A recent report from the National Association of Professional Employer Organizations (NAPEO) demonstrates the actual value of using PEO services.
According to the NAPEO research, companies realize, on average, a 27% return on investment, or ROI. Companies – especially small to medium-sized businesses – benefit in a variety of ways from working with a PEO. Add a hefty ROI to these benefits and it simply makes good sense to consider outsourcing your HR functions to an expert.
Understanding the PEO ROI Calculation
The NAPEO white paper that reported the new PEO ROI data explained their calculations in great detail.
Essential, ROI is calculated by dividing the economic benefit of an investment by the dollar amount that was invested. The NAPEO data demonstrated that, for every $1,000 spent on PEO services, businesses derived an average of $1,272 in benefits – a 27.2% return on investment.
NAPEO analyzed benefits in five categories, including health benefit costs, human resources expenses, workers’ comp costs, and the costs associated with HR staff (salaries and benefits). ROI was especially strong in the areas of health benefit costs and the cost of employing an HR staff.
Additional PEO Benefits Reported by NAPEO
The report detailed other benefits that companies derive by outsourcing their human resources functions, including hiring, employee training, payroll and benefits administration.
NAPEO reported the most impactful benefits in the area of recruiting, hiring and retaining highly qualified staff members. Company owners and managers also benefit by becoming freed up to focus on managing and growing their business, rather than spending time and effort trying to manage HR functions.
To apply this research in your own business, consider the report’s findings that employers saved an average of $1,775 per employee, per year. The cost of using a PEO is, on average, $1,395 per employee, per year, for a net savings of about $360. If you have 10 employees, you could save $3,600 per year, while reaping all the other benefits a PEO provides.
Does a PEO Make Economic Sense for Your Business?
Although not every company will recognize the same level of ROI, the NAPEO statistics are hard to argue with.
With the potential for reducing turnover, increasing profitability and taking the stress out of HR, it’s worth the time and effort required to research how your company could benefit from working with a PEO.
In Utah, WTA, Inc. assists business owners with a full range of human resources-related services. We provide payroll processing, benefits administration, recruiting, onboarding, training and more. Our team of experts takes the guesswork out of compliance and helps reduce the risk for the employer. Contact us today to learn more about your company can capitalize on the ROI that comes from outsourcing your HR functions to a PEO.