In a competitive business environment, having an edge could be the thing that propels you to new growth. What if there was an advantage that could help your business grow faster - and smarter?
Businesses that use a professional employer organization (PEO) have that edge.
PEO clients gain a competitive advantage in attracting the best employees. Often, PEOs allow them to offer a higher level of benefits than they would be able to afford on their own. Most importantly, offloading responsibility for HR, payroll, benefits, workers’ compensation, and other administrative tasks to a PEO frees up leaders to focus more of their time and energy on their core competencies and strategic issues.
- PEO clients have higher growth rates than other small businesses.
- PEOs are able to provide a broad array of HR services at a lower cost.
- Small business executives who use PEOs are better able to focus their attention on the core business
- PEOs offer retirement plans to small businesses that may not sponsor them otherwise, and their employees participate at much higher rates.
So how does it work? Here are five services PEO offer and the ways they can fuel small businesses growth:
Many small businesses learn about PEOs as a creative solution to workers’ compensation challenges. Start-up businesses, for example, can often have a hard time getting workers’ comp insurance in the standard market. In other cases, a business with a history of claims, one with high experience modifier rates, or those in inherently risky industries - like construction and manufacturing - often have trouble finding affordable workers’ comp coverage.
PEOs can help solve workers’ comp issues, accepting most class codes with reasonable premiums.
And they don’t stop there. PEOs can also provide workers’ comp claims management and worksite safety solutions to reduce the frequency and severity of injuries as well as the overall cost of workers’ compensation claims.
Some of the risk management services a PEO can offer include:
- Written safety program and safety manual
- Provide specialty safety programs for your industry
- Provide comprehensive safety inspections and regular worksite safety reviews
- Develop safety action plan
- Consult on safety activity in the workplace
- Complete and provide OSHA logs
- Help with PPE (personal protective equipment) requirements
- Accident investigations
- Injury claims administration
- Provide occupational training as required by law/ industry
How many vendors, programs, and resources are required to manage employee administration tasks in your business? Many small- to mid-sized businesses are overwhelmed with employee administration tasks.
PEOs can turn employee management, benefits administration, payroll, workers' compensation, technology utilization, loss prevention, claims management, and more into a single vendor solution. Small business executives and HR professionals can manage the many facets of employee management with one vendor, and be assured that everything is completed professionally and compliantly.
And businesses that use a PEO for employee administration tasks do so at an overall lower cost. A conservative estimate is that PEO clients enjoy a 21% savings on HR administration. For the typical PEO client, the savings are likely to be many times greater than this.
PEOs can help small businesses to make employee administration more professional, compliant, easy, and streamlined -- often at a lower cost.
Imagine a single, streamlined process to manage:
- Payroll check and report generation
- Payroll check signing
- Deductions and garnishments
- Direct deposits
- New hire reporting
- Web payroll entry
- Preparation of quarterly reports
- Remittance of federal, state and local taxes
- Year-end W-2 preparation and mailing
- Accurate and timely payroll tax liability
Human Resources Services
Is your human resources department on par with a Fortune 500 company? Imagine if you could offer the same level of professionalism as a major corporation, without hiring any additional HR staff.
Partnering with a PEO company can help your small business amp up your human resources offerings while freeing up your existing HR personnel to focus their resources on the humans who are helping you build your business.
PEOs can offer human resources services including:
- Develop and provide a customized employee handbook
- Assist with development of job descriptions
- Assist with development of employee performance evaluation program
- Research compensation ranges and development wage matrix
- Provide quick start guide including required employment forms
- Employee management including hiring, discipline, conflict resolution and termination
- Perform background checks with optional drug & alcohol testing
- Maintain employee personnel records
- Manage employee unemployment claims
- Provide FMLA status reports and tracking
- Provide mandatory employment positing
A more comprehensive approach to human resources and employee administration may be one of the reasons that companies that partner with PEOs enjoy an employee turnover rate that’s 10-14% lower per year than that of comparable companies.
Perhaps the most valuable services a PEO can offer a small business are employer-sponsored retirement benefits, such as 401(k) or similar plans.
Retirement benefits are a rare offering among small businesses. Only 16% of small businesses with 10 or fewer workers and 30% of those with 10-49 workers sponsor some type of retirement plan.
In comparison, nearly all - 98% - of PEO companies offer some type of retirement plan to their clients.
The biggest reasons that small businesses have for not offering retirement benefits is the cost and burden of setting up and managing retirement plans.
PEOs are able to offer affordable retirement benefits through an economy of scale model, giving small businesses access to benefit plans at a cost they most likely could never obtain at their current size. Then the PEO company takes over the burden of administering these retirement plans.
- 47% of employees cited retirement benefits as an important reason to stay with their employer.
- 35% of employees cited these benefits as the reason they went to work for their current employer.
Employment Practices Liability Insurance
Workers’ compensation isn’t the only insurance policy that a PEO can offer to its clients at a low cost. Employment practices liability insurance (EPLI) is often provided by a PEO company as part of its employee administration services.
The reality of today’s workplace is that an employee grievance can quickly escalate into a costly lawsuit. If one of your employees perceives a company employment practice as unfair, an employment-related action could follow.
When a PEO company is providing best practices and formalized employment policies for your business, it can go a long way toward preventing employee-related lawsuits. PEOs can also help with federal and state regulatory compliance. By including EPLI coverage as part of its offerings, a PEO company can help shield your business from a multi-million dollar lawsuit that could close your doors for good.
When you get EPLI through your PEO, you can access coverage with much larger limits - at lower rates - than your business is likely to get on its own.
Whether your business needs help with HR and employee administration tasks, is trying to solve workers’ compensation challenges, or wants to offer best-in-class benefits to your employees, a PEO can be the perfect solution. The best part? PEOs can offer all of these services to your business at a price that is often the same - or lower - than you would pay for just one of these services yourself.
If you want your business to thrive, a PEO partnership could be the catalyst for growth and profitability that you’ve been looking for.