As a small business, securing benefits can be a serious pain point. Businesses that rate highly on benefits see 56% lower attrition, and over 70% of employees note that better benefits would boost their overall job satisfaction. In other words, benefits can be the key that unlocks higher retention rates, better hires, and more productive employees. But getting great benefits isn't cheap — especially for small businesses.
According to the Bureau of Labor Statistics, benefits account for roughly 30% of employee compensation costs. Chances are, your small business can't afford to bust out best-in-class benefits. They're expensive! You don't have the bank account or employee pool size leverage like Fortune 500 companies do. So, you end up paying more for worse benefits.
Luckily, there's a better way. Professional Employer Organizations (PEOs) can help small businesses secure spectacular benefits without breaking the bank.
When it comes to employee retention, there's nothing quite like employee benefits. Both Millennials and Gen X say that benefits are among the top three things they look for when applying to jobs.
Around 20 percent of your workers would leave today if they got offered a better benefits package from another company. In fact, over 50% of employees said that they eventually left their job due to better benefits offers from other businesses.
To put benefits into perspective: 80% of workers would rather keep a job with good benefits than take another job with much higher pay but poor-to-no benefits. Benefits help you attract top talent, and they help you keep that talent happy, satisfied, and hungry to work for you.
There's a reason that 83% of businesses say that employee retention is their primary reason for investing in benefits — good benefits keep workers.
Unfortunately, benefits aren't cheap, especially for smaller businesses.
Studies show that small businesses typically pay over $400 per month, per employee just for basic healthcare. That's almost the same cost as individual healthcare!
Why?
Because unlike Fortune 500 companies, small businesses don't have leverage in the form of large employee pools. So, talent is drained out of startups and smaller family businesses and funneled into massive companies.
But does it have to be that way?
Small businesses have three options if they want to get better benefits at a lower cost:
A Professional Employer Organization (PEO) is an outsourced HR partner that helps small businesses tackle big HR problems. From payroll to compliance, PEOs are there to make sure that small businesses have the resources and help they need to navigate the complicated world of HR without a massive internal HR team.
While PEOs offer a plethora of advantages, they're particularly useful at securing benefits packages. PEOs use economies of scale by pooling together the employees of every business they work with into one bargaining chip. So, when a PEO talks with a benefits provider, they're not just using your employees as leverage; they're using hundreds of other businesses' employees as well. PEOs can enter the bargaining table with tons of leverage.
Small businesses that partner with PEOs can then access those benefits plans negotiated on behalf of hundreds or even thousands of employees.
This means that small businesses can get similar benefits to those big Fortune 500 companies without having to hire thousands of workers. Instead, the PEO unites the workers of many different businesses to help all of those businesses get great benefits. All of this enabled by a "co-employment" model of business.
When businesses first hear the word "co-employment," it can sound a little terrifying.
After all, you built your business from the ground up. Why in the world would you let someone else "co-employ" it?
Don't worry!
Co-employment isn't a scary internal takeover.
In fact, co-employment doesn't actually give the PEO any control over your company outside of HR.
The reality is that co-employment only makes the PEO the employer of record for payroll tax and liability purposes. PEOs won't hire or fire anyone. You still have total control over your business, your employees, and your daily workflows. The most tangible difference is that payroll taxes are filed under the PEOs employment identification number instead of yours.
Co-employment also allows PEOs to add your employees to their pool when they negotiate with benefits providers. PEOs work with many different small businesses, allowing them to pool all of those small businesses employees' under one plan. This means that PEOs can bring a swarm of employees to the bargaining table with benefits companies — helping you secure best-in-class rates and benefits packages.
Securing amazing benefits isn't a lost cause for small businesses. PEOs can leverage a "co-employment" model to help you bring economies of scale to the negotiating table with benefits providers. That means better benefits at a lower rate for your employees, which helps you reduce attrition and attract top talent.