Professional employer organizations (PEOs) are often seen as a way to save time by taking routine and mundane matters away from your in-house HR team.
However, PEOs also improves the productivity of every employee in the business. That’s not just because you are no longer asking the administrative assistant to process payroll.
PEOs can improve employee productivity both directly by improving the health and wellness of your employees, and indirectly by allowing HR to focus on priorities that also improve productivity.
When you don't have a great benefits plan, your employees tend to put off routine doctors' appointments and are more likely to come into the office when sick and give it to everyone else.
Employees who work while sick are also generally slower and less productive. There is more "presenteeism," where the employee is in the office, but not really doing anything. Catching problems earlier reduces the number of sick days taken. Not having coverage for dependents, especially children, can also result in employees taking more time off to nurse a sick child.
Not having good health insurance (and other benefits such as retirement) also tends to make everyone more stressed, which in turn reduces productivity and increases both absenteeism and presenteeism. PEOs can help by giving you the bargaining power that allows you to access better benefits than you could access on your own. They can also use their experience to help you design wellness and return-to-work programs that also reduce downtime.
PEOs also have a wealth of experience related to employee safety. Many have safety programs that they have designed by using the knowledge gained from all of their clients. This reduces the number of accidents and workplace injuries that can also cause downtime.
PEOs know the best practices you should implement for your industry and situation and help you not just meet compliance with safety regulations but go beyond them to ensure that your workers are as safe as they can be.
Aside from the direct impacts, PEOs have a number of indirect impacts on productivity.
The PEO gives you access to pay-as-you-go workers’ compensation. This means that instead of estimating and paying your premiums at the start of the year, you have a payment plan that is based on your exact payroll for that month. You don't end up overpaying or underpaying, and have more free cash that can then be spent on incentive programs, wellness programs, etc.
This is not a low deposit plan, but is genuinely zero deposit because the PEO has already paid the deposit and is allowing you to spread out the cost. It works for them because they are operating at scale.
Partnering with a PEO also helps keep premiums down by giving you access to their experience modifier, which is almost always better than what a startup is offered.
Because your in-house HR team is not spending hours doing payroll, administering benefits, or otherwise pushing paper, they can focus on something much more critical: Keeping your employees happy. HR has time to address complaints, fix employee issues, and otherwise improve company culture.
Satisfied employees are more productive. Unsatisfied employees tend to create a downward spiral of less productivity as they complain to each other. Satisfied employees stick around, which reduces the cost of employee turnover.
In many small companies, HR often has to ask for help when things are busy, and that help ends up being provided by the owner or another employee. When those people are doing HR paperwork, they are not focusing on revenue-generating tasks.
The PEO also helps ensure that you are up to date on the latest regulations, instead of HR having to do these tasks. This also frees up HR’s time and that of other employees.
If you choose an experienced PEO, then they have been around the block. Through their other clients, they have seen good examples of what does and does not work. They can pass that expertise on to you. They can help you design employee wellness and incentive programs that work.
They make sure that you avoid expensive compliance problems by keeping everything accurate and up-to-date. They also often have access to enterprise-grade tools that you might not be able to afford independently. Their expertise can help you build a better company culture that results in higher productivity.
On top of improving productivity, PEOs have an average ROI of 27.2%. This includes the significant time savings of outsourcing all, not just part, of your routine HR matters. Partnering with a PEO is the ideal, scalable solution for small businesses who cannot afford a full HR team and want to ensure that their employees get the support they need.