Employee benefits are more than just a line item on your expense report—they’re critical tools for attracting and retaining top talent while driving business growth. But if you’re a small business owner or CEO, navigating the complexities of employee benefits can feel like scaling a mountain without a map.
Here’s the good news: you don’t have to tackle it alone. Partnering with a Professional Employer Organization (PEO) could be the key to not only maximizing employee benefits but also driving profitability and long-term success for your organization.
This guide will explain the value of employee benefits, break down how PEOs work, and provide actionable insights on how incorporating a PEO solution can transform your business.
If you’ve wondered whether employee benefits are worth the investment, here’s some perspective. According to a report from the Society for Human Resource Management (SHRM), 92% of employees consider benefits “important to their overall job satisfaction.” Happy employees? That’s great. But here’s where it really matters for your bottom line.
Replacing an employee costs up to 50% to 60% of their annual salary, according to Gallup. Competitive benefits can reduce turnover and create stable teams, saving you money on recruitment and training.
Perks like health insurance, retirement savings plans, and wellness programs ensure your employees are healthy, stress-free, and motivated. Gallup reports that engaged employees are up to 21% more productive.
Small businesses often struggle to compete with corporate giants for talent. A robust benefits package can level the playing field and give you an edge in recruiting skilled employees.
Offering valuable benefits is no longer optional—it’s essential for thriving in today’s competitive market. The challenge? Building an attractive package while managing costs efficiently.
A PEO is a third-party organization that partners with small businesses to handle employee-related functions like payroll, HR, compliance, and most importantly—benefits.
Think of them as your backstage crew, helping you juggle the administrative details so you can focus on running the show. Through a co-employment model, you share employment responsibilities with the PEO, enabling them to offer you access to resources that would usually be out of reach for a small business.
But how does that apply to benefits, and more importantly, your profitability?
PEOs are game-changers when it comes to employee benefits. Here’s why they’re worth considering:
PEOs pool together employees from multiple small businesses to create a large “employee group.” This allows them to negotiate comprehensive benefits comparable to what big corporations offer.
This means affordable health insurance plans, retirement packages, dental and vision coverage, and even perks like flexible spending accounts (FSAs) or student loan assistance. Better benefits help you keep employees engaged while staying within budget.
Managing benefits internally can result in inefficiencies and inflated costs, especially if you’re unfamiliar with compliance rules or market-rate pricing. PEOs take negotiating, processing, and compliance off your plate, streamlining your costs.
The National Association of Professional Employer Organizations (NAPEO) found that businesses leveraging PEOs save an average of 27.2% on HR administration costs.
Navigating compliance for employee benefits can be daunting. The Affordable Care Act (ACA), ERISA regulations, COBRA—a single oversight can result in hefty fines.
PEOs bring HR and legal experts to the table, ensuring your business remains compliant. Their expertise minimizes risks while enabling you to trust that employee benefits are managed correctly.
Let's take a look at some of the ways that PEOs improve cost-effectiveness and drive your profits.
When you don’t have to spend hours managing payroll, benefits enrollment, and compliance, you gain valuable time to focus on profitability-driving activities like business development or leadership strategies.
Providing competitive benefits without breaking the bank directly impacts your ability to retain top talent. Fewer resignations mean fewer resources spent on hiring and onboarding replacements.
PEOs are purpose-built to evolve alongside your business. Whether you’re hiring your fifth employee or your fiftieth, you can deliver consistent benefits and HR support without worrying about added overhead.
With the right benefits package in place, employees feel more valued and engaged in their roles. Engaged teams perform better—leading to improved output and a stronger bottom line.
Choosing a PEO is a critical decision, so doing your homework is essential. Here are some steps to finding the right partner:
Take an inventory of your current HR processes. What’s taking up the most time and resources? What’s missing from your current benefits package?
Ensure the PEO is certified by organizations like the Employer Services Assurance Corporation (ESAC) or IRS Certified PEO.
PEO pricing generally comes in two forms—per employee per month or as a percentage of gross payroll. Clarify their pricing model upfront and confirm whether benefits costs are included.
Request a detailed list of their available benefits and assess how well it aligns with your employees’ needs. Ask about employee feedback or testimonials from other small businesses they partner with.
A good PEO isn’t just about compliance and savings—they should align with your values and help reinforce your company culture.
Employee benefits and profitability aren’t mutually exclusive. With the right partner, you can create an environment where your team thrives while keeping costs under control.
If building an impactful benefits program feels overwhelming, a PEO might be your solution. Their ability to offer competitive benefits, simplify operations, and enhance compliance makes them invaluable allies for small businesses.
Ready to take your business to the next level? Affinity HR is here to help. Explore how our PEO solutions can support your growth and build a stronger workplace today!