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Top 7 Ways Small Businesses Can Benefit from PEOs

Small businesses are the backbone of the U.S. economy. Attracting more new private-sector jobs than large companies, small businesses have a proven track record for successful job creation and innovation. However, the road to business success is often complicated by many factors. One major obstacle is the development and sustainability of human resources services.

According to the National Association of Professional Employer Organizations (NAPEO), there are 1.1 million businesses in the United States that have between 10 and 99 employees. As companies hire more people, deploying effective human resources solutions are critical to business survival.

Most small businesses only provide basic HR needs. Creating safe work environments, navigating complex regulatory requirements, developing attractive benefits packages, handling payroll and minimizing employee turnover, are all tasks many business owners find too time-consuming and costly to handle themselves.

The time and effort allocated to remedy these challenges often take away from other critical business-related tasks and can result in loss of revenue, credibility, and good workers. One effective solution is the use of a Professional Employers Organization (PEO)

PEOs provide human resources services to their small business clients. These services include paying wages and taxes, as well as providing compliance assistance with myriad state and federal laws and regulations. Because of the effectiveness of PEOs, the industry has grown over the years and now provides services to between 156,000 to 180,000 small and mid-sized businesses, employing between 2.7 and 3.4 million people.

According to NAPEO and Delta Administrative Services’ staff of HR/PEO specialists, the seven most important benefits to using PEO services are:

1. Business grows faster using a PEO.

Since December 2004, employment at small businesses using a PEO has grown more than 7 percent faster than at small businesses overall, according to the Intuit Small Business Employment Index.

2. Employee turnover is lower.

The average overall employee turnover rate in the U.S. is approximately 42 percent per year, based on 2012 data. It is 28 to 32 percent for companies that used a PEO for at least four quarters.

3. Businesses are 50% less likely to go out of business.

The overall business failure rate among private businesses in the United States as a whole is nearly 8 percent per year, based on 2012 data. It is approximately 4 percent per year for those companies that used a PEO for at least four quarters.

4. Access to Fortune 500 employee benefits.

Through a PEO, the employees of small businesses gain access to big-business employee benefits such as: health insurance, dental and vision care, life insurance, retirement saving plans and more.

5. Increased access to employer-sponsored retirement plans, such as 401(k) or similar offerings.

Retirement benefits are rare among most small businesses. The availability of retirement plans represents a major difference between PEO clients and other small businesses.

6. More services at a lower price.

PEOs are able to provide services at a lower cost than their clients would have to pay for more basic HR administrative services. Per employee HR administrative cost for companies that do not use a PEO is $1,744; average cost for PEO clients is $1,295.

7. Demystifying state and federal regulations.

PEOs help clients better understand a myriad of complex state and federal regulations, including labor and employment-related legislative bills and the Affordable Care Act (ACA).

PEOs offer small business HR solutions critical to the long-term success of a company. Recognizing the need for HR services and bringing in experts to handle the overwhelming responsibilities of providing payroll services, benefits, and regulatory compliance are smart business solutions for companies working to ensure economic growth and employee retention. Contact Delta Administrative Services today to learn more about how we can help your small business succeed.

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