New England Businesses That Partner with a PEO 50% Less Likely to Fail…Here’s Why

by | 2 Mar, 2015

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If you are a New England small business owner, you may be familiar with the daunting statistic reported by the SBA that 50% of small businesses will fail within the first year. However, that doesn’t mean that yours will. In fact, according to a study released by NAPEO from noted economists Laurie Bassi and Dan McMurrer, small businesses that partner with a Professional Employer Organization, commonly referred to  as a PEO, are actually more likely to succeed.

Below are the findings from the NAPEO study:

  • Small businesses that use a PEO grow 7-9% faster than companies that do not.
  • Turnover rate for companies that use a PEO were between 29-32%, compared to 42% for companies who do not use a PEO.
  • Businesses that partner with a PEO are approximately 50% less likely to fail from year to year when compared to similar companies who prefer to do everything without the help of a PEO.

This study shows clear advantages of using a PEO in two essential areas for a small or mid-sized business – keeping the doors open and retaining employees. But what exactly is a PEO and what can it do for you? A PEO is a firm that provides outsourcing services for companies that need help with employee management tasks, such as employee benefits, payroll and workers’ compensation, recruiting, risk/safety management, and training and development. It is a fact that using a PEO will allow you to spend more time doing what matters most: generating revenue.

New England small business owners find there are many advantages to partnering with a PEO, for both the company and its  employees, which we’ve outlined below.

Employer benefits of a PEO:

  • Customized service packages tailored to your specific HR needs
  • Around-the-clock guidance & support from specialists in HR, Risk Management, Benefits, and Payroll
  • Real-time access to expertise in all aspects of labor compliance (Affordable Care Act, Equal Employment Opportunity Commission, Immigration Reform and Control Act, etc.)
  • Ability to minimize risk exposure by shifting government reporting, unemployment claims, audits and wage claim responsibilities over to the PEO
  • Development and deployment of effective employment recruitment and retention strategies that align with your company vision
  • Access to affordable top-tier benefits from a variety of insurance carriers that will enable you to attract and retain top talent
  • Streamlined payroll and HR administration, which means significantly reduced payroll-related expenses, accounting, and benefits costs for you, the employer, as well as minimized time spent on employee-related paperwork

Employee benefits of a PEO:

  • Access to Fortune 500-level benefits and a 401k plan, which may have been previously unavailable
  • On-time and error-free payroll
  • Speedy and accurate worker’s compensation claims processing
  • Portable benefits (great for employees moving from one company to another)
  • Streamlined recruitment and onboarding process

One of the biggest advantages for your employees is the previously unattainable comprehensive benefits packages that are usually only available for larger companies. Having a healthcare package is essential for attracting and retaining top-level talent. According to NAPEO, PEOs provide access to healthcare for as many as 4 to 6 million people.

No business owner wants to be a part of the 50% small business failure statistic. Teaming up with a PEO ensures that not only can your business survive, but that it can thrive. With PEO, clients experience higher survival, growth, and retention rates than their counterparts, evidence strongly suggests that outsourcing non-revenue generating activities could prove to be a major competitive advantage for small businesses.

Tom DiSilva
Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design. . He is an active member of The Society for Human Resource Management (SHRM), The National Association of Professional Employer Organizations (NAPEO), Professional Association of Co-Employers (PACE), and The American Payroll Association (APA). He is deeply committed to giving back to the community both personally and through Navigate Cares, which provides support for several nonprofit organizations such as the USO, The Boys & Girls Club, and the 3Point Foundation.

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Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.