Why the Smart Money Is on PEOs — and Why Now Is the Perfect Time to Consider One
There was a time when a growing small business had to do it all: payroll, HR, hiring, insurance and health benefits, and myriad other tasks. It was costly, and it seemingly took countless man-hours to accomplish. Enter the PEO, or Professional Employment Organization. It was a great leap forward because it saved businesses both time and money, and brought with it the combined buying power of hundreds of business and thousands of employees.
There are many ways in which today’s small-business owner can save money by opting for a PEO, mostly because PEOs allow you to offer a range of benefits to your employees, and do so at lower costs to you. Due to the way PEOs are structured, and because they work to find the most competitive rates for businesses, costs are lower for everything from workers’ compensation and medical benefits to retirement plans. It’s a win-win: PEOs do all the legwork, and they save your business money at the same time.
What exactly is a PEO, how does it work, and why are they able to effectively save small businesses money on benefits that larger companies offer? Take a look:
What Exactly Is A PEO?
PEOs work on behalf of small businesses to assist them with numerous business tasks, from managing compliance and human resources, to payroll, health and employee benefits, as well as a range of other vital aspects of running and managing a small business. From research and paperwork to covering myriad associated details, PEOs take care of these and many other aspects of your small business, freeing you up to focus on your most important job of all: making your customers happy and expanding your bottom line.
One of the most attractive aspects of PEOs is that it provides small businesses the same buying power enjoyed by bigger companies and large corporations. They achieve this by grouping small businesses together, not unlike the way insurance companies offer better rates with a greater number of customers. As a result, rates from a PEO can be more affordable to small-business owners; this includes access to high-quality, affordable healthcare, employee benefits and perks that might otherwise be accessible to larger companies. Again, since they secure these benefits in bulk, the costs to your small business are substantially lower for each employee covered. Opting for a PEO also has the added benefit of attracting the best and the brightest talent to your organization by offering top-tier health benefits and other employee perks.
PEOs Help Small Businesses Save Money. Here’s How:
It’s no secret that health insurance costs are going up, in some cases astronomically. And due to a requirement of the Affordable Care Act, businesses with in excess of 50 full-time employees are mandated to offer health insurance to their employees. With this in mind, employee health insurance is only going to take a bigger bite out of small companies’ budgets — and profits.
Consulting a healthcare broker will be eye-opening; he or she will bluntly tell you that your options for health insurance are limited at best. There are options, but any insurance that you feel you want to provide would be expensive — much more so than it would be for a larger organization. Today the average health care cost for an employer/employee at a small business in the United States is $15,375. In fact, the smaller the business, the higher the monthly premiums on average.
This is where a PEO makes a lot of sense. In varies by state, but in general PEO health insurance is significantly less expensive than traditional health plans. In fact, on average a small business can save as much as $2,400 per employee annually with a PEO. Multiplied by five employees, that’s a savings of $12,000 a year in the cost of health insurance. That’s serious money!
Do you offer your employees a 401(k) plan? If so, you’d be smart to consider opting for a PEO. Naturally it’s just good business to put money aside for the future, but like any investment, it’s unwise to keep all of your money in one place. Diversification is key. Should a business fail, their contribution to the 401(k) plan could vanish.
Issuers of 401(k) plans make their money by investing your money and collecting fees. They like to focus on larger companies that invest more on behalf of their larger employee base. For small businesses it’s important to connect with a 401(k) provider they can trust — one that will look out for their best interests now, and down the line. The larger your 401(k) program grows in total assets, the more you can save on fees. As such, a PEO can help you achieve your goal sooner, even though you have a smaller employee base than a larger corporation.
Further, there are other fees that 401(k) providers charge you to ensure they make a profit on small businesses. PEOs pool their contributions, so with the money working together, 401(k) issuers have to offer a discount on fees consistent with the total amount of funds invested. A small company’s per-employee fees will fall with a larger group. It’s that simple.
Other Benefits, Including Workers’ Compensation and Life Insurance
A PEO is really a powerhouse of connections. When it comes to insurance, PEOs constitute a huge network that reaches deep into the industry. For example. if your small company wants to offer life insurance to your employees, look no further than your PEO; it can make it happen! The same holds true for Workers’ Compensation; PEOs can secure plans in bulk, saving your business time, money and energy.
PEOs have advantages that go beyond mere health and life insurance and retirement benefits. Some PEOs have connections with entities such as travel agencies; that allows your employees to secure sharp discounts on everything from airfares, hotels, resorts and car rentals — all perks that are traditionally the purview of larger corporations. Everyone wins!
In truth, PEOs are a panacea for the small business looking to save money, save time, and grow. With a network of thousands of employees across hundreds of companies — all pooled together into one money-saving block — your small business will save on virtually every benefit you offer to your employees. From health, life, dental and vision insurance to retirement benefits Workers’ Compensation plans and special perks for employees, a PEO is the perfect answer to the question: “Who will help me with all this work, allow me to save time, and keep more of my hard-earned money?” The PEO does it all!
Make the Move, Save More Time and Money!
Looking to make the smart move to a PEO? Expert PEO will show you the way. We’ll work with you to find the ideal PEO for your growing small business, and get your organization on the road to greater time management and smarter insurance decisions, all while saving considerable money right away, and down the road. Call today for a risk-free consultation and a flawless, streamlined process.