Your entrepreneurial spirit has led you to pursue your dream and start your very own business. At the start, you focused on setting the company up for success… and success you achieved. But, with that success came an increase in employees. As your staff grew so did the amount of time you spent on logistical and administrative HR tasks. Tasks that have you so buried under a mountain of paperwork that strategies to take the business to the next level are figuratively sitting on a shelf collecting dust.
What if you could ditch the paperwork and recoup the time you need to actually run the business the way you envisioned? And, in the process lessen business costs? Many small business owners are doing just that with the help of a professional employer organization (PEO).
The Top Four Ways a PEO Can Save You Money
1. Health Insurance
With no end in sight, health insurance premiums continue to rise, putting small businesses with limited budgets at a distinct disadvantage. In fact, a recent eHealth study found that 41% of small business owners are “very concerned” about their ability to continue to offer health benefits to employees.
The same research drives this point home by illustrating how staffing figures can make a significant difference in premium cost. In 2018, the premium for businesses with fewer than six employees was $419 per covered employee. By increasing staff by just one employee, the monthly cost per covered employee was 13% less, or $364. Just think about how much you could save if you were able to obtain quality health insurance based on the cost of covering hundreds, if not thousands of employees.
PEOs provide economies of scale, enabling you to cost-effectively purchase insurance plans that are comparable to those offered by Fortune 500 companies. Your costs are lower because PEOs have the purchasing power gained from providing insurance coverage to employees from many companies. These savings are then passed on to you.
2. Retirement Plans
Plan setup, record keeping, administration, investment and advisory, miscellaneous administration fees, etc.; establishing and maintaining a 401 (k) for your business is not only costly but can be a logistical nightmare. At the start, your pool of 401 (k) investment money will most likely be minimal. Not only does this affect the quality and number of providers that you’ll be able to work with, it has a direct impact on fees. Let’s assume your company’s investment assets total $300K, your fees will most likely be between $5K – $10K per year. As your business’ investment builds, your cost decreases. ShareBuilder demonstrates this with the following example: If your company’s 401 (k) program has grown to over $500K or $1M in total assets, you can expect to pay at least 25% less.
As a small business, it may take you years to build up the 401 (k) assets needed to make a dent in fees. This is where a PEO can get you there almost immediately. Since they leverage the combined investments from the company’s they serve, they’re able to pass these savings on to you, and in some cases even provide additional discounts.
3. HR Compliance
Made up of an overwhelming number of rules and regulations, employment law is complex and constantly changing , which makes keeping your finger on the pulse nearly impossible. But to avoid mistakes, where even the smallest error can be costly and large infractions can result in massive fines, you need to be on top of rule and regulation changes.
Taking a look at just one aspect, payroll, revealed that the IRS penalizes small businesses billions of dollars each year for payroll errors. When it comes to HR compliance, this is one area that you don’t want to risk making any mistakes. By partnering with a PEO you get peace of mind that you’re always in compliance, which ultimately saves you money on potential fines, not to mention the time you’ll now have to grow your business.
4. Workers’ Compensation
Nobody wants to think about it, but workers’ comp claims can and do get filed regularly. What makes a claim so costly and time-consuming? Two things – insurance premiums and claims management. As a small business, you don’t have access to the same workers’ comp rates as larger organizations.
PEO’s have the ability to provide workers’ comp coverage through its own workers’ comp insurance program, which ultimately saves you countless dollars in premiums. In addition, they’re on-hand to lessen possible future claims by providing safety services such as OSHA training. With a PEO you gain affordable rates and knowledgeable personnel to manage compliance, audits, paperwork, and certifications.
The cost savings above are just the tip of the iceberg. Think about the cost you incur to recruit top talent and what it takes to keep them in your employment. Or your ability to provide the learning and development programs Millennials, Gen X’ers and now Gen Z’ers, who are just entering the workforce, value when making employment decisions. Many PEO’s offer these types of services and more, giving you a competitive edge.
Are you considering a PEO? Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization (PEO) to determine if it’s the right choice for your organization.