integrating standard business practices with fresh opportunities, younger decision makers are most willing to embrace and appreciate the advantages of a PEO partnership.
69% cited issues with employee recruiting and retention
Recruiting and retaining top-level talent continues to be of high concern for SMB leaders. The NAPEO report reveals offering competitive benefits (65%) and maintaining employee satisfaction (61%) were the two most challenging aspects of business growth in 2022. These areas require constant attention and strategy, which can be time-consuming without the help of a PEO.
66% of PEOs report an average 4.7% wage increase
As SMBs evolve, they need a scalable way to maintain revenues while also handling the increase of expenses. Per the NAPEO Q1 Snapshot, the level of employment has grown for all SMBs, except those with 1-19 employees. Plus, it continues to be a tight labor market with an increase in average wages by 4.7%. As part of a comprehensive PEO solution, SMBs receive tailored strategies to meet industry demands and integrate their specific business needs.
Matching clients with the right PEO
By making the connection with a PEO, brokers help their clients alleviate their HR responsibilities so they can focus their time and efforts on company growth. As the adoption of PEO services becomes increasingly popular, brokers and employers alike are closely evaluating their options. With respect to fundamental offerings, there are similarities, but not all PEOs are the same. When sourcing a customized solution, ExtensisHR sets itself apart from the competition.
11 second response rate
Since broker-client relationships are built upon trust and accountability, it’s crucial to connect SMBs with a PEO solution focused on personalization. Because their bandwidth is limited, big-box PEOs typically operate through a support ticket system, which may not provide relevant answers to a company’s specific concerns. Whereas, ExtensisHR provides a dedicated customer service team who is well-equipped to handle all HR inquiries with urgency. This helps to customize solutions rather than automate them.
1% of PEO accreditation
Brokers can feel confident by recommending ExtensisHR to their clients. It is part of the 1% of PEOs maintaining the trifecta of ESAC Accreditation, Certification Institute (CI) for Workers’ Compensation and Risk Management, and is an IRS Certified PEO (CPEO). These credentials are in addition to upholding a Service Organization Control (SOC) Type II Certification and listing as an SHRM-certified HR professional.
82% Net Promoter Score (NPS)
Maintaining client satisfaction is equally as important to professional credentials, and ExtensisHR maintains a NPS which more than doubles the PEO average of 37%. We are dedicated to supporting the broker-client relationship and providing a person-to-person approach when delivering our HR services.
The NAPEO survey makes it clear SMBs are increasingly looking to PEOs to help their businesses grow. As a broker-centric PEO, we work with brokers who want to fulfill this need for their clients, delivering benefits to all.
Contact our team of HR experts to learn how our tailored PEO solutions can be part of your competitive advantage as you strengthen your portfolio.