[aa_subtitle_display]You may have heard that professional employment organizations (PEO) can save your company money, but how? It depends on what services you contract out to them, but the money you can save by partnering with a PEO will more than pay for their services. Here are some of the ways that a PEO can save you money.
Save on Worker’s Compensation
Small and mid-sized businesses can have high worker’s compensation insurance payments simply because they don’t have many employees. When a company partners with a PEO, their employees become employees of the PEO and are added to the PEO’s much larger pool of employees. With all of these employees, PEOs have greater buying power and may get lower rates. Some PEOs may even own their own insurance carriers, meaning they can get even lower rates.
Working with a PEO can also reduce a company’s risk of a worker’s compensation claim, which will save the company money. PEOs may offer workplace safety audits and training, as well as administrative help if an incident occurs. Some PEOs may also be able to provide guidance or help you put a workplace safety program into place.
In addition to saving money, working with a PEO can make it easier to pay for worker’s compensation and improve cash flow. Many small businesses are required to pay annual premiums upfront, or at least to pay a large down payment toward it. With a PEO, companies can pay weekly or bi-weekly premiums along with their payroll.
Save on Employee Health Insurance
Now that companies with more than 50 employees must provide health insurance, many businesses need to find ways to save on these costs. Much like with worker’s compensation insurance, having fewer employees means that insurance carriers will charge more per employee. Because PEOs have a larger employee pool and more negotiating power, they can get lower rates no matter how many employees each individual client company has.
Save on 401(k) Plans
Again, there is power in numbers. Some 401(k) providers are reluctant to work with smaller companies because they represent a smaller investment. There are usually more fees for smaller companies as well. With a larger employee pool and greater total investments, providers will give discounts and make 401(k) plans affordable.
Save Employee Time – How many hours do you pay employees to do payroll, fill out and verify time sheets, or deal with administrative paperwork? Couldn’t those hours be better spent on more profitable tasks? PEOs may provide self-service websites that will save on time and paperwork, plus time and labor tracking that will save the time employees would have spent filling out timesheets.
Save on Unemployment Taxes
Depending on the situation and the state the company is in, companies may be able to pay lower state unemployment tax rates when they are partnered with a PEO.
Save on Hiring
There’s no better way to save on recruitment and hiring than to retain the great employees your company already has. Working with a PEO means that companies can offer great benefits to their employees, so they’ll want to stay. Some PEOs can also help with recruitment and hiring, so that you hire the right employees with less cost.