Achieving your small business growth goals is a huge accomplishment. Yet, each step forward brings new challenges. You need more employees, increasing your level of risk on many fronts. And there's a never-ending and ever-growing list of administrative tasks. Without the right strategy, these barriers can halt business development.
Professional employer organizations (PEOs) enable small and midsize businesses (SMBs) to scale quickly with fewer workforce disruptions and risks. Indeed, recent data from the National Association of Professional Employer Organizations (NAPEO) showed that over 208,000 companies use PEO services to employ 4.5 million employees. This figure "represents 17% of all businesses with 10 to 99 employees." Explore how PEO services steer your company past obstacles and toward success.
Understanding common SMB growth challenges
Slow and steady expansion allows business owners to build processes and adjust policies over time. However, entrepreneurs want to reach revenue goals quickly and see a return on their investment.
Faster growth, while admirable and often necessary, can strain small business owners and staff. Problems arise that halt development and leave leaders scrambling to put out fires instead of innovating.
Growing pains can cause the following challenges:
- Time and resource constraints: When your business expands, administrative and executive work volume increases. There are more emails, texts, and tasks. Departments require additional technologies and employees, with new resource requests coming daily.
- Decreases in employee morale: Growth places pressure on staff and systems. The workplace can feel more hectic and disorganized. Workloads may increase, and employees may take on new roles or duties. As a result, employees can feel company profits come before their well-being.
- Cash flow issues: More money to manage makes financial planning essential. But your company must spend funds to expand. Worries over how to afford employees, software, cloud storage, and physical space can keep you up at night. You may want to attract investors or secure a loan.
- Risk and compliance concerns: Human resources (HR) must stay vigilant as your company expands to comply with employment laws and handle HR complaints. Growing workforces mean more safety concerns and potential workers' compensation claims.
- Increases in recruitment demands: Hiring employees is challenging in the best of times. Small businesses rarely have a dedicated recruiting team or digital onboarding processes to streamline high-volume hiring events.
[Read more: What Is a Professional Employer Organization?]
Optimize executives' time and company resources
As your company expands, HR demands and administrative tasks increase. Indeed, in many small businesses, solopreneurs, LLC members, and CEOs wear many hats, meaning they might run payroll and handle HR requests. Outsourcing human resources allows leaders to focus on core activities.
Since a PEO frees up time, executives can identify and act on growth opportunities instead of supporting overburdened HR teams. At the same time, PEOs provide a return on investment (ROI), resulting in cost savings. Increased revenue growth and cost reductions mean improved profitability.
NAPEO estimated the ROI of using a PEO. It reported a cost savings of 27.2%. "For every $1,000 spent on PEO services, an average client would save $1,272, yielding a net (cost savings) benefit of $272 for every $1,000 spent."
Cost savings come from five HR-related areas:
- HR personnel costs.
- Health benefits.
- Workers' compensation.
- Unemployment insurance.
- Other external HR expenditures (payroll service, benefits, and more).
According to NAPEO, most organizations added retirement plans, health benefits, and life insurance when they 'began working with a PEO.'
Increase employee retention
Growing pains impact every team member and can alter your corporate culture. By shifting HR tasks to a PEO, your staff can prioritize people management.
NAPEO data showed substantially "lower employee turnover among PEO clients." Nationally, companies using PEO services experienced a total employee turnover rate that "was almost 20 percentage points lower than turnover nationally."
While using a PEO, consider having team leaders and HR assess staff skills, request feedback, and benchmark employee engagement. Your PEO software can help. For instance, Engage PEO's platform includes skills and competency tracking. Give your team the resources and knowledge they need to succeed and grow as your company expands.
In addition, PEO services support training and compliance. These user-friendly tools improve employee experiences by streamlining basic tasks and making resources accessible. Also, some PEOs, like TriNet PEO, assist with engagement surveys, employee development, and management training.
[Read more: 7 Proven Ways to Invest in Employee Development]
Improve recruitment and onboarding
A growing business must attract and hire the right employees quickly and at scale. To accomplish this feat, companies need mobile-friendly platforms and multichannel job postings. Most importantly, they must provide seamless experiences.
CareerPlug's annual candidate experience report showed that 49% of applicants rejected a "job offer due to a poor experience" during the hiring process and 81% said "it influenced their decision to accept the offer." Outdated, slow, or confusing processes also hurt your brand. Over a quarter of job seekers gave a negative online review after having a bad experience.
NAPEO reviewed employment growth for small businesses in 2021. Although comparable companies saw a 6% decline, PEO clients "had employment grow by 1% since early 2020." Moreover, the "rate of employment growth over the last six months" was 81% higher.
PEO services provide the technologies and support to ensure smooth recruiting and onboarding experiences. With Rippling PEO, you can onboard new hires in 90 seconds. TriNet PEO offers an applicant tracking system, allowing HR to create and automate customized recruiting pipelines.
Manage risk and compliance
Business growth makes HR more complex. You need to stay abreast of federal, state, and local employment laws and on top of payroll changes and workers' compensation requirements.
Expanding companies may need expert guidance and compliance support, especially if something unexpected occurs. PEOs provide risk mitigation, compliance, and employee safety guidance.
Fuel growth and avoid setbacks by using a PEO to accomplish the following:
- Administer Affordable Care Act and Consolidated Omnibus Budget Reconciliation Act benefits.
- Supply mandatory workplace posters and safety training resources.
- Advise on wrongful termination, harassment, and discrimination claims.
- Develop drug-free and return-to-work programs.
- Provide U.S. Occupational Safety and Health Administration reporting and compliance assistance.
- Offer safety program recommendations and dedicated safety teams.
Enhance benefits and support claims management
Benefits are crucial to recruiting and retaining employees. But small businesses need help finding affordable programs. Furthermore, HR staff must implement, run, and manage your benefits system. Since PEOs pool employees, they can offer better benefits at lower prices. Their technology platforms and support teams handle benefits and claims administration.
According to NAPEO, most organizations added retirement plans, health benefits, and life insurance when they "began working with a PEO." However, PEOs offer nationwide benefits and perks that extend beyond the basics. You can improve your recruiting and retention rates with fitness memberships and wellness perks through Justworks. Or add HealthAdvocate financial planning tools through Engage PEO.
Online tools, mobile apps, and customer support agents are available to help your employees. Your staff can compare options and update their information without requesting assistance from your HR staff. The PEO helpline will explain benefit enrollment choices, assist with disputing a medical bill, or estimate healthcare costs.
[Read more: Everything Your Small Business Needs to Know About Choosing a PEO]
Attract investors and acquire capital
If your company needs external funding, using a PEO can demonstrate your growth mindset to investors and financiers. After all, sustainable growth requires repeatable business processes. PEOs have these in place. They also offer reporting tools for payroll and workforce data.
A reputable third party can give investors peace of mind by providing reliable information. In addition, they can streamline your funding application and follow-up appointments.
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