If you run a small business, you probably have a great understanding of how difficult it can be to run your daily operation and handle the necessary but complicated HR paperwork. Balancing both these functions can feel overwhelming, which is why many growing businesses turn to professional employer organizations (PEOs) for help. PEOs offer a range of HR outsourcing solutions for small businesses, which means you could spend more time focused on your business.
If you’re considering working with a PEO, you may be concerned with the costs. The costs can be incredibly affordable but may vary based on the size of your business and your exact HR outsourcing needs.
Different PEOs offer different rates, so saving money requires shopping around. While this can be time-consuming, the PEO brokers at NetPEO are here to help. We can learn about your business needs and help you find the right PEO for your budget. All it takes to get started is a call to (678) 376-1212.
Cost Structure
PEOs are in the business of working with smaller companies, so they frequently will do what they can to make their services affordable. A PEO may offer to calculate the required payments via:
- A fee per employee
- A percentage of gross payroll receipts
Which option ends up being cheaper will depend on the structure of your business. A flat fee can be economical for companies with relatively few employees, especially if they are highly paid. A percentage of gross payroll can end up saving money if you have a larger number of employees, particularly if they are on the lower end of the wage scale.
PEOs typically charge a 3% to 9% fee on monthly gross payroll receipts if you opt for the flat percentage. Flat fees per employee usually range from $900 to $1,500 per year for each employee. If you run a smaller business, particularly one with five or fewer employees, you may be able to outsource your HR needs for $150 per employee.
What You Can Get by Outsourcing
PEOs provide solutions to all types of HR challenges facing small businesses. Depending on your business needs, you may be able to get help with:
- Legal compliance
- Payroll processing
- Benefits administration
- Managing workers’ compensation claims
- Employee handbook creation
- Creating and maintaining employee self-service sites
- Recruitment (job posting, interviewing, onboarding)
What services you can benefit most from will depend on the challenges your company faces. When you call (678) 376-1212 to speak with one of our PEO brokers at NetPEO, we conduct an initial needs analysis to understand the problems you face and to inform you of what services might fit well with your company.
The True Impact on Your Budget
While there are upfront costs to outsourcing your HR functions, it’s important to recognize there are benefits your business receives as a result of your decision to partner with a PEO. The National Association of Professional Employer Associations (NAPEO) reports a wide range of benefits for businesses that work with PEOs. These include:
- Lower administrative costs per employee
- Faster business growth
- Decreased likelihood of permanent business closure
- Reduced employee turnover
These factors will impact your budget beyond the costs of the PEO and the time you get back by outsourcing your HR functions.
Hidden Savings
To consider the true impact on your budget, consider employee turnover. According to research conducted by the Society of Human Resource Management (SHRM), it can cost an average of $4,129 to replace an employee. The typical time to replace an employee is 41 days, meaning you lose the productivity of the employee and any time spent trying to find a replacement.
With a PEO, you are less likely to have your employees leave for greener pastures. One reason is that you are better able to focus on the operation of your business and maintain a better relationship with your employees.
Another reason for the improved employee retention comes from the relationship with the PEO itself. As the PEO is a co-employer of your employees, as well as a co-employer for any other businesses they’ve partnered with, your employees get access to certain benefits you might not have been able to provide beforehand. They can get access to better health insurance plans and retirement savings accounts that are typically reserved for bigger businesses.
Start Your PEO Search Today!
If you’re ready to begin outsourcing your company’s HR needs, call (678) 376-1212 to get started with NetPEO for free!
