In today’s competitive labor market, attracting and retaining top talent is no easy feat. Companies of all sizes are vying for the same skilled professionals, and for small- and mid-sized businesses, the challenge can be particularly daunting. Larger enterprises often have an edge, boasting extensive benefit packages, well-resourced HR teams, and the ability to offer highly competitive salaries. However, Professional Employer Organizations (PEOs) can change the game for smaller employers, leveling the playing field and providing them with the tools to compete effectively for top-tier talent.
PEO Benefits Make Businesses More Competitive in the Talent Marketplace
In short, PEOs have the ability to put smaller businesses on par with major enterprises.
How? A PEO acts as a strategic partner in the hiring process, providing comprehensive HR solutions that include payroll processing, compliance support, and most notably, access to a wide array of employee benefits.
Because the PEO can spread its own costs among a large portfolio of client employers, they can offer enterprise-sized benefits at small business-sized budgets. This partnership enables smaller firms to offer benefits that would otherwise be cost-prohibitive. The result is a strengthened ability to hire and retain employees when compared to non-PEO users.
For a business with otherwise limited HR resources, crafting a competitive benefits package independently can be nearly impossible. Consider a small company with 40 employees attempting to match the offerings of a multinational corporation with thousands of employees. Without the collective bargaining power of a PEO, this would be an uphill battle. However, when businesses partner with a PEO, they gain access to high-quality benefits at competitive rates, giving them a significant advantage in attracting and retaining talent.
Note that there are two distinct dimensions to outcompeting other businesses for talent: (1) finding/hiring premiere talent and then (2) keeping that talent through effective employee retention strategies. To start, PEOs provide a comprehensive suite of services specifically designed to support businesses in hiring the right employees. These include:
- Access to professional recruiting and talent acquisition services
- Streamlined application and interview procedures
- Background screening and drug testing
- Competitive salary benchmarking and pre-employment assessments
- Comprehensive onboarding resources to ensure a smooth start for new hires
PEO Benefits Are Better and More Affordable
Next up: PEO benefits offerings. The reality is that benefits play a crucial role in a job seeker’s decision-making process. Workers today expect more than just a paycheck; they want robust healthcare plans, retirement savings options, and additional perks that enhance their overall well-being.
One of the most compelling advantages of working with a PEO is the ability to offer a superior benefits package. Small businesses typically operate on tight budgets, and without a PEO, even providing basic health insurance can be financially overwhelming. PEOs aggregate employees from multiple companies, leveraging their buying power to negotiate better rates and provide a broader range of benefits.
For example, research shows that organizations using a PEO are 56% more likely to offer mental health resources and behavioral health programs than those that don’t, according to Guardian Life. These benefits are particularly important in the modern workplace, where employee wellness is a top priority. In addition to mental health resources, PEO clients commonly gain access to:
- Comprehensive health, dental, and vision insurance plans
- Retirement savings options, including 401(k) plans with employer matching
- Life and disability insurance
- Employee assistance programs (EAPs)
- Wellness programs and financial counseling services
PEOs Facilitate Effective Employee Retention Strategies
A strong benefits package doesn’t just help with recruitment, it also plays a critical role in employee retention. When employees feel secure in their jobs and satisfied with their benefits, they are more likely to stay with their employer long-term. The National Association of PEOs (NAPEO) has found that the employee turnover rate for PEO clients is 12% lower compared to similar businesses that don’t use a PEO. NAPEO has also found that employee engagement among PEO users is five points higher than among non-PEO users.
This workforce stability goes deeper than better benefits, though. PEOs provide a variety of services and employee retention strategies aimed specifically at cultivating employee engagement and retention:
- Expert guidance on employee relations matters
- Access to professional development workshops and leadership training
- Performance management tools and coaching programs
- Accurate and efficient payroll processing to ensure timely and correct compensation
- Improved buying power to provide employees with better, more affordable benefits
For employees, PEOs offer:
- Access to robust and convenient self-service options
- Improved accuracy that can reduce issues like payroll or benefits errors
- Access to HR experts who can answer more complicated questions faster
Altogether, the result is a happier workforce that’s more engaged, more loyal, more motivated, and more likely to stay.
PEOs Benefits Give Businesses a Necessary Edge in 2025
The real question is does it make a difference to the bottom-line? As mentioned above, NAPEO has found that PEO users enjoy:
- A growth rate more than 2x higher than non-users,
- An employer turnover rate 12% lower, and
- 50% more resilience against going out of business.
“These are the marks of stable, robust businesses that remain better positioned for long-term success,” the report concludes. “This higher growth rate among PEO clients likely reflects primarily their increased capacity to focus on strategic business matters while the PEO provides all of the employee-related services.”
As competition for talent continues to intensify, businesses must adopt innovative techniques for hiring employees and then implement effective employee retention strategies. A PEO provides a clear solution, granting smaller firms access to premium benefits, professional HR services, and streamlined administrative support. In doing so, they allow businesses to focus on their core operations while ensuring they remain competitive in a challenging job market.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our professional recruitment services, contact us today.
**The information provided on this website is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and completeness of the information, we make no guarantees about its correctness, completeness, or applicability to your specific circumstances. Laws and regulations are subject to change, and you should consult a qualified legal professional before making any decisions based on the information provided here.