We write regularly about the impact of utilizing a Professional Employer Organization (PEO) on employers, detailing the ways a PEO can generate cost savings, business advantages, and peace of mind for business owners. But what about the impact of a PEO on workers?
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. In turn, dealing with employee administration issues and everything that follows requires time and resources that would ideally be spent on the core “business owner” role. This is where a (PEO) helps by becoming a “co-employer.” While business owners always maintain control and continuously “own” the employer-employee relationship, the PEO becomes “employer of record” for handling administrative and regulatory issues like payroll taxes.
A PEO benefits both employees and employers.
Even when the benefit to the employer is clear – they have more time and resources to dedicate to their core business – the business owner may wonder if this is genuinely helpful for employees. After all, isn’t it better for the employee to be able to address HR questions and issues in-house, rather than having to navigate a third-party partner?
What employers and employees don’t expect is the high-touch service that can provide immediate answers even to highly idiosyncratic and complex questions; that’s the benefit of having access to HR experts who deal with these kinds of inquiries all day, every day, across many organizations.
In fact, a PEO can improve employee retention.
In fact, the National Association of Professional Employer Organizations (NAPEO) commissioned an independent research study and found that the turnover rate was 10 to 14 percentage points lower for companies that used PEO services versus comparable companies that did not. Employees of PEO users tend to have more positive beliefs about their employers, which can help with employee satisfaction, engagement, and loyalty. For example, NAPEO has also found that employee engagement is 5 points higher among PEO users versus others.
It’s a common myth of PEO outsourcing that employees suffer reduced service under a PEO, but PEOs can actually provide higher-touch services, more sophisticated technologies, and better benefits than would otherwise be available, particularly for smaller businesses.
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.