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How a PEO Strengthens Employee Relations

Many employers who have never used a Professional Employer Organization (PEO) worry that a PEO would hurt their relationship with their employees or somehow damage company culture.

This is not at all true, but it’s understandable why this would be a concern. The PEO manages aspects of the employee experience that can affect the employee’s relationship with the employer, like how satisfied they are with their benefits. The fear is that the employer would thus lose control over employee morale.

However, this concern is founded entirely on an inaccurate or incomplete understanding of how PEOs function. A PEO becomes the “employer of record” for matters like payroll taxes, assuming employment-related risks on behalf of the employer, while exercising employer-related activities with greater competency than many small and midsize businesses (SMBs) possess in-house.

Still, it’s not surprising that some people would worry about the impact of PEOs on company culture. Numerous misconceptions about PEOs persist (we debunk four of them here). The biggest fear is usually that PEOs simply take over, but that’s untrue. The business owner always stays in charge of all business decisions, including those that affect their employees.

PEOs do, however, contribute a level of HR-related expertise and high-touch service that would often be unavailable to small and midsize businesses (SMBs) otherwise. Further, PEOs can make large group health insurance packages available at small business prices.

These contributions strengthen employee relations. The National Association of Professional Employer Organizations (NAPEO) studied PEO users versus non-PEO users and found that employee engagement was five points higher among PEO users than others, and the turnover rate was 10 to 14 percentage points lower. Perhaps even more importantly, PEOs can save small businesses and startups from shutting down or facing litigation due to avoidable HR issues. (We detail three companies that should have invested more in HR here).

In short, employees are often happier when a PEO enables their employer to offer better services or products than they’d otherwise get.

These kinds of advantages are particularly impactful for SMBs because they make enterprise-grade HR services and products available to small companies and startups at low cost. In fact, the average cost per employee for HR administration is 35% lower for PEO clients when compared to all employers.

Simultaneously, PEOs free SMB owners and leaders from having to spend time administering employee matters, so they can instead focus on business building and building solid day-to-day relationships with their teams.

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 ability to create a strategic HR function in your business that drives business growth potential, contact us today.

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