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5 Ways a PEO Saves Your Company Money

Updated: May 17


5 Ways a PEO Saves Your Company Money
5 Ways a PEO Saves Your Company Money

Are you a small or mid-sized business owner? Are you struggling to keep your employees or finding it challenging to attract the right talent to your team? Chances are, you're competing with large organizations that have the capacity to offer juicier and bigger benefits and perks to their employees. But did you know that you can attract the best talents and offer them competitive benefits packages as though you were a big firm?


In a 2018 study by the US Bureau of Labor Statistics, the average cost of employee benefits per employee for one year was $21,726. When you add this to the average workers' salary of $50,000, you'll arrive at a total of $71,726 per employee. Now, that's a figure that many American small businesses and startups may not be able to afford. Imagine you have 5-20 employees; that can be pretty hard to keep up with, especially if you're just starting.


But regardless of these stats, when it comes to offering excellent employee benefits, your company is most likely going to be better off with a professional employer organization behind it. Indeed, teaming up with a PEO has proven to be a reliable solution for most SMBs looking to save money.


How Partnering with a PEO Can Save Your Company Money


Here are some ways a PEO can save your company from spending too much on HR-related matters.


Reduced Cost of Employee Turnover


There are significant costs to hiring and replacing employees. You may never know the devastating impact of high employee turnover until you experience it. According to Employee Benefit News, the average US employer spends about 33% of a worker's annual salary to replace that same employee. This means that if a worker makes $40,000 per annum, it will cost the employer $13,200 to replace that worker.


Without a doubt, employee turnover can cripple a business, so you want to avoid it. Nevertheless, there are many reasons employees may wish to take the exit door, but it's important to make sure those reasons are not things within your control. Even for large firms, one of the most effective ways to ensure this does not happen or is minimized is by partnering with a PEO.


Health Insurance


One of the best ways a PEO can save your company money is through quality health insurance coverage. Health insurance is a serious conversation, and employees have expectations regarding their health insurance benefits, just as they do their salaries. In fact, surveys reveal that more employees prefer more or better benefits over a salary increase. Many small businesses are willing to provide a comprehensive health insurance package for each employee, only that it can be a serious undertaking for small businesses.


However, in a co-employment arrangement with a professional employer organization (PEO), your company has the opportunity of enjoying access to better insurance benefits for less. Regardless of the organization's size, many businesses now look to PEOs as the best solutions for health insurance packages. On your own, you may be spending up to $10,000 per employee each year for healthcare benefits alone. For instance, in a state like California, an average SMB is expected to spend $7,056 per year on health insurance, and this varies depending on your location and state.


Compliance Issues


Compliance is an issue for many businesses. Typically, you'd prefer to focus on key business activities rather than divide your attention between important meetings with clients and resolving compliance-related matters. Federal labor and employment laws may sometimes be overwhelming to understand. You may even unknowingly be flouting the provisions of the law. But a PEO can save you from so much trouble since they understand the laws and how to interact with the authorities.


The Occupational Safety and Health Administration (OSHA) laws and regulations and Workers' Compensation laws exist today to protect the interests of employees and ensure they are treated well by employers. Filing taxes, both for your company and employees often comes with complications that many businesses may find challenging to handle. These may also attract monetary penalties, but a reliable PEO can save your company from regulatory and compliance issues, thereby saving you money.


In the state of California, the labor law is more pro-worker, and the damages and penalties a worker can be compensated for are higher under California labor law than under federal labor law.


Administrative Savings


Did you know that the cost of running the day-to-day activities of your business, especially HR-related matters, can add up significantly, demanding more than you initially realized? According to a study, companies that partner with a PEO enjoys an average of 21% savings on HR administration. From onboarding to payroll processing, filing of taxes, and managing employee benefits, PEOs can provide a unified administrative solution that takes care of all HR administrative processes, saving you money on those important expenses.


401(k) and Retirement


A 401(k) plan is a special type of retirement savings plan named after a section of the United States Internal Revenue Code. Employees fund their 401(k) account through automatic payroll deductions, taken before taxes are paid on the balance. Employers, on the other hand, can match some or all of those contributions, depending on how they choose to contribute.


Employers can contribute by:

  • Matching Contribution: Employer puts in money as long as the employee is contributing

  • Non-elective Contribution: Employers may elect to put in a determined percentage of the employee's pay, whether or not they're contributing to their 401(k) plans.

  • Profit-sharing Contribution: The employer may decide to set a particular amount into the plan if it is profitable.

Check out the important things every employer should know about implementing 401(k) plans to learn more about 401(k) and how your company can benefit from partnering with a PEO on this.


Ready to Choose a PEO


You can begin by checking out our list of the best PEO companies to work with in 2022. If you need further assistance choosing the right PEO for your business, we would be happy to help. As growth experts specializing in helping businesses grow, we provide small and mid-sized companies with expert guidance and profitable marketing solutions to scale their businesses.


At Mission, we do not only offer your business the services and solutions you need to scale your business quickly and efficiently; we also bring our years of experience and rich insight to the table, providing businesses with answers to all their bugging HR and outsourcing needs. Don't hesitate to contact us, if you have further questions about PEO or hiring employees in other locations.