Professional employer organizations are often seen as a way to reduce administrative burdens, but they can do more than that. For companies in the Bay Area, they can help increase your profit. PEO clients are 16 percent more likely to report an increase in profitability than non-clients.
So, how can partnering with a Bay Area PEO increase your profitability and help your small business grow?
No Need to Hire Internal HR Staff
This doesn’t mean that the PEO replaces your HR team, but as your company grows, outsourcing to a PEO will delay when you need to hire more staff. You can instead pay the PEO for only the time and expertise you are using, at a fraction of the cost.
The average salary for a human resources generalist in San Francisco is $72,839, and that’s not counting hiring costs, benefits, etc. Outsourcing is generally cheaper as you are sharing staff costs with other firms.
Better Employee Benefits
The ability to afford competitive benefits is one of the largest challenges faced by small to medium-sized businesses. This is particularly acute in areas with a higher cost of living such as the Bay Area; your employees may not be able to afford to work for you if you can’t provide them with the benefits they need.
Partnering with a PEO results in a substantial reduction in healthcare costs because you can enroll your employees in their master plan, which is negotiated at scale. They can also, for similar reasons, provide you with a much better deal on retirement benefits.
Better benefits also reduce absenteeism. When your employees can afford (and are encouraged to get) preventive medicine, they are less likely to be sick or out for an extended time.
Decreased Turnover
Partnering with a PEO has been demonstrated to increase the intent of employees to stay in their position, including the number of employees happy to stay until they retire.
Turnover is expensive at many levels. It can cost a lot and take time to hire new staff, and productivity is inevitably down both while looking for the new person and while they get up to speed. Training costs are another issue.
Decreasing turnover significantly reduces costs. PEOs also improve employee satisfaction and engagement. Overall, PEOs reduce turnover in multiple ways.
Increased Productivity
Reduced administrative burdens can equate directly to increased productivity. For one thing, overburdened HR departments may hand off paperwork to staff in other departments, or the owner may step in to help. This means those people are not doing their actual jobs.
HR can be much more productive and engage in activities that improve employee focus and productivity with the help of a PEO.
Should your business be partnering with a PEO? Learn more!
Higher Employee Engagement
HR can also spend time increasing employee engagement. For example, they can spend time and resources on crafting and deploying quality training and professional development programs. Employees that feel the company is investing in them are far more likely to be engaged and productive.
HR can also work on building a company culture that encourages engagement and builds positive relationships between employees, instead of spending hours processing payroll.
Better Hiring Practices
Hiring the right people is a knack. PEOs leave the hiring to clients who have much more insight into the type of candidate they’re looking for. However, they do provide recruitment tools that make it easier for HR departments by providing access to best practices, background check providers, and drug screening providers.
By improving your hiring practices, you reduce turnover (by avoiding hiring the wrong people who, while they might be eminently qualified, turn out to be a poor fit in other ways) and also improve your risk management by reducing your risk of a discrimination suit.
Fewer Administrative Burdens
We have already mentioned lowering administrative burdens several times. It is the most obvious thing people think of when it comes to HR outsourcing, after all. But PEOs really do lower administrative burdens.
Furthermore, a comprehensive HR solution does this a lot better than, say, only outsourcing payroll (as many companies do). In addition to payroll, a PEO can take on benefits administration, including answering employee questions, administering training, etc. Anything that doesn’t require your HR team’s specific expertise can be taken off their plate, freeing them to focus on specialized parts of their jobs.
Better HR Technology
Automation is a key part of streamlining HR. However, many small to medium-sized businesses either don’t have the right HR technology, or they don’t know how to use it. The time spent on researching and buying software can be significant, and some businesses resort to custom tech (even if they don’t need to).
When you outsource to a PEO, they already have all the HR software you need. They will be able to set up your HR technology in ways that make it functional for you, saving everyone time and helping ensure privacy and data integrity.
Working with a PEO in the Bay Area can increase your profitability by improving productivity and engagement, reducing turnover, providing better benefits, reducing administrative tasks, and improving your hiring practices. In this challenging area, everything you can do to increase your profitability helps. To find out more, check out our blog.
