How To Save Your Company From Recession - What Can a PEO Do

 A recession is referred to as a significant period of economic decline. Signs of such a recession include a decline in economic activity, employment, and consumer demand. No business is immune from a recession, but there are ways to save your company from recession and the constraints that come with an economic decline.

How can a PEO save you money during a recession? [2022]

To answer the above question comprehensively, it is important to explain the following:

• What is a PEO?
• How do PEOs work?
• Who can use a PEO?
• Why use a PEO?

What is a PEO?

A PEO is a professional employer organization. This is a fully packaged human resource outsourcing service which is also referred to as co-employment. PEOs perform different employee administration tasks on behalf of a business.

Different PEOs offer different services. Some offer a full house package, while others may offer one or two strategic services. It is therefore important to research what PEO service aligns with your business needs.

How Do PEOs Work?

A PEO will directly hire staff and handle all employment-related administrative tasks. The client will now be able to focus on what matters and that is the day-to-day operations of their business, including being in charge of the employees. 

Such an arrangement means that the PEO is the employer of the record for tax and insurance purposes. This is because the PEO will take care of the business's administrative and compliance sections. All the employees will, however, still receive their instructions and assignments from the respective client.

PEOs are also referred to as co-employers. This is because when companies team up with PEOs, they can significantly cut down employment costs for the client businesses. A specialist PEO that offers packaged services can do so more efficiently than the client business itself.

What can a PEO do? Some of the duties covered by a PEO include:

• Payroll administration
• Human resource administration and HR compliance
• Management of employee benefits such as retirement, compensation plans, and health insurance
• Essential taxes

Who Can Use a PEO?

A wide variety of businesses and companies can benefit from the services of a PEO. Such services are recommended for businesses that have fewer resources and personnel at their disposal. 

A PEO allows such a business to have a professional outlook while focusing on business development. PEOs work with a large pool of employees simultaneously, plus they can provide small and medium-sized businesses with employee benefits that are normally enjoyed in larger companies.

Why Use a PEO?

Numbers do not lie. Statistics from the National Association of Professional Employer Organization, NAPEO indicate that:

• Businesses that hire the services of PEOs grow 7 to 9 percent faster
• Businesses that work with PEOs have an average employee turnover rate that is 10 to 14 percent lower
• Businesses that use a PEO are approximately 50 percent less likely to fail

The figures above clearly prove how you can save your company by partnering with a PEO.

Are PEOs Worth It, Money Wise? 

All economists and financial analysts share a popular sentiment that recessions are inevitable. It all has to do with a capitalist economy and a business cycle. 

Recessions occur regularly every decade and seem to have a pattern. As a business owner, you need to understand that even though there is not much you can do about recession, there are things you can do to mitigate its effects on your business. You need to ensure that you save money; this is where a PEO comes in.

Any company or business weighing its options regarding cost-saving strategies will eventually have to consider working with a PEO. During a recession, employee experience may worsen, and staff may no longer want to work with the company. Business owners must look for ways to protect their employees before such situations.

Employers who partner with a PEO experience lower turnover rates. This is a result of being assisted with various HR processes and the increased number of benefits.

According to a study by NAPEO, the expected ROI for businesses that work with PEOs was 27.2 percent. This was due to five major cost-saving mechanisms.

1. Health Insurance

Business owners experience additional pressure trying to determine the best means of maintaining benefits that employees find satisfactory.

Health insurance is one of the major ways to save money in a business. Employees are not just elated about the monthly salary; a good package also counts. This is especially true for employees who have large families. According to a survey published by the American Institute of CPAs, many employed people coveted more than just a good salary.

Many companies are turning to professional employer organizations to see how they can lower benefit costs. A comprehensive health insurance plan through a PEO would come with more benefits at an affordable rate.

2. Administrative Savings

The core operations of any business are intertwined with human resources. Since this is the epicenter of all administrative tasks, things can be overwhelming. With a PEO, overwhelming can be converted into a single comprehensive solution. 

It is estimated that companies that work with PEOs save an average of 21 percent when it comes to HR administration costs. PEOs will tackle the following:

• Wage garnishments
• Tax reports
• Payroll processing direct deposits
• Generation of checks
• Employee benefits compliance and administration

3. Retain Employees

A business that utilizes PEO services has an employee turnover rate of 10 to 14 percent lower than businesses that do not use such services. When employees quit, it normally creates a disruption. Hiring a new employee is also costly, so why not focus on retaining and growing the ones you have?

A PEO helps your employee retention efforts by:

• Creating and establishing a healthy and solid company culture.
• Offering great benefits
• Creating and ensuring high-quality HR practices are adhered to

A company should seriously invest in employee retention strategies to establish a solid and productive team. PEOs will take care of the critical aspects of retention, such as:

• Recruitment
• Training 
• Administration benefits

4. Compliance Savings

Every business owner should be aware that wage and hour laws (FLSA) protect employees against unfair work practices. To lower your risk profile, it is important to be in good standing with the law and the public. A lower risk profile translates to saving money since your company will not face any violations or lawsuits and reduces worker's compensation.

A PEO company assists with regulatory compliance. This means that you stay in business and away from compliance-related issues. With recession comes the temptation to try new ideas. A PEO ensures that you avoid expensive mistakes.

5. Indirect Savings

What kind of work environment have you created for your employees? This question is important because the phrase 'company culture' is one of the main aspects potential and current employees consider before making their next move. It is the pawn in career circles. 

Once you have established a healthy business culture, you can be sure that your employees will find it a good place to stay and grow.

When you partner with a PEO, you gain access to tools and resources that make the onboarding process effective and efficient. A good onboarding process gives new employees a clearer perspective of what is expected of them and the kind of work environment they will be expected to navigate through.  A PEO equips you to help every employee carve a niche for themselves within your business, thus ensuring growth for both you and them.

Recession Proofing Starts Now

Are you ready to start taking beginner steps in saving your company from the financial complications that accompany every recession? Partner with ScalePEO so that you can start taking care of tomorrow, and today. 

With ScalePEO, all your processes are streamlined, giving you more time to focus on the items that matter most. ScalePEO specializes in packaged PEO services. Specifically, it allows you to manage all the tasks around the entire employee lifecycle – from hiring to retirement. 

The polished and streamlined system interaction with prospective and current employees leaves them with a solid interpretation of the company. This and the rich benefits at a competitive price help companies retain and attract quality employees. 

Schedule a consultation today to find out how we can save your company money.