Higher Growth Rates for Small Businesses That Use PEOs

Professional employer organizations can help grow you business

New Study Shows Higher Growth Rates For Small Businesses That Use Professional Employer Organizations For HR And Compliance
A new study released by the National Association of Professional Employer Organizations (NAPEO) at its annual conference in San Antonio reveals that small businesses that use professional employer organizations (PEOs) have an employment growth rate that is nearly 10 percent higher than small businesses that don’t use PEOs.

The study, by economists Laurie Bassi and Dan McMurrer, also showed that PEOs are able to provide a broad array of HR services at a lower cost, saving their small business clients at least 21 percent on HR administration.

PEOs provide payroll, benefits, tax compliance, and other HR services to small and mid-sized companies. Approximately 250,000 businesses use PEOs, and PEOs provide access to healthcare coverage for as many as 6 million people. Through a PEO, the employees of small businesses gain access to employee benefits such as 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits typically provided by large companies.

Another key finding of the study is that PEOs offer retirement plans to small businesses that may not otherwise sponsor them, and these employees participate at much higher rates.

Ninety-eight percent of PEOs offer some type of retirement plan to their small business clients. By contrast, in 2011, only 16 percent of all employees of the smallest companies (those employing fewer than 10 workers), and 30 percent of those at companies with 10 to 49 employees, were offered any type of retirement plan, according to the Employee Benefit Research Institute (EBRI).

“PEOs are not only good for small business,” said Cleary, “but for small business employees.”

“This new study clearly shows that PEOs are a great value proposition because they help small business owners manage the ‘people’ side of their businesses more effectively, by ensuring that they avoid compliance pitfalls and are able to provide key benefits for their employees,” Cleary said. “At the same time, PEOs free up time for executives to grow their businesses by focusing on operations, strategy, and innovation.”

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