Without question, professional employer organizations (PEOs) are the lifeblood of many small and medium-sized businesses (SMBs). In fact, a National Association of Professional Employer Organizations (NAPEO) press release announced that in the first quarter of 2020, PEOs had its highest growth rate since 2018. What may not be as obvious are the benefits of hiring a PEO to help cope with workplace challenges resulting from Covid-19.
How Covid-19 has Affected SMBs
Although SMB closures aren’t a new phenomenon, the rate at which they are closing their doors certainly is. A report by McKinsey & Company states that as a result of the coronavirus 30 million small-business jobs are vulnerable. If we break down this figure further – SMBs with less than 100 employees are more vulnerable than their larger counterparts; and the hardest hit industries are accommodations, food services, construction, retail, healthcare, and social assistance.
As we brace for the second wave of the virus, it’s estimated that 36,000 franchise small businesses won’t be in business by spring 2021. This is in addition to the nearly 33,000 SMBs that have been driven out of business as a result of Covid-19. While the news of ongoing closures and displaced employees is alarming, there is a way for SMBs to gain a foothold during these unprecedented times.
The Significance of HR During COVID-19
At the onset of the pandemic, business owners had to rethink how they could continue to run their companies, as non-essential workers transitioned from the office to working from home. Although the move to work-from-home sounds easy, businesses needed to take into consideration tools such as laptops and virtual meeting software to ensure employee productivity. In addition, there were security risk issues to contend with, as well as a host of other complexities.
For businesses that were not faring well, they were faced with laying off employees, and the HR tasks that accompany the decision to furlough employees. Decisions such as which employees to make redundant, the benefits open to the laid-off employee such as unemployment and COBRA, and assistance with outplacement services became commonplace. While necessary, these events can take a significant amount of time. For SMBs that have just a couple of HR representatives or no HR assistance, many began turning to PEOs to handle the increase in HR-related activities. As we continue to make our way through the pandemic, PEOs are continuing to make a significant impact on the sustainability of SMBs.
The Positive Impact of Hiring a PEO
Did you know that SMBs that use PEO assistance are faring better than their counterparts? A recent report published by NAPEO highlights the findings of an analysis that compared the impact that PEOs have had on SMBs since the start of the pandemic. The analysis looked at key criteria and the outcomes of PEO clients.
- Paycheck Protection Program (PPP) loans: This criterion is split into two groups – percent of SMBs receiving PPP loans and percent receiving PPP loans earlier in the process.
- At the start of the pandemic, PEOs played a vital role in assisting SMBs with PPP applications. As a result, SMBs that worked with a PEO was 119% more likely to have received PPP loans.
- In comparison, 65.9% of those that are PEO clients, received the PPP loan, while only 30.1% of those without a PEO, were approved for their loans.
- Additionally, during the first phase of PPP funding, 49.7% of PEO clients received PPP loans, over 115,000 SMBs approved; while only 28.9% of SMBs, without a PEO, secured their loans on the initial round.
- While many SMBs were forced to temporarily close during the shutdown, an impressive 91% of SMBs that are PEO clients are less likely to still be closed. In fact, nearly all PEO clients are now open for business, while a significant percentage of SMBs that do not use PEO assistance remain closed.
- When it comes to survival rates, once again PEO SMB clients fared much better – with 60% less likely to have permanently closed due to the pandemic.
The benefits of hiring a PEO during Covid-19 are clear – pandemic assistance, payroll, benefits, retirement plans, workers’ compensation, lawsuits, recruiting, unemployment, regulatory compliance, and much more.
Are you considering a PEO for your HR tasks? Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization to determine if it’s the right choice for your organization.