The Top 5 Ways a PEO Reduces Your Expenses

22 Apr The Top 5 Ways a PEO Reduces Your Expenses

When you’re running a business, the reduction of your expenses is an elusive, ever-present demand that gives your company fiscal balance, makes growth possible, and pleases your investors. But the path to expense reduction isn’t always a straight line or clearly delineated path towards more cash flow availability.

There is one avenue for reducing your overall business expenses that a lot of CEO’s don’t know about, or don’t know much about, at least: PEOs, aka Professional Employer Organizations. In essence, a PEO works with companies who are looking to outsource their Human Resources, providing stronger benefit plans, attractive incentives to potential new employees, and HR expense reductions to the point that a PEO practically pays for itself.

The proof’s in the pudding, though, right? So, I’ve put together a list of the top 5 real ways that a PEO can reduce your business expenses.

1. Reduces your health insurance premiums

PEOs are able to get lower health insurance premiums by covering a much larger group of individuals under one plan.

2. Reduces your workers compensation premiums

Similar to your health insurance premiums, by covering a much larger pool of people, workers compensation packages are spread out across the masses, meaning each of your individual employees costs less to cover.

3. Reduces your state unemployment tax rate

PEOs often times have their own – reduced – state unemployment tax rate, based on the number of people they “employ” and the respective ratio of those individuals who apply for unemployment. PEOs are also very proactive about managing their unemployment process in order to maintain their low tax rate, something many smaller organizations don’t have the time to focus on.

4. Reduces turnover costs

One of the most attractive perks of partnering with a PEO are the strong benefit packages they’re able to provide your staff. This initially helps in recruiting and hiring, but secondarily helps to keep your best workers engaged and sticking around.

5. Reduces soft HR costs

These include costs like software maintenance, payroll management, and time lost doing mounds of necessary, but tedious paperwork that a PEO will do for you. This allows your HR department to focus instead on strategic business initiatives that will help grow the company.

By combining roughly 400 companies into one, a PEO can reduce your own company expenses simply through the economies of scale. They have more avenues for cutting costs than a smaller organization would on their own, and they’re happy to share the wealth. In fact, that’s their primary goal.



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