The Best PEO Pays for Itself

The most successful small business owners understand the need to concentrate their efforts on clients and those clients’ needs. Still, the running of any business entails managing a host of other non-client-related but still fundamental tasks. These tasks, like payroll, benefits administration and recruitment, can consume inordinate amounts of time and energy when performed by in-house staff.

Fortunately, the advent of Professional Employer Organizations (PEOs) offers an excellent alternative to providing these services in-house. PEOs are experts in human capital management (HCM) and, in many cases, can even pay for themselves by lowering not only operating costs but also soft costs.

Lower HCM Administrative Costs

From a simple cost perspective, a PEO can significantly reduce your administrative payroll. In smaller companies, especially, there is no need to maintain a dedicated HR staff. While a single, dedicated point person should be appointed at the company, in most cases, the location managers and the business owner can handle the details and the decisions without any other HR administrators. In fact, once the service plan is established, the PEO can act as the liaison between employees, the payroll department and the benefits provider. In short, the savings in manpower, time and effort can be significant.

Superior Benefits

Most PEOs represent a broad base of clients whose workforce encompasses a considerable number of employees. For this reason, a PEO has much more bargaining power with a benefits provider than a single small business. This leverage manifests itself in lower premiums, greater benefits and better customer service from the provider. The employees gain through better benefits packages while the company enjoys an advantage over competitors when hiring new talent. In addition, premiums are usually lower for all involved.

Reduced Recruitment and Hiring and Costs

With a PEO, recruitment and hiring costs are also lowered for a company. Small businesses do not usually have dedicated personnel for this process so, when the need does arise, they must divert resources from their normal business activities to find the right talent. It is an inefficient and sometimes fruitless endeavor.
PEOs, on the other hand, are experts in the process of identifying, testing and screening potential new hires. In addition, they see a far wider range of applicants than a single business and can steer the right candidates to the right companies. In many ways, they fulfill the role of traditional job search firms and headhunters.

Lowered Turnover Rate

The use of a PEO can certainly provide some dramatic hard cost savings for a small business but it can also deliver some significant reductions in soft costs. To start, PEOs hire the right people for the right job, then ensure that their on-boarding is thorough and, finally, that their training is complete. These three seemingly simple steps can reduce the turnover of a company by a significant margin. The benefits are immediate and long-lasting as new employees do not have to be recruited, hired and trained on a continual basis.

Increased Productivity

In a similar manner to the one above, employees with experience naturally gain better skills, provide improved customer service and cause fewer internal problems. This fact inevitably leads to a significant increase in employee productivity. Through repetition and experience, employees are able to transform their day to day interactions into a more reliable and efficient work performance. 

In the simplest terms, any business procedure, from data entry to the most delicate aspects of customer service, can be enhanced by employee experience. PEOs make this entire scenario possible by ensuring that the proper recruiting, hiring and training measures are implemented and observed.

Reduced Litigation

With respect to the regulation of OSHA, the EEOC and the relevant state and local laws, it is far better to err on the side of caution than to provoke any controversy. A PEO is well-versed in the latest iterations of these laws and their sometimes arcane interpretations. It is far better to take a proactive approach to these laws than to wake up one morning under the cloud of an impending lawsuit.

The Fundamental Role of a PEO

In a nutshell, PEOs offer the best HCM services at the most affordable prices for any small to midsized company. The time, energy and resources that a PEO can devote to a client company’s HCM issues easily overshadow the cost. A PEO divides its administrative costs over a multitude of clients and, thus, can offer superior HCM for a reduced price.
As importantly, a PEO brings a wider experience with HCM issues. In general, it provides access to a greater talent pool, better management strategies and can often forestall potential HR problems for their clients. In short, any company looking for the best way to manage their HCM should consider the benefits of a PEO.