The Numbers Are In: PEOs DO Help Small Businesses Grow
In September 2013, the National Association of Professional Employer Organizations (NAPEO) commissioned a study to see if what the industry was claiming to be true – was actually true.
Before the study, we were advertising that with the help of a PEO small- and mid-sized businesses owners have more time to focus on their strategic business objectives, enjoy higher growth rates, and have higher employee retention and satisfaction rates. Those of us in the industry knew that was true - but we didn't have any hard numbers to back it up with.
Enter Laurie Bassi and Dan McMurrer with McBassi & Company, an independent analytics and research firm that helps clients create consistently profitable and enlightened workplaces. They conducted a number of surveys, put in some heavy research time, and wrote a white paper substantiating what we were already promoting. For a little light reading, here is the full white paper, Professional Employer Organizations: Fueling Small Business Growth.
There is a lot of interesting information and some surprising statistics in here but for those of us having a TLDR moment, I have listed below the top 3 key findings.
PEO clients have higher growth rates than other small businesses. Since 2010, employment growth among PEO clients has been 9% higher than other small businesses (based on the Intuit Small Business Employment Index), and 4% higher than employment growth in the US economy overall.
PEOs are able to provide a broad array of HR services at a lower cost. A conservative estimate (based on information from Bersin & Associates) is that PEO clients enjoy a 21% savings on HR administration. For the typical PEO client, the savings are likely to be many times greater than this conservative estimate.
Small business executives who use PEOs are better able to focus their attention on the core business. PEOs help their clients manage the "people side" of their businesses more effectively, avoiding compliance pitfalls and creating key benefits for the businesses and their employees, while simultaneously freeing up time for owners and executives to concentrate on growing their businesses by focusing on operations, strategy, and innovation.
PEOs offer retirement plans to small businesses that may not sponsor them otherwise, and their employees participate at much higher rates. 98% of PEOs offer some type of retirement plan to their small business clients. In contrast, in 2011, only 16% of all employees of the smallest companies (those employing fewer than 10 workers), and 30% of those at companies with 10 to 49 employees, work for a company that sponsors some type of retirement plan, according to the Employee Benefit Research Institute (EBRI). Among the smallest businesses (employing fewer than 10 workers), the percentage of employees participating in employer-provided retirement plans is more than 3x greater among employees of PEO clients than it is among employees of all other similarly-sized businesses (40% v. 13%). For employees working for companies with between 10 and 49 employees, there is also a major difference: 52% of employees v. 23%.
So if you have been on the fence about outsourcing your human resources management, benefits administration, workers' compensation administration and management, 401(k) administration, and your payroll and tax administration, hopefully these key findings backed up by hard numbers has swayed you.