The ROI of PEOs: 5 Ways a PEO Saves Businesses Money

Are you considering a partnership with a professional employer organization (PEO) for your small to mid-sized company? For a growing number of employers, it’s a great strategic decision, as a PEO empowers you to invest in the core activities of growing your business without the added strain of countless HR details.

• Research by National Association of Professional Employer Organizations (NAPEO) has shown that PEO client companies grow seven percent to nine percent faster, have 10 percent to 14 percent less employee turnover, and are 50 percent less likely to go out of business than their non-PEO competitors.
• A NAPEO study in 2019 showed a 27.2 percent estimated ROI based on cost savings alone for PEO clients. To arrive at this figure, NAPEO calculated POE-related savings from the five expense areas below and compared the number to costs per worksite employee.

Here’s a closer look at how a PEO can help you lower costs when it comes to:

How PEO’s Help Lower Cost

HR Tasks

HR administrative tasks can be extremely time-consuming, but they must be properly managed or you may risk serious, costly issues in areas like compliance management, recruitment, safety, and more. Your PEO can oversee and handle these responsibilities for you. This gives you the freedom to focus on growing your company and streamlining your processes for increased profitability. It also eliminates the incidental costs of inefficiencies related to mishaps such as missed deadlines or compliance errors.

Employee Benefits

Your PEO becomes the employer of record for your employees. Among the benefits of this agreement, your PEO partner can offer Fortune 500 level benefits to smaller businesses, utilizing economy of scale as they pool various clients’ employees together. In addition, you are relieved of managing multiple benefit providers and related employee records.

Workers’ Compensation

A PEO can help you manage workers’ comp costs while also helping you navigate any safety challenges at your business. This includes choosing plan coverage and cutting premiums by negotiating competitive options with providers. Your PEO can also help you design a robust safety program, resolve any claims that do occur, manage relations with injured workers, and implement an effective return-to-work program.

Unemployment Insurance

Working with a PEO, company wages are reported under the federal employee identification number (FEIN) of the PEO, so the PEO calculates, reports and pays all taxes, using its own experience rating. Your PEO is a motivated partner in keeping unemployment claims to a minimum and ensuring that any questionable ones are contested. Your PEO can also guide you through the critical unemployment documentation process, and prepare for and attend hearings on your behalf.

Payroll

You can also hand payroll and related tax and accounting responsibilities over to your PEO. Plus, your PEO can automate your payroll process, as well as handle all withholdings, W-2s and garnishments.

Looking for an HR Expert You Can Trust? Key HR Can Help!

Key HR is aligned with industry-leading PEOs and related service providers to help you meet all your HR and talent management needs. You can count on us for nothing less than the best service to help you reduce costs, save time, optimize your workforce, build revenue and minimize risk. Contact us today to learn more.