Surveys consistently show that businesses partnering with Professional Employer Organizations (PEOs) are happier, more productive, and have lower HR operational costs than their peers. But the benefits of a PEO extend beyond business owners — employees also fare better when their employers choose to work with a PEO.
A survey from NAPEO of over 1,588 employees across 100 firms found that employees of businesses with PEOs are more satisfied with their healthcare plans and overall HR administration than employees of business without a PEO. According to the survey, employees with a PEO are more likely to:
- More likely to know who to contact if they have questions about their benefits
- Agree with the statement "I feel comfortable I have someone to talk to if I have an HR problem"
- Agree with the statement, "Our company's employee benefits are generous"
- Believe that their employer has good hiring practices
- Believe that their employer does a good job of designing roles
- Believe that their employer provides adequate training and opportunities for development
For the same reason that 98% of businesses with a PEO would recommend one to their colleagues, employees generally favor employers who work with PEOs. Due to the nature of co-employment, PEOs are able to secure superior benefits packages at lower rates — allowing employers to secure best-in-class benefits that are typically reserved for massive enterprises.
At the same time, PEOs provide consistent, holistic, and experience-driven HR administration that gives employees someone to turn to when they have critical questions about their health insurance policies. With experienced guidance, HR-centered goals, and disruptive HR technology (e.g., self-service portals, employer portals, etc.), PEOs help employees access, understand, and utilize their benefits.
PEOs and Health Benefits Cost Savings
In a traditional SMB, securing benefits is a painful experience. Since SMBs don't have numerous employees, benefits providers often force SMBs to pay over-market rates for plans. Health insurance is expensive. According to research by the Kaiser Family Foundation, the average cost of single-provider health insurance is $7,188 per employee. The smaller you are, the more you'll have to pay.
PEOs flip this problem upside down. They can pool your employees together with the employees from all of their other clients to use economies-of-scale when negotiating with benefits providers.
In a nutshell, PEOs reduce the overall costs of benefits and improve the quality of your benefits packages. It's a win-win.
PEOs and Benefits Administration: Easing the Burden of Benefits
For almost all employers, benefits administration is a pain point. Despite 72% of employees admitting that better benefits packages increase their job satisfaction and 58% of employees saying that benefits are their number one concern when they're looking for jobs, many employers simply can't find the time, resources, of experience to deal with best-in-class benefits administration. It's difficult.
You have to deal with renewals, premium leakage, reporting, reconciliation, and all of the other HR administrative duties that surround the benefits ecosystem. And that doesn't even include the actual process of negotiating benefits. To put it simply, employers spend an average of $11 per hour per employee on benefits. That's expensive! Unfortunately, those are only the costs for the benefits themselves.
Administration is an entirely different bucket of costs. And those costs can be high. Small business owners spend at least one day a week dealing with benefits according to surveys. For business owners, time is valuable. That day lost in the muck of administration means fewer leads, slowed growth, and more headaches. And that's hard to quantify.
Again, this is where PEOs shine. Not only can PEOs handle the avalanche of HR administrative responsibilities that surround benefits administration, but they can answer critical questions, tackle crucial reporting and compliance needs, and act as a liaison between employers and benefits providers.
Are You Tired of the Benefits Black Hole?
For business owners, benefits can be a nightmare. Not only is securing benefits an expensive, time-consuming, and compliance-heavy task, but SMBs without thousands of employees typically overpay for benefits simply due to their size. PEOs are designed to provide economies-of-scale and cost-savings features to businesses — allowing them to secure best-of-breed benefits without draining their bank accounts.
But that's only the start. There's a reason that it's common for large businesses that already have economies of scale choose to work with PEOs; a PEO can help alleviate administrative pain points. From reconciliation, compliance, and reporting to simply answering questions and acting as an open channel of communication, PEOs help businesses, large and small, scale their benefits without headaches.