A quick look at how PEOs help small businesses take care of their workers.
Among the most valuable PEO services are employer-sponsored retirement benefits, such as 401(k) (or similar) plans. These retirement benefits play a key role in a company’s ability to attract and retain skilled employees. While ubiquitous in most corporate benefits packages, retirement benefits are a hard sell for most small businesses. High individual costs and weak negotiating leverage often means that the average mom-and-pop simply can’t afford to provide meaningful retirement benefits. As a direct result, long-term talent can be difficult to come by, and even more difficult to retain. A 2012 survey by Towers Watson found that nearly half of the employees surveyed viewed retirement benefits as an “important” reason to stay with their current employer. Over one-third cited retirement benefits as a deciding factor in working for their employers to begin with.
PEOs Provide Leverage
The availability of retirement plans represents a major difference between PEO clients and other small businesses. The vast majority of PEOs offer some type of retirement plan to their clients (although not all clients may opt to take advantage of those services). In contrast, less than one in six of all employees of the companies employing fewer than 10 workers, and less than one-third of those at companies with 10 to 49 employees, work for a company that sponsors some type of retirement plan, according to the Employee Benefit Research Institute (EBRI). Those without retirement plans cited high costs as one of the biggest obstacles to offering a competitive plan, while others pointed to the bureaucratic burden.
PEOs overcome both obstacles. Utilizing a method known as “pooling”, PEOs can often employ economies of scale to leverage better rates on healthcare and workers’ compensation coverage. These cost savings make traditional retirement benefits more affordable for client companies to offer. Furthermore, PEOs typically take on the day-to-day responsibilities of administering benefits and other HR services. In other words, they assume the bureaucratic burden while you get back to running your business.
By making it considerably easier for small and medium-size employers to offer retirement benefits to their workers, PEOs create value for employees and employers. As a result, PEO clients reap several key benefits:
- Affordable retirement benefits.
- Reduced bureaucratic burden.
- Reduced risk exposure.
- The ability to attract and retain high-quality employees who will promote growth.
- Peace of mind.
The right PEO can help you leverage your business’ growth potential today.