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The Value of a PEO for Your Small Business

As a small business owner, you’re committed to realizing your vision and delivering exceptional products and services to your customers. That same drive and ambition is what keeps your business growing. But as your business grows, so do your HR responsibilities – and navigating the time-consuming and often confusing world of HR can be a real challenge.

From payroll and benefits administration to workplace compliance, recruitment, performance management, and more – if you’re spending more time on administrative tasks than building your business, outsourcing your HR to a professional employer organization (PEO) could be the solution you need to free up time and improve efficiencies.

For a small business, a PEO provides comprehensive HR solutions designed to alleviate administrative burdens – allowing you and your team to focus on growth and innovation. And partnering with a PEO means you gain access to a team of HR experts who understands the unique challenges facing your business – specialists who are committed to helping you streamline your HR processes and take great care of your employees.

The HR experts at G&A Partners are here to help you grow your small business with a PEO. Schedule a consultation today!

What is a PEO for small businesses?

A professional employer organization (PEO) functions as an administrative partner, taking on responsibilities related to human resources, payroll, benefits, and compliance. When you partner with a PEO, you enter into a co-employment relationship where the PEO handles all HR-related tasks, allowing you to focus on revenue-generating efforts.

A PEO for your small business, however, is more than just an HR outsourcing solution. It's a partnership that empowers you to streamline operations, optimize costs, manage risk, and ultimately, achieve long-term success.

Is a PEO worth it for small businesses?

Let's face it, every investment needs a clear ROI, and we understand the "worth it" question. So, is a PEO worth it for your business? The answer is: it depends.

Finding the best PEO for your small business starts with understanding your unique needs and challenges. At G&A, we assess each client’s specific situation, which allows us to customize a solution and unlock tangible benefits. These are just a few of the ways we can help transform your company's efficiency, employee satisfaction, and compliance – all critical ingredients for a thriving organization:

  • Streamlined operations: Free yourself from the burden of HR tasks and focus on your core business.
  • Happy employees: Attract and retain top talent with a comprehensive benefits package.
  • Compliance confidence: Navigate complex regulations and mitigate risk with expert guidance.

Now, let’s get into some numbers. Studies show that businesses who partner with a PEO see improved employee satisfaction and reduced turnover. In fact, the National Association of Professional Employer Organizations (NAPEO) found that businesses utilizing a PEO experience nearly 20% lower turnover rates. As you know, the hard (and soft) costs of employee turnover can be significant – and the loss of institutional knowledge can also severely impact your bottom line. So, lower turnover matters – a lot.

NAPEO’s research also found that businesses that use a PEO have an average ROI of 27.2%. The study also stated that for every $1,000 spent on PEO services, an average business would save $1,272. And businesses with above-average in-house HR costs are likely to have above-average ROI with a PEO partnership.

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What are the benefits of having a PEO?

Working with a PEO, like G&A Partners, offers a wide range of benefits – especially for smaller businesses. These PEO small business benefits can be transformative, allowing you to streamline operations, empower your workforce, and ultimately, achieve long-term growth.

Here are a few of the key benefits of partnering with a PEO:

  • Access to high-quality, affordable employee benefits
    By pooling employees from all of their client companies, PEOs, like G&A, are able to leverage economies of scale to negotiate better rates and terms for employee benefits. This means you gain access to affordable, Fortune 500-level employee benefits, typically only available to larger organizations.
  • Peace of mind with expert compliance guidance
    By staying abreast of ever-changing regulations, a PEO can provide expert guidance to help your business meet all legal requirements related to employment laws, tax regulations, and workplace safety standards.
  • Improved recruitment and retention
    A PEO can help you streamline your recruiting process, improve employee satisfaction through better HR management, and offer competitive benefits packages – all of which contribute to a stronger workplace cultures that attracts and retains top talent.

What are the downsides of using a PEO?

No two companies are alike, and while the needs and challenges of one may make them a great fit for a PEO, others may not currently be in a place where it makes sense to choose a PEO partnership.

Some of the perceived downsides of partnering with a PEO include:

  • Loss of control: Some businesses may perceive partnering with a PEO as relinquishing control over certain HR functions, such as payroll and benefits administration, which they prefer to manage in-house.
  • Cost: While PEOs offer comprehensive HR services, there may be a perception that the cost of outsourcing these functions outweighs the benefits, especially for small businesses with limited budgets.
  • Complexity: Introducing a PEO into the business structure may add complexity to operations, as employees navigate a new co-employment relationship and adjust to changes in HR processes and procedures.

However, if you look at these same downsides through a different lens, the benefits often outweigh initial concerns. These include:

  • Retained control with support: PEOs offer tailored solutions that allow businesses to retain control over strategic decision-making while benefiting from expert guidance and support in areas like compliance and employee relations.
  • Cost-effectiveness: By leveraging economies of scale to negotiate competitive rates for employee benefits and streamline HR processes, PEOs ultimately help reduce administrative overhead and provide access to Fortune 500-level benefits at affordable rates.
  • Simplified operations and enhanced compliance: Rather than adding complexity, partnering with a PEO can simplify operations by centralizing HR functions and providing access to streamlined processes and technology platforms. Additionally, PEOs specialize in compliance management, helping businesses to effectively navigate complex regulations and mitigate compliance risks.

When should you use a PEO?

You should consider utilizing PEO services for your small business when:

  • You are in growth mode or poised for growth, but are finding HR administration burdensome
  • You are finding it difficult to attain high-quality, affordable health insurance and other benefits
  • Navigating regulations and staying compliant becomes confusing and/or complicated
  • Attracting and retaining talent becomes a challenge
  • You need to improve your workplace culture and increase employee engagement.

When the demands of HR responsibilities start to exceed the capabilities of your existing internal resources, a PEO could be a good next step. If you feel you’re at, or nearing that point, it’s a good idea to identify what you’re looking for in a PEO (technology, client service, workplace culture, etc.), identify some firms that fit those wants, and then reach out to those organizations to discuss your specific needs and what they can offer.

To find out if PEO services are a good fit for your small business, schedule a consultation with G&A Partners today.

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Who should use a PEO?

Really, any business looking to save time and money on HR responsibilities could benefit from using a PEO. However, small and medium-sized businesses often benefit the most, especially those with 10-99 employees.

Industry research in 2023 by NAPEO found that small and medium-sized businesses consistently report positive effects from partnering with a PEO, including:

  • A better chance of staying in business
  • Higher growth rates
  • Lower employee turnover
  • Higher employee satisfaction

Business owners are quickly catching on to the benefits of PEOs and the industry has grown consistently from 2008 to 2022. By the end of 2022, there were 523 PEOs in the United States, employing a total of 4.5 million worksite employees, who were paid a total of $308 billion. These employees worked for over 208,000 different PEO clients, a count that represents 17% of all businesses with 10-99 employees.

Should startups use a PEO?

For startups, the decision to partner with a PEO can be particularly impactful. The early stages of building a business are critical, and it’s important that you have time to concentrate on product development, market entry, and scaling operations. The administrative burden of HR can be overwhelming, especially if you’re trying to scale quickly and hire multiple employees at once. If you’re in this situation, a PEO for your startup is a good option.

At G&A, we’re familiar with these challenges and we’ve helped a number of startups unlock significant growth potential by streamlining HR, securing top-tier benefits, and empowering them to focus on what they do best – building the future.

Find out how our partnership with GuideCX helped the founder of this dynamic startup company free up his time to grow his business and compete successfully for top talent – resulting in growth from six to 85 employees in just over three years.

As our partnership with GuideCX shows, we firmly believe that the best PEOs for startups should offer their clients a strategic advantage. Startups face fierce competition for talent, and the ability to administer high-quality, affordable HR functions and offer Fortune 500-level benefits can be a game changer.

For more examples of how G&A Partners is making a difference for organizations in a variety of industries, explore our case studies.

How do you pick a PEO?

When considering how to choose a PEO, thorough research and due diligence are your best allies. To help you make an informed decision, consider the following:

  • Identify your needs
    Begin by determining the specific HR needs of your business and what objectives you aim to achieve through a PEO partnership.
  • Research options
    Researching options when choosing a PEO is crucial as it ensures you find a partner that aligns with your business needs, values, and growth objectives, ultimately maximizing the benefits of the partnership. As you find different options, keep a list of PEO companies that meet your requirements.
  • Compare PEOs
    It’s important to compare the services, benefits, and costs of the PEOs you’re considering. Remember, the best PEO companies are those that not only fit your current needs, but can scale with your business, offer state-of-the-art, integrated technology and best-in-class customer service, and provide strategic benefits that align with your goals.
  • Check reviews and resources
    Public reviews are a great way to gauge how a PEO treats its clients. So is a Net Promoter Score (NPS) – a survey that measures client experience for companies and is used by Apple, Amazon, Google, and more. At G&A Partners, our NPS ranks best-in-class within the HR outsourcing industry. We take feedback that clients share in their monthly NPS surveys seriously and use their input to help us enhance our service and build a roadmap for future improvements.

    Another good sign is a PEO that provides plenty of free resources on its website – this shows the PEO is dedicated to providing education and helping its clients truly succeed.
  • Schedule a consultation
    Before signing on the dotted line, it’s important to meet with your chosen PEO to evaluate their customer service and see if their offerings align with your needs. This consultation should give you the information you need to select the right PEO. If you’re still unsure, ask your top candidates about the issues that are giving you pause — their response should help you make your final decision.

Why G&A

G&A Partners offers access to HR experts with years of experience helping businesses develop their employees, improve their workplace cultures, implement new HR processes and procedures, and more. Schedule a consultation with one of our trusted business advisors to learn more.