Download Our Free White Paper: Professional Employer Organizations: Keeping Turnover Low And Survival High
Professional employer organizations (PEOs) were first started in the 1980s. In fact, Alcott HR was one of the first PEOs in the nation. Today, PEOs play a crucial role in supporting thousands of businesses across the country by providing compliance solutions, payroll and payroll tax services, employee benefits and other HR-related solutions.
But why are so many businesses turning to PEOs, and what are the advantages of using them? To find out, independent researchers at McBassi & Company explored the business benefits of partnering with PEOs. Their research revealed what PEO clients already know – that working with a PEO can reduce turnover, improve profitability and spur business growth.
PEOs help keep turnover low
According to the study, PEO clients have annual turnover rates 10 to 14 percentage points lower than comparable companies, based on 2012 data. In general, the employee turnover rate for businesses in the United States is 42 percent per year. For companies that used PEOs for at least four quarters, that figure is only 28-32 percent annually.
Businesses that use PEOs are approximately 50 percent less likely to fail
Approximately 8 percent of private businesses fail every year. However for those companies that used PEOs, the failure rate is just 4 percent annually. The study found that these results are consistent whether companies are compared to expected survival for their industry or their respective states. According to McBassi, “Even using the most conservative analytic approach, the business failure rate is 50 percent lower for businesses using PEOs than for businesses overall.”
Summing it up.
In their conclusion, McBassi summed up their findings, as follows:
“Across all industries, this study shows that there are clear advantages for PEO clients on two of the most fundamental issues faced by any business: retention of employees and continued survival. PEOs significantly decrease employee turnover for their clients, allowing them to retain the knowledge and skills of their employees while simultaneously reducing direct and indirect turnover-related costs (which are substantial). The fact that PEOs significantly increase the likelihood of client survival is likely a result of PEOs providing a combination of services that makes it possible for businesses to focus on their core areas of expertise.”
For an in-depth look at the benefits of working with PEOs like Alcott HR, get your free copy of this insightful white paper today