A woman business owner looks directly at the viewer and is smiling. She is holding a computer tablet in her hands. Behind her are several employees who are working in a modern warehouse office.
Using a PEO service allows you to recruit and retain employees by offering the competitive benefits that large businesses offer with the advantages that small businesses offer. — Getty Images/FG Trade

The National Association of Professional Employer Organizations (NAPEO) research is clear — PEOs improve outcomes. Companies decrease staff turnover by almost 20% and save 27% on human resources (HR) costs. But how exactly do PEOs enhance employee experiences and increase retention rates?

We dove into the PEO services and features that directly or indirectly affect workforces. Learn how improvements in each area can help your business retain employees while enhancing experiences.

Expand your company's benefits package

Healthcare and retirement benefits are crucial to employee retention. PEOs co-employ thousands of workers, which allows them to offer robust benefit packages at reasonable rates. They also provide fringe benefits, including wellness services, gym memberships, childcare stipends, and pet insurance.

Additionally, PEOs administer benefits, alleviating HR burdens and improving employee experiences. They provide technology platforms for staff to compare and access benefits.

Some PEOs offer advanced guidance. For instance, employees can contact Rippling by phone or chat to assess symptoms, calculate healthcare costs, or dispute medical bills. ADP TotalSource consults with business owners to determine which plans to offer and why.

Still, a Gallup poll showed that pay and benefits "[were] identified only 20% of the time as the primary reason people left their job[s]." Fortunately, PEOs offer other services and tools to keep employees at your company.

[Read more: Everything Your Small Business Needs to Know About Choosing a PEO]

Increase employee engagement

Many factors impact employee engagement, including leadership and culture. According to Gallup, "Three times as many people left their job due to engagement and culture or wellbeing and work-life balance reasons, compared with the number of people who primarily left for better pay or benefits."

PEOs help you measure and improve employee engagement. For starters, you can gauge satisfaction levels with PEO-administered surveys. Some providers analyze data and supply actionable follow-up plans.

HR teams can access resources and guidance when developing employee engagement strategies. PEOs may recommend best practices or assist with implementation. In addition, PEOs assist with designing, deploying, and administering employee recognition programs.

Support administrators and management

Supervisors and HR teams set the tone for your workforce. Yet, noncore tasks and work overload lead to burnout. Paperwork, ever-changing regulations, and staff requests are never-ending.

PEOs take over the administrative side and provide automation tools for many functions. For example, Deel offers on-demand HR support so your team doesn't spend hours searching for answers. Rippling's add-on IT software makes quick work of provisioning devices or resetting passwords.

Going with a certified professional employer organization (CPEO) solution like ADP TotalSource can relieve burdens further. The IRS stated, "Generally, the CPEO is solely liable for paying the customer's employment taxes, filing returns, and making deposits and payments" for worksite payroll. The bottom line is that PEOs improve administrator and management roles while allowing them to invest more time into employee-focused programs.

Healthcare and retirement benefits are crucial to employee retention. PEOs co-employ thousands of workers, which allows them to offer robust benefit packages at reasonable rates.

PEOs enhance employee experiences

People work for small businesses for many reasons. One of those is that the smaller size offers a friendly, family-like workplace environment. At the same time, everyone loves the convenience of HR and financial mobile apps with 24/7 support — things not all small companies can provide staff.

Ultimately, you retain control over day-to-day people operations. Your role is to ensure management teams are supporting and motivating staff. This component is especially critical to avoid any disconnect or miscommunication between employers and their workforce when signing up with a PEO.

However, PEOs can enrich experiences by:

  • Making it easier for employees to submit time-off requests and view their statuses.
  • Providing consumer friendly calculators and planning tools.
  • Offering health or retirement benefits consultations.
  • Supplying a self-service system for adding dependents.
  • Furnishing a conflict resolution line.

[Read more: 8 Simple Ways to Retain Your Best Employees]

Enable learning and growth opportunities

Advancement opportunities motivate employees, whereas training programs ensure they're prepared with the latest job-related skills. Notably, 63% of respondents to a Paychex survey said, "They would be more likely to stay at their organization if they were provided better career advancement opportunities."

PEO services may offer an online learning management system with interactive courses or they partner with third parties to provide app-based training solutions that gamify upskilling opportunities.

Deliver workforce analytics for strategic decision-making

Aside from on-demand reporting capabilities, PEOs may provide custom workforce analytics and metrics. These may be specific to your initiatives, such as retaining employees or increasing engagement. Having the big picture and granular details helps you decide where to spend your budget to get the most value, whether it's implementing flex scheduling or improving your performance review program.

PEO partners can supply data-driven insights that enable employers to accomplish the following:

  • Identify employees at risk for turnover.
  • Break down satisfaction and engagement rates by role.
  • Find upskilling and reskilling opportunities.
  • View career growth models for team members.
  • Understand how employees use benefits and online platforms.

Increase workplace safety

Safer work environments do more than ensure compliance and reduce workers' compensation claims. It demonstrates that your business cares about employee safety. In return, workers may have increased trust, confidence in your business, and loyalty — all factors relating to retention.

PEOs have a vested interest in managing on-site risks. Most handle your workers' compensation insurance and oversee some compliance topics. They help small companies document safety protocols and manuals. Some will complete safety audits.

Many PEOs assist with developing and implementing safety training programs. They may have online options or complete in-person sessions. For instance, Deel can provide locally compliant training, and ADP TotalSource offers training and safety advice.

[Read more: 5 Things You Need to Know About Choosing a PEO]

Reduce payroll and tax errors

Payroll mistakes directly impact your employees. Indeed, about half of the respondents to a study from the Workforce Institute at Kronos Incorporated said they "will begin searching for a new job after experiencing just two issues with their paycheck." Since a significant number of people live paycheck to paycheck, blunders are much more than an inconvenience.

And it doesn't just affect low-income workers. A 2022 Lending Club survey found that 48% of Americans with yearly incomes over $100,000 live paycheck to paycheck.

Likewise, inaccurate or untimely tax forms increase your costs and can result in penalties. PEOs provide all-in-one payroll and tax support. They often have a dedicated payroll manager to assist with last-minute adjustments or questions. Like well-known payroll services, PEOs offer iOS and Android apps for employees, allowing them to view timesheets and paystubs.

Some PEOs guarantee their services against errors. They incur the costs associated with accounting or payroll mistakes. This aspect is especially beneficial if your business has a mix of contractors and full and part-time staff and must manage overtime or tip payments.

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