PEOs Offer Small Employers a Fighting Chance at Success


Published on

In today's uncertain, challenging economic environment, virtually all small employers are challenged how to create their own economies of scale, reduce their labor costs and improve benefit options. One solution is to outsource their Human Resources to a Professional Employer Organization.

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

PEOs Offer Small Employers a Fighting Chance at Success

  1. 1. Professional Employer Organizations Offer Small Employers a Fighting Chance at Success As employment costs continue to grow for most businesses across the country, employers must take a hard look at one of the highest cost centers in their organization: labor costs. Loosely speaking, these areas can include health insurance premiums, workers’ compensation costs, employment compliance, payroll/tax costs, salaries, and overhead relating to employee administration. Unfortunately, according to the Small Business Administration (SBA), small businesses bear the largest burden of managing these labor costs. They report that a small business (under 20 employees) spends an average of $7600 per employee annually managing regulatory compliance, compared to large companies (over 500 employees) that only pay on average $5300 per employee (a 45% discrepancy). This cost differential is easy to understand, as many expenses relating to compliance are ‘fixed’. That is, a firm of 20 employees incurs many of the same base expenses as a firm with 200. In large firms, these fixed costs of compliance are spread over a large employee base, which results in lower costs per individual. This phenomenon is known as economies of scale and it results in an obvious advantage to large firms over smaller ones. Further hindering small employers is their ability to attract top talent away from their larger competitors. They are often limited in the variety of health insurance plans they can offer, have limited buying-power for workers’ compensation, and overall, have less flexibility in administering these plans. The net result is typically higher premiums with fewer options.9000 Sunset Blvd, Suite 900, West Hollywood, CA | | 800-850-7133
  2. 2. The challenge facing virtually all small employers is how to create their own economies of scale, reduce their labor costs and improve benefit options? One solution is to outsource their Human Resources to a Professional Employer Organization. What is a Professional Employer Organization? Professional Employer Organizations, or PEOs, were established in the early 1980s, primarily offering insurance and payroll services to small and mid-sized employers. In the early days, the PEO industry was also known as “Staff Leasing” or “Employee Leasing.” As employment and labor laws became more complex in the ‘80s and ‘90s, the PEO industry expanded to include many other aspects of employee relations and HR compliance. In a A PEO firm can help PEO relationship, a PEO shares many of the responsibilities of small employers being an employer with their clients. These responsibilities successfully reduce costs include: processing payroll, filing payroll taxes, providing by pooling hundreds, and sometimes health insurance for the staff, issuing workers’ compensation thousands, of businesses insurance, and assisting their clients to comply with relevant under one umbrella state and federal labor law regulations. program. A PEO firm can help small employers successfully reduce costs by pooling hundreds, and sometimes thousands, of businesses under one umbrella program. PEOs aggregate workers’ compensation insurance, health plans, retirement plans, and legal expertise. They are also in the position to establish relationships with regional insurance companies to offer lower premiums with better plan options. The net result is that small employers gain access to the PEO’s buying power and economies-of-scale.9000 Sunset Blvd, Suite 900, West Hollywood, CA | | 800-850-7133
  3. 3. Proven Systems and Robust Resources Beyond negotiating rates and plans, PEOs maintain the internal resources to support programs that help keep insurance premiums down into the future. Many PEOs offer health and wellness incentives, Work/Life balance programs, or discounts to health clubs and gyms. Research consistently shows that a healthy lifestyle inside and outside the workplace makes significant, positive impacts on the cost of health insurance premiums. In regards to safety and workers’ compensation, the PEO creates effective injury and illness prevention plans, conducts on-site safety inspections, and offers safety incentives to reduce the frequency of workplace injuries. These programs ultimately result in fewer workplace injuries and more competitive insurance premiums. While many small employers try to ‘go at it alone’, partnering with a PEO offers them a competitive advantage in terms of reducing labor costs, providing their employees enhanced benefit programs, and reducing workplace injuries. If you are small business trying to make it in today’s tough economic environment, a PEO may just be the answer you are looking for. About CPEhr Celebrating its 30th anniversary this year, CPEhr provides human resources solutions to over 75,000 employees through a high-touch service model. Services include:  Employment compliance;  Training;  HR administration;  Medical benefits;  Payroll;  Workers’ compensation insurance. With corporate headquarters in Los Angeles, CPEhr is one of the largest, privately held Human Resources Outsourcing and PEO firms in the state.9000 Sunset Blvd, Suite 900, West Hollywood, CA | | 800-850-7133