5 Ways a PEO Saves Your Company Money

When considering cost-savings strategies, business owners and HR leaders will ultimately have to weigh the possible savings with the potential employee experiences. 

If the employee experience begins to decline, employees may no longer want to remain with the company. When you are trying to find ways to save money within your business, it is essential to take actions that will not hurt your employees’ experiences.

Employers who partner with a Professional Employer Organization (PEO) can experience lower  turnover rates than the national average at 10 percent to 14 percent. This is mainly attributed to the increased number of benefits and assistance with HR processes.

According to a 2019 study conducted by the NAPEO(National Association of Employer Organizations), the estimate of the expected  ROI for PEO clients was 27.2 percent. The study based this estimate on cost-saving from five effective mechanisms.

Health Insurance

One of the most important ways a PEO can help save your company money is health insurance. Employees care as much about their benefits package and affordable options as they do their weekly or monthly pay. Four out of five  employees prefer new or extra benefits over an increase in their salary, especially the employees who have additional people in their household.

Those statistics only add additional pressure to business owners trying to determine the best ways to maintain the benefits that employees want and need. Employer-sponsored healthcare benefits are expected to cost nearly  $15,000 per employee per year.

Regardless of the number of employees, many companies look to a Professional Employer Organization to help lower benefit-related costs. Comprehensive health insurance plans through a PEO will offer  more health care benefits at a lower price.

Indirect Savings

Company  culture or workplace culture have been buzzwords in this industry for a long time. According to many business circles, company culture is one of the keys to attracting talent and retaining talent. Once a company culture has been established, there need to be strategies and systems to help you maintain that culture.

Partnering with a PEO will provide your business with the tools and resources you need to create an efficient and effective onboarding process. Your onboarding process will help your new employees gain a clearer understanding of their responsibilities, so they can quickly impart their experiences and skills. 

As the PEO takes on administrative burdens, your HR department will gain the time it needs to focus on employee culture.

Your company culture is everything that makes your company what it is. Your company culture will impact every business practice, employee satisfaction, recruiting, retention, and more.  A PEO can help you build the company culture everyone in the workplace desires.

Administrative Savings

The seemingly never-ending list of administrative tasks can be overwhelming. A PEO can turn all of those tasks into a comprehensive solution. According to one estimate, PEO clients enjoy an average of 21 percent savings on HR administration. 

PEOs can provide streamlined payroll processing, generation of checks, direct deposits, wage garnishments, tax reports, and more. The completion of paperwork and dealing with human relations can significantly impact your ability to operate your business.

A PEO can also help tackle employee benefits administration. PEO professionals can assist with negotiating benefits, plan enrollment, and administering retirement plans. 

Compliance Savings

Wage and hour laws have been designed to protect workers against unfair practices. The Fair Labor Standards Act (FLSA), passed in 1938, establishes minimum wage, overtime pay, recordkeeping, and child employment standards. OSHA and Workers' Compensation laws have also been established to offer forms of protection for employees.

Ensuring compliance with proper regulations will ensure that you can lower your risk profile. Reducing your risk profile is extremely important because it will produce more savings when you avoid regulatory violations and lawsuits. Over time, it will also save money by reducing workers’ compensation “experience modifier” costs.

A PEO will provide assistance with regulatory compliance, and this is an advantage that can be worth more than the savings you gain in administrative and health insurance. Your company can stay on the right side of FLSA compliance and other compliance laws by partnering with a PEO.

Retain Employees

Businesses that partner with a PEO have an employee turnover rate that is 10-14 percent lower than companies that do not have a PEO. This means that a small business that employs over ten people will lose at least one less employee every year.

When an employee unexpectedly leaves, it creates problems by disrupting the current workplace culture. An unexpected departure will require a costly search for a new employee. 

Retention is a significant issue that employers need to address before beginning the search for a new employee. A PEO can help your business retain employees by offering better benefits, creating high-quality HR practices, and creating a stronger company culture. 

Investing in employee retention strategies is a crucial way to help you create a productive and strong team. A PEO will tackle critical services like employee recruitment, training, and the administration of benefits. PEO professionals who fully understand the job market will put you in the best position to attract top talent and retain them.

The right PEO will help protect your company from administrative errors, regulatory violations, and other costly mistakes. 

There are additional ways a PEO can save your company money. You can learn about more ways a PEO can make a difference in your business by downloading our free eBook:  ''How A PEO Could Lower Costs''.