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5 Ways a PEO Reduces Your Business Costs

Cost cutting concept

Every business owner seeks ways to maximize profits and reduce expenses. Working with a Professional Employer Organization (PEO), your business may be able to achieve this goal. There are many ways a PEO reduces costs for your business, including affordable benefits and employee retention.

Better Benefits at a Lower Cost

Providing competitive benefits to employees is often cost-prohibitive for small businesses. Benefits come at a premium when you do not have leverage to negotiate. Fortune 500 companies can get better prices on healthcare premiums, for example, because they have thousands of employees working for them. This creates a large risk pool for the healthcare provider to minimize their risk of providing health insurance. 

Small businesses can access these cost savings through a co-employment relationship with a PEO. Co-employment allows the PEO to become the employer of record for your employees. While co-employment keeps you in the driver’s seat, it gives you and your employees access to the PEO’s healthcare plans, negotiated at scale to help you and your employees save on healthcare premiums. By partnering with a PEO, you gain access to Fortune 500 level benefits at Fortune 500 prices.

Hire a Team for the Cost of One Employee

A PEO is not meant to replace your existing HR staff. In fact, to get the most benefit of a PEO relationship, the HR experts at your PEO will partner with your existing HR staff. Doing this allows your internal HR team to focus on your business success while the HR experts work to provide your company with a positive ROI by reducing your costs.

Hiring just one additional HR employee in-house can cost tens of thousands of dollars in salary. You rely on one person to help keep your business compliant and save money. With a PEO, you have a team of HR experts working to help you achieve your business goals.

Lower Premiums on Workers’ Comp

Depending on the industry you are in, small businesses often find it challenging to locate cost-effective workers’ compensation insurance coverage. With few exceptions, the law requires this coverage and this coverage will support any employees who may have suffered an injury while on the job. PEOs will help you find the most cost-effective plan for your business objectives.

Avoid Compliance Fines

Employment law compliance is complex and ripe for mistakes. Trusting your HR compliance to one person on your team places a great deal of responsibility on them. With a PEO, you get an entire team of HR experts who stay up-to-date on ever-changing labor laws. They help your business make policy adjustments to ensure compliance with existing laws and prepare for changes that may come with new employment laws.

Failing to comply with employment laws can cause costly and embarrassing fines for your company. Many violations occur in:

  • Missed payroll
  • Employee misclassification
  • Incorrect withholding
  • Safety issues
  • Improper training

In-house HR employees cannot possibly stay up-to-date on every nuance in every employment law. They have other duties they need to focus on keeping your business running. Partnering with a PEO gives you access to a team of HR experts who work tirelessly to ensure your business stays compliant and avoids costly fines.

Lower Turnover

Turnover costs businesses thousands of dollars per employee. One of the most common reasons that employees leave a company is due to lack of benefits. That’s why your company could benefit from a holistic approach from a PEO.

Reducing turnover in your business will create a more inclusive and collaborative environment and lower your costs. By keeping employees for many years, your employees provide your company with loyalty and productivity. In turn, your company receives cost savings by not having to replace employees constantly. This reduced hiring burden on your internal HR staff means they can focus on your core business needs and helping you grow.

The Right PEO Saves Your Business Money

HR outsourcing with a PEO can save your business money. Offering stellar benefits to your employees makes them more loyal to you and less likely to leave your company for a competitor. That helps reduce your overhead of replacing employees, and it gives your company a good reputation in the industry, showing you care about your employees by offering them great benefits. This alone can be a great recruiting tool.

Partnering with the right PEO makes all of these cost savings possible. Without a PEO, you risk employee lawsuits, compliance violation fines from government agencies, and losing employees to competitors. With a PEO, you can avoid all of this while still retaining a positive ROI. Partner with the right PEO to help your business reduce costs.