May 22, 2022


The Number One Source For Business

Unlocking better business outcomes with PEOs

To stay resilient during these unpredictable times and beyond, small business clients are looking for efficient processes and expert guidance to respond to the various challenges brought on by the COVID-19 pandemic.

Attracting and retaining talent, managing a human resources department, onboarding new employees, administering payroll and other benefits programs can be difficult for small businesses to handle and requires in-depth knowledge of each topic. Offering clients the option to work with a professional employer organization can help increase overall efficiency and profitability by offloading the key administrative tasks necessary to running a business, and allowing them to refocus on higher level priorities like achieving better business outcomes. PEOs can relieve some of the stress employers may have associated with key HR tasks, making it easier to keep the business operating smoothly.

A PEO enables clients to outsource key aspects of their business including payroll, employee benefits administration and insurance, as well as offering support through HR consultants that can provide expertise to clients on topics such as benefits, payroll, regulatory compliance, workers’ compensation, risk management and more. Among many other benefits, PEOs may also help businesses with the tax and reporting complications that have arisen over the past year while enabling employers to offer their employees the best possible benefits options.

From profitability and cost savings to business longevity, clients looking for greater freedom from the complexities of administrative HR and business tasks may greatly benefit from working with a PEO.

Competitive edge in the job market

For small and midsize businesses, it can be challenging to compete for the best talent, while also focusing on retaining current employees. And in today’s competitive employment landscape, staffing concerns are a top priority for businesses, especially as the “Great Resignation” looms overhead.

A prospective company’s benefits package is one of the key competitive factors candidates assess when selecting their next employer. The value of working with a PEO means access to a wider and more robust range of high-quality affordable benefits options. Through a PEO relationship, small businesses may tap into the buying power that is typically only reserved for much larger companies with more resources. Some benefits PEOs may provide include health insurance, disability insurance, employee assistance and discount programs, 401(k) plans, and others. Beyond these, a PEO may also deliver online access to employees’ payroll reports, pay stubs, and W-2 forms without requiring the employer to purchase and set up the infrastructure to provide these services to their employees.

Employee-centric benefits and services 

PEOs are known to be synonymous with outsourcing key HR functions. However, an additional benefit of adopting a PEO extends beyond these administrative HR tasks. PEOs may help employers deliver policies and programs that convey a commitment to the social responsibility today’s employees have come to expect from the companies they work for. As companies are flooded with questions about how to prioritize diversity, equity and inclusion, whether to institute flexible work options, how to support the mental health of their employees, and more, it has never been more valuable to have a dedicated HR consultant on your side to provide you with HR advice and expertise on these ever-changing topics. Furthermore, PEOs may also offer employee assistance programs (EAPs), which may offer valuable employee resources and support including counseling, resolution of medical claims, stress management, mental health support and physical wellbeing support.

Increased profitability

According to a 2019 survey conducted by the National Association of Professional Employer Organizations (NAPEO), 16% of businesses who use PEOs are more likely to report an increase in profitability compared to those who do not work with a PEO. As small businesses typically have limited resources, outsourcing various timely tasks such as payroll, benefits and legislative compliance enables them to refocus their attention on the bottom line and growing their business. Rather than taking the time to research and become proficient in these complex topics, clients may look to the expertise within the PEO and adjust their attention to focus on long-term strategy. Furthermore, PEOs help employers stay up to date on the latest government regulations impacting businesses to help them reduce risk and help with compliance.

Additionally, PEOs may conduct in-depth assessments designed to help small businesses maximize growth and minimize liability, enabling clients to better understand where there are opportunities for development and expansion for the company.

Cost savings

For various reasons, a business working with a PEO is more likely to save on overall HR administration costs and benefits packages for employees. In fact, companies working with PEOs saved 27% in costs associated with HR services such as payroll and benefits, according to recent research from NAPEO,

Many smaller business clients likely do not have access to big-business employee benefits ranging from health insurance to retirement savings plans, educational benefits and more. It is important to note that a PEO not only offers small businesses access to these plans, but also has the advantage of a wider network and greater buying power compared to what a client has on its own. With this power comes substantial savings in plan offerings, as companies that work with a PEO usually experience lower group insurance costs given their larger employee count. The NAPEO research previously mentioned also found that the average cost savings realized from leveraging a PEO is $1,775 per employee, a significant number for many small businesses.

In some cases, PEOs may be able to offer a lower state unemployment insurance rate to their clients because their employees are listed under the PEO’s federal and state ID numbers for payroll purposes

Furthermore, PEOs may help to control the labor costs associated with accounting expenses. For example, many smaller clients may find the value of a PEO in having access to a dedicated finance or labor infrastructure, as many small businesses do not have the budget for these crucial resources in-house.

Business longevity

PEOs offer small businesses access to big-business benefits at sensible costs. Offering competitive benefits to employees can help clients not only help attract prospective employees but also help increase overall retention rates. According to a NAPEO survey, businesses who utilize a PEO have a 10-14% lower employee turnover rate than those who do not and are 50% more likely to stay in business.

As the regulatory landscape continues to change in response to the COVID-19 pandemic, PEOs may offer the expertise needed by employers to help them comply with the latest regulations and minimize the risk of costly fines. Working with a PEO provider that has compliance expertise is integral to help avoid failing to comply with all applicable state and federal tax and employment laws and the potentially costly consequences.

In order to ensure clients are better protected and prepared, make sure they work with a PEO that has the knowledge to help with compliance concerns and the ability to support them as they develop systems and processes that make compliance easier, from monitoring changes to meeting critical compliance deadlines.

Efficiency at work

As an accountant, it is critical to help clients save money and increase both their bottom-line and the overall efficiency of their business. By working with clients to assess their needs and how they could be more streamlined overall, you can help them to understand if a PEO could help take their payroll, capital management, and human resources efforts to the next level — resulting in happier employees, better benefits, and significant cost savings, and future-proofing the business for longevity.