PEOs Work For Small Businesses – 5 Reasons Why

According to NAPEO, the average PEO client has 19 employees. However, we find the sweet spot for the Professional Employer Organization industry is anywhere from 10-100 employees. These are 5 major reasons why the PEO value proposition works well for small businesses:

Size does Matter Even For Small Businesses 

• For a company with less than 100 employees, hiring a full-time, competent HR professional can be too costly to justify ($60k-110k per year). PEOs provide small businesses with access to SHRM certified HR consultants to guide with company policies, strategy, and HR compliance. Companies can rest assured they’re in compliance with all Federal and State regulations for a fraction of the costs.

• Companies with more than 100 employees begin entering the size range where economies of scale work in their favor when purchasing health insurance, workers comp insurance, and many other HR related expenditures; the need for a PEO’s buying power is mitigated in this case.

• When small businesses have less than 10 employees, they may struggle to find a PEO that will accept them on their group health insurance policy. Certain PEOs are more flexible in this regard, and will provide the full range of services for small businesses with less than 10 employees, but it will limit the options in the market. Check out our case study on PEO for startups.

• If a company has less than 10 employees Human Resources may not be a prioritized initiative for the company, so the need for outsourcing HR isn’t yet realized.

• Many of our clients utilize a PEO, spending major dollars on payroll services, 401(k) services, HRIS systems, EPLI insurance, and other various HR expenditures.

If PEOs Makes Sense For Small Businesses

If you've reviewed this list and it looks like it is worth a look at how a PEO can help you ease the cost of your small business benefits, talk to a PEO Broker like PEO Spectrum to go over the pros and cons without having to talk to a PEO service rep. A consultation and PEO comparison report is free to the client and will cut through the noise of the Internet so you can focus on the just the few PEOs that work for your individual business.