Employees have a significant role in the business landscape and are typically the backbone of any successful company. We often write about how a Professional Employer Organization can help business owners generate cost savings, business advantages, and peace of mind. All of which are equally important to run a business smoothly.
But what about the people who work in these businesses - the employees? How do they benefit from working with a PEO? That's what we'll explore in this blog. We'll take a closer look at how a PEO can make a positive difference in the lives of your employees, highlight some valuable benefits to both employers and employees and clear up some common misunderstandings.
How does a PEO partnership work?
First, let’s define the relationships here. When a business owner hires their first employee, they take on a brand-new role: employer. However, this new role includes dealing with various employee administration tasks and other related matters. These tasks demand time and resources that would ideally be used for their core role as business owners.
This is where a PEO steps in to assist. The PEO takes on the role of a "co-employer." Importantly, business owners retain complete control and ownership of the employer-employee relationship.
Simultaneously, the PEO acts as the "employer of record" responsible for handling administrative and regulatory tasks like ensuring compliance with employment law and providing HR services like managing an employee benefits package including health benefits. This division of responsibilities enables business owners to focus on their core business activities while ensuring that employees' needs are managed.
In turn, the Professional Employer Organization can handle almost any or all aspects of the HR function for their clients:
· Workforce management.
A PEO benefits both employees and employers.
While it's evident how PEOs help employers by giving them more time and resources to focus on their core business, there might be questions about how this benefits employees. Some business owners may wonder if it's better to have in-house solutions for HR questions and issues instead of dealing with an external third-party partner.
What's often surprising to both employers and employees is the high-tough service that PEOs can provide. They can provide immediate answers to unique and complex questions from HR experts. These experts deal with these kinds of inquiries all day, every day, across many different organizations.
Similarly, PEOs can deploy advanced and user-friendly self-service technologies. This enables employees to get answers quickly and handle tasks promptly, instead of having to wait for help.
In addition, employees get improved access to better employee benefits – especially those with smaller employers – because PEOs make enterprise-grade purchasing power available all their clients, even the tiniest startups. As a result, employees can get the best Large Group Health Plans regardless of the size of their employer, as well as access to a wider array of benefits like dental and vision, other forms of insurance, employee assistance programs, and more.
In fact, a PEO can improve the relationship between employee and employer.
Employees who are happier are more likely to be engaged, productive, and loyal. For example, the World Economic Forum reports on a study that found happy employees had 13% higher sales than their unhappy colleagues. They’re also less likely to leave for greener pastures. In fact, a PEO can have a significantly positive impact on the employment relationship.
To provide solid evidence, the National Association of Professional Employer Organizations (NAPEO) commissioned an independent research study. They found that companies that partnered with a PEO experienced a turnover rate was 10 to 14 percentage points lower compared to those similar companies that didn't work with a PEO. In other words, employees in businesses that use Professional Employer Organizations tend to stay with their employer for a longer duration, which is a great cost-effective strategy for small business owners.
Moreover, these employees tend to have more positive views of their employers, which leads to increased employee satisfaction, engagement, and loyalty. NAPEO's research also showed that employee engagement was 5 points higher among those working with PEOs compared to those who didn't.
It’s a common myth of PEO outsourcing that employees suffer reduced service under a Professional Employer Organization. However, PEOs can actually provide higher-touch services, more sophisticated technologies, and better benefits than would otherwise be available, particularly for smaller businesses.
Debunking the Myths About Outsourcing to a PEO
Partnering with a Professional Employer Organization (PEO) to outsource HR functions can bring significant benefits to both employers and employees. However, there are some common misconceptions associated with working with a PEO. We will address and debunk a few of these myths. To learn more about common PEO misconceptions, we invite you to read our blog titled "Six Common PEO Misconceptions Debunked."
All Professional Employer Organizations Are The Same
A misconception many employers have is that all Professional Employer Organizations offer identical services and benefits.
Although they follow the same basic business model, PEOs can vary in expertise, geographic coverage, and the services they offer. It's essential to partner with a PEO that aligns with your specific business needs. Some PEOs offer tailored services, while others may focus on specific industries of business sizes.
Professional Employer Organizations Are Just Glorified Staffing Firms
Another common myth is that PEOs are similar to staffing firms. While both have their role in supporting businesses, they serve different purposes.
PEOs are comprehensive HR solutions that provide services like benefits administration, payroll processing, and HR compliance. They work closely with businesses, become their HR partners, and handle various HR tasks and administrative functions.
Staffing firms, on the other hand, primarily focus on providing temporary or contract workers for specific job positions. They focus on recruiting and placing individuals in short-term jobs.
Understanding the difference is important because PEOs offer long-term solutions to enhance HR management and support business growth, beyond what staffing firms provide.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), assists small to mid-sized companies with HR solutions. Our services encompass HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.