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benefits for SMBs of using a PEO graphic

Benefits of Using a PEO for Your Small Business

Have you heard about a PEO and wondered what all the buzz is about?

You’ve come to the right place!

This article explores a Professional Employee Organization and why many small businesses use them. Swipeclock is not a PEO but does work with many PEOs to provide timekeeping, an employee portal, payroll integrations, and other cool HR tools.

PEO_ Keeping Turnover Low, Survival High Statistics for SMBs Using A PEO

But there are other benefits.

Here are a few:

  • Small employers gain access to high-quality, comprehensive benefits
    • These benefits come at a lower price than the direct cost to the SMB
  • Benefits have a higher participation ratio by the SMB’s employees.
    • This means that employees are more vested in their benefits and more likely to be happier with their employer!
  • SMBs can more easily attract and retain employees
    • Lowering the expense of employee turnover (an expense with no ROI!)
  • PEOs make it possible for CEOs to focus on the core business
    • Effectively use the talents and knowledge of your executive team to grow and build the business. If you are an SMB owner, don’t waste your talent trying to figure out other administrative tasks instead of focusing on your core business!
  • PEO clients have higher growth rate than small businesses not using a PEO
    • Arguably its because their expenses are down (benefit expenses and turnover expenses) and because their CEOs focus on the core business (which provides higher growth and allows the business to be more nimble)
  • The employee turnover rate for a PEO is 10%-14% lower than comparable small business employers in the same industry.
    • When you consider that the average cost of employee turnover can be as high as 200% the employee’s salary (per SHRM), that’s a lot of savings!
  • Businesses who use a PEO are twice as likely to succeed as businesses who don’t use a PEO.
    • Studies show that SMBs using a PEO are 50% less likely to go out of business (permanently fail) from one year to the next.
  • SMBs save an average of 21% in HR administrative costs when using a PEO.
  • Employers more easily stay on top of regulations which minimizes risk.
    • It also reduces labor law fines and reputation risk. How much time does your executive team have to track and monitor employment laws? Are you paying an attorney to monitor local laws for you? Consider strongly the implications of non-compliance.
  • PEOs allow an SMB to increase HR support without increasing the number of employees.
  • SMBs pay (on average) 36% more per employee to comply with federal regulations compared with large businesses (According to the SBA)
  • SMBs using a PEO are 3 Times more likely to offer retirement benefits.
    • 47% of employees surveyed cite retirement benefits as an important reason to stay with their existing employer. (According to a survey by Towers Watson)

Industries that Typically Utilize a PEO

  • Real Estate
  • Property Management
  • Computer Services
  • Securities brokers and dealers
  • Engineering Services
  • Health Services
  • Legal Services
  • Management Consulting Services
  • Business Services
  • Accounting auditing and bookkeeping
  • Manufacturing
  • Plumbing
  • HVAC
  • Electrical
  • Insurance
  • Wholesale
  • Not-for-profits
  • Technology

Key Questions To Ask Yourself When Considering a PEO

There are many aspects to consider when looking at partnering with a PEO. Here are a few questions you should ask yourself.

  • Is my HR administration taking up more time than I would like?
    1. Am I spending time on HR that is pulling me away from my core business?
    2. Is HR administration too much for my existing HR staff?
    3. Is my staff getting bogged down?

Did you know that up to 80% of an HR Departments time is spent on administrative tasks and paperwork?

Shameless plug: You can cut that down drastically, just by allowing employees to modify and update information on an employee self-service portal.

  • Am I on top of ongoing updates to state and federal labor laws?
    1. Does my local city or county have any new employment laws?
    2. Am I up to date on rest breaks, sick leave laws, local FMLA, minimum wage, and other local laws?
    3. Am I aware of laws for all locations that my employees may temporarily work within (such as California) that require additional compliance from me even if I am not located within that area?

Did you know that the majority of the states had local minimum wage increases in 2018? More are scheduled for 2019.

In addition, local cities and states now require paid sick leave awards to employees.

And, Oregon (plus several cities) now have scheduling laws employers must comply with or face heavy fines.

The list goes on. . .

  • Has the Health Care Reform compliance given me a headache?
    1. Are the new changes for 2019 causing me stress?
    2. What am I doing to stay abreast of ever-changing requirements for SMBs?
    3. Am I concerned about the changes (passed and still -debated) coming to Obama-Care?

Did you know that private, state and local employers already carry a burden of an estimated $30 Billion? (According to the US House of Representatives Committee on Small Business 2013)

  • Has it been an obstacle for my company to recruit and develop the right employees?
    1. Has it been hard to retain those skilled employees?

The job market is more competitive than it has been in 30 years with unemployment at a 17 year low. More employers now compete for the same employees and that means that hiring has gotten more difficult. It also means that current employees may be more likely to check out “greener grass.”

Did you know that in 2017, 52% of CEOs planned to hire more employees? However, 77% of those CEOs were concerned about the availability of key skills. (according to the PwC 2017 US CEO Survey, 2017)

  • When you compete for talented employees, am I confident that my company stands out from other employers?
    1. In what ways does your company stand out?

In addition for the typical array of benefits, SMBs can also offer a variety of non-traditional’ benefits. These are becoming increasingly more popular with Millenials.

Check this out:

Employees who are very satisfied with their benefits are nearly 4 times more likely to be very satisfied with their jobs (MetLife 2015)

Think your business is too small?

Did you know?

The average employee size of SMBs using a PEO is under 10 employees!

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