The Big Difference For Your Small Business: Outsourcing HR

I love talking to entrepreneurs, the visionaries who launch small businesses. Their ventures often begin with a great idea for a new product or service that will make people’s lives better, easier, or more efficient.

Too often, these same entrepreneurs discover that the more successful they are, the harder it is for them to keep their focus on the work that inspired them in the first place. Instead of reaching more customers, innovating, and growing their business, they are bogged down in administrative tasks—shopping around for the best health insurance or managing payroll taxes, or monitoring benefits and retirement plans. They’re spending more time performing HR tasks rather than ensuring that their business continues to excel.

The good news for every entrepreneur and small business owner is that there is an easy and affordable solution: outsourcing HR to a Professional Employer Organization (PEO).

I’ve made it my mission to share the PEO message with as many business owners as possible because I’ve seen, again and again, how it enables leaders to offload human resources tasks to experts who are trained in the necessary laws and regulations. These HR responsibilities are handled skillfully, strategically, and often at a lower cost than if they were handled internally.

I recently spoke with an owner of a flooring business. Demand was strong for his high-quality craftsmanship. Many of his skilled installers had worked for the business for years.

“My employees are family,” he told me. “I want to take care of them, but there aren’t enough hours in the day. I can’t afford to hire an HR manager, but I also can’t afford to make a mistake.”

As we talked, I explained to him that, by outsourcing HR administration to experts, he was demonstrating his commitment to his employees. Just as his customers were hiring his team for the unique skills and knowledge they brought to a project—knowledge that the average Do-It-Yourselfer doesn’t have—a PEO could ensure that his employees benefited from the same level of expertise when it came to benefits, payroll, and compliance issues. He was prioritizing his employees by hiring a PEO.

PEOs work with their clients to identify the HR services that can be outsourced—tasks like payroll and payroll tax administration; employee benefits such as healthcare and other types of insurance, as well as retirement plans such as a 401(k); safety consultation and access to workers’ compensation insurance; and assistance with federal and state regulatory compliance.

A PEO also creates opportunities to access better benefits packages at more affordable prices. How? It’s a matter of economies of scale. The average PEO client is a business with about 20 employees. A business that size typically isn’t going to get the kind of competitive insurance rates that a large corporation can negotiate. But a PEO that is managing HR for multiple businesses can negotiate those rates for the thousands of employees they are servicing. That means access to workers’ compensation insurance or group health insurance at a much lower rate.

As labor laws and compliance regulation become increasingly complex, it’s not surprising that the PEO industry is surging. And results show that the PEO relationship works:

• Privately-held businesses that use PEOs are approximately 50 percent less likely to fail.
• PEOs reduce the basic costs of workers’ compensation by as much as 25 percent for small businesses.
• Small businesses that use PEOs grow faster than those that don’t.
• Companies that work with a PEO have lower employee turnover.

Last year, an extraordinary 5.4 million new business applications were filed in the United States. That’s one million more new businesses than the year before and nearly two million more than in 2019!

As an entrepreneur myself, I’m excited by this surge in entrepreneurial energy and can’t wait to see how all of these new ventures will fuel innovation and transform communities. I want to make sure that these new businesses have access to the tools and knowledge to thrive. I’ll be sharing the PEO solution with every entrepreneur I meet to ensure that even the smallest business has access to the best workforce management.