Small businesses often face challenges when it comes to optimizing their operations and keeping costs down. However, there are solutions available that can help small businesses operate more efficiently while reducing costs. One such solution is to partner with a Professional Employer Organization (PEO) or a Global Employer of Record (EOR) platform.
By utilizing a PEO or EOR, small businesses can benefit from a range of services, including human resources management, payroll administration, benefits administration, and compliance assistance. These services can help streamline operations and free up valuable time for business owners and managers, allowing them to focus on core business functions and growth strategies.
What is a PEO or EOR?
A PEO or EOR is a third-party provider that offers a range of HR-related services to small businesses. These services include payroll processing, benefits administration, compliance management, and employee onboarding. By outsourcing these functions to a PEO or EOR, small businesses can focus on their core activities, improve their productivity and reduce their HR costs.
PEO/EOR industry has seen tremendous growth in recent years, with around 200000 clients representing 15.3 percent of all employers with 10 to 99 employees. This trend is likely to continue as more SMBs (Small and Mid Size Businesses) realize the benefits of working with a PEO or EOR. In this article, we’ll explore the benefits of using a PEO or EOR for small businesses and how they can help streamline operations and reduce costs.
1. Cost Reduction
One of the most significant benefits of using a PEO or EOR is cost reduction. Small businesses can save a considerable amount of money by outsourcing their HR functions to a PEO or EOR. According to a research, companies that use PEOs save an average of $1,775 per employee per year. This figure is significant for small businesses, where even small cost savings can have a significant impact on the bottom line.
Furthermore, PEO/EOR clients experience 27% savings in HR costs each year. The reduced costs are attributed to several factors, including the elimination of in-house HR staff, improved efficiency and productivity, and access to better benefits packages due to the purchasing power of the PEO/EOR.
2. Improved HR Efficiency
Using a PEO or EOR can also help small businesses improve their HR efficiency. With a PEO or EOR handling their HR functions, small businesses can focus on their core activities and improve their productivity. This approach ensures that HR-related tasks are managed efficiently and effectively, reducing the burden on in-house HR staff.
PEO and EOR platforms have dedicated teams of HR professionals who are experienced in handling HR functions. As a result, small businesses can expect a higher level of HR expertise, which can help them manage complex HR-related issues, such as compliance with employment laws and regulations.
3. Attracting and Retaining Top Talent
Small businesses that work with a PEO or EOR have access to better benefits packages than they would be able to provide on their own. PEOs and EORs offer economies of scale, which means they can purchase benefits packages at a lower cost than small businesses can on their own. As a result, small businesses that work with a PEO or EOR can offer their employees better benefits packages, which can help them attract and retain top talent.
Furthermore, clients who work with a PEO experience 20% less employee turnover, which can save companies additional costs associated with recruitment, training, and lost productivity. Additionally, over the past 15 years, employment at SMBs using PEOs/EORs has grown between 7% and 9% faster than small to midsize businesses overall. This growth can be attributed to the increased focus on core business activities and the ability to attract and retain top talent.
In addition to the benefits mentioned above, small businesses that use PEOs or EORs can also expect:
1. Improved compliance management
PEOs and EORs stay up-to-date with changes in employment laws and regulations, ensuring that small businesses remain compliant.
2. Reduced risk
PEOs and EORs can help small businesses manage their risk by providing access to HR-related expertise and tools.
3. Improved scalability
PEOs and EORs can help small businesses scale up or down quickly by providing access to HR-related expertise and tools.
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In conclusion, it is evident that using a PEO or EOR platform can offer numerous benefits to small businesses. From cost reduction and improved HR efficiency to attracting and retaining top talent, the benefits are substantial. By outsourcing their HR functions to a PEO or EOR, small businesses can focus on their core activities and improve their productivity, ultimately leading to increased profitability.
If you are interested in exploring the benefits of using a PEO or EOR platform for your small business, we invite you to schedule a demo with us today.