How will a PEO benefit your business’ bottom line?
In the current economic climate, small and medium-sized businesses are continually looking for ways to reduce costs, maximize the operating budget, and increase efficiency. Partnering with a Professional Employer Organization (PEO) is one way that businesses can achieve savings and help the company grow.
Rather than thinking about HR outsourcing as an expense, it’s time to think of it as an investment. A study by the National Association of Employer Organizations (NAPEO) shows that businesses can expect a 27.2% ROI when they partner with a PEO.
Let’s look at some of the ways a PEO benefits and generates cost savings for your business.
Easing the Administrative Burden
Think about the cost in time and resources when small business owners and their workers spend the majority of their time on the seemingly never-ending list of administrative tasks. We’re talking about payroll processing each month, distributing paychecks, providing training and support, preparing and remitting payroll taxes, new hire reporting, keeping up with legislative changes, generating reports, and more. Dealing with human resources and completing paperwork can have a significant impact on your ability to operate your business.
Regardless of your business size, chances are you can save money by working with a PEO. HR outsourcing to a PEO will give you more time to focus on building your business and streamlining your processes for better productivity.
The HR professionals will take the administrative burden off your shoulders by:
- Managing your benefit plans
- Running your payroll
- Researching new HR regulations
- Bulking up your recruiting efforts
- Compiling important reports for you
Combat Compliance Issues
Every year, regulatory agencies issue millions of penalties related to wage and labor regulations. Understanding and applying legislative changes take a lot of time and many small and mid-sized businesses will need to scale their in-house payroll team as the company grows or contracts. Also, business and labor laws are ever-changing, increasing the risk of non-compliance and penalties for errors, omissions, and late payments.
PEOs must stay current with local, state, federal, and industry-specific regulation changes. A good PEO partner is far less likely to make serious mistakes than your in-house team. They will reduce your risk profile, which will help you avoid regulatory violations that can lead to serious fines, lawsuits, and court fees.
Giving You Access to Better Employee Benefits
Partnering with a PEO is the easiest way for small and medium-sized businesses to get access to a competitive employee benefits package. A PEO gives you the chance to save money on employee benefits since they provide more options than you would have available.
When you enter into a co-employment relationship with a PEO, your employees can be considered co-employed by the PEO. By grouping hundreds or thousands of employees across different companies together, a PEO is able to negotiate comprehensive employee benefits packages with lower premiums for you. This will help lower benefit-related costs and allow you to attract better talent. Whether it’s health, life, dental, vision, workers’ compensation, or retirement benefits, a PEO will save money.
Reducing Employee Turnover
In many industries, high employee turnover is a major factor in profit loss. There are many reasons for employees to leave a company, including a perceived lack of appreciation, a poorly designed benefits package, or a general lack of managerial/administrative support.
When an employee unexpectedly leaves, it disrupts the current workplace culture and results in a costly search for a new employee. Studies show that the cost of hiring a new employee is 1.25 to 1.4 times the base salary of the new hire. Avoiding unnecessary costs around hiring new workers will improve your bottom line and growth.
The employee turnover rate for companies that partner with a PEO is 10-14% lower than businesses without a PEO. A PEO can help your business reduce employee turnover rates by creating high-quality HR practices, offering better benefits, and creating a stronger company culture. A PEO will also handle crucial HR tasks like employee recruitment, training, and onboarding. An experienced PEO benefits your company by putting you in a position to attract and retain top talent.
Start Saving Today with Vested HR
Vested HR can take time-consuming HR tasks off your plate, provide access to competitive employee benefits, and advise you on best practices to avoid compliance issues. We’ll work with your business and budget and provide top-tier PEO solutions that will save you money and keep your business running smoothly. If you’re ready to learn more about practical and financial PEO benefits, contact us today to schedule a free consultation.