Transform Your Employee Benefits Strategy With a PEO

Managing employee benefits is a critical but complex and time-consuming task that can cause headaches for employers, especially for small to midsize businesses. From keeping up with compliance regulations to providing competitive benefits packages, the demands of benefits administration can place a heavy burden on internal HR teams or even business owners themselves.

Due to both the cost and administrative burden, every employer is going to seek out ways to streamline how they handle and administer benefits. The problem? Not every strategy will be effective or beneficial.

Think of it this way: A competitive benefits package is well known to improve productivity, retention, and other aspects of the employee relationship; but you only get that boost in employee engagement if employees get the benefits that are right for them.

That’s harder to ensure than it might seem. Most employees struggle to understand the benefits available to them, and most employers struggle to communicate adequately about their benefit offerings. With only so much capacity available for business owners or internal HR teams to take on new workloads, it's often a logistical necessity to take steps like reducing the range of benefits available, offering only one-size-fits-all benefits packages, and limiting the level of employee support.

However, limiting benefits and reducing communication is a counterproductive way to streamline and likely won’t produce the recruitment and engagement gains employers want. This is where a Professional Employer Organization (PEO), can make a transformative difference. A PEO is a company that provides outsourced HR services, including payroll, compliance, risk management, and most importantly, benefits administration services. A PEO partner can simultaneously provide benefits administration services while also providing more extensive benefits packages, more customizability of those benefits, and more hands-on support for employees struggling with all the options.

As a result, the employer can get their proverbial cake and can eat it too: fewer burdens on their plate, lower benefits-related costs, and a happier workforce. That’s the definition of a win-win, and it’s the result of streamlining the right way (with a PEO at your side) instead of trying to find ways to take shortcuts and cut corners because you’re handling it all on your own.

How Does a PEO Streamline Benefits Administration Services?

1. Expanding and Customizing Benefit Offerings

Foundationally, a PEO will facilitate access to better benefits at more competitive rates. Due to their size and pooled purchasing power, PEOs can negotiate favorable rates with insurance providers. This means that businesses partnering with a PEO can offer their employees high-quality health insurance, dental, vision, retirement plans, and other benefits that might otherwise be out of reach.

Moreover, the PEO manages all these separate vendor relationships. That way, the client employer can work through a single point of contact (the PEO) instead of constantly juggling dozens of relationships.

2. Integrating Payroll and Benefits

One of the pain points for employers in benefits administration is integrating payroll and benefits data, especially when they operate as separate systems. With a PEO, these systems are integrated and streamlined. Because the PEO handles both payroll and benefits administration, all employee data is centralized, allowing for more accurate reporting and reducing the chance of errors.

For example, when an employee changes their benefits selection during open enrollment, those changes are automatically reflected in payroll deductions, ensuring a smooth and efficient process. This integration can profoundly reduce the administrative burden associated with using separate systems, especially if the alternative is human workers manually porting data from one system into another.

3. Employee Support

Crucially, when the PEO handles benefits administration, employees will turn to the PEO instead of internal staff for support and questions; that means less work for in-house leaders and HR departments. “Employees no longer need to turn to overworked HR departments to get a comprehensive understanding of what they’re signing up for,” Gary Stevens, front-end developer and founder of Hosting Canada, told Business.com about the PEO experience. “Instead, any questions employees may have can be turned directly to the PEO. Since one of their main functions is finding the best plans available, employees no longer need to worry that they’re making a mistake during their yearly enrollment.”

This level of support applies all year long but is especially pressing during open enrollment periods. PEOs can provide intensive and high-touch support and resources, including training sessions and one-on-one counseling, to help employees make informed decisions regarding their health, retirement, and other benefits.

How Does a PEO’s Benefits Administration Services Benefit Employers Specifically?

Benefit #1: Leaders Can Focus on Core Business Functions

By outsourcing these time-consuming tasks, businesses can focus on the core activities that fuel growth while knowing that their benefits strategy is being managed efficiently. Certainly, managing benefits is vital to being a successful employer, but it’s also a function that doesn’t directly contribute to revenue.

Likewise, with a PEO as a partner, internal HR teams can concentrate on more strategic HR initiatives that align with broader business goals, rather than getting bogged down in routine administrative tasks. In short, PEO users maximize the value of their in-house HR by focusing on high-impact work and letting the PEO handle the rest.

Benefit #2: Organizations Can Reduce Benefits-Related Costs

Part of streamlining benefits administration means slimming benefits-related costs. That’s key when more than half (56%) of employers struggle to assemble a competitive package of benefits within their available budget, according to Aflac’s 2023 WorkForces report.

Once again, this is an area where PEOs shine. By pooling employees from multiple companies, PEOs have stronger negotiating power with insurance providers, which translates into lower premiums for their clients. Even better, the difference is calculable. For example, according to one analysis, the average PEO saves $654 per FTE in health benefits costs alone.

That’s why nearly two-thirds (63%) of new PEO clients say health benefits costs are lower with a PEO…and that’s even as PEOs “are also able to provide a wider range of health benefits options to their clients, a benefit that is not reflected when focusing solely on cost savings,” writes Laurie Bassi and Dan McMurrer, CEO and Chief Analyst respectively at analytics and research firm McBassi & Company.

All told, benefits administration services from Professional Employer Organizations empower small and midsize companies to punch well above their weight in recruiting and engaging a powerhouse workforce—all at lower cost than they’d otherwise face.

Optimize Your Benefits and Payroll in 2025!

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