Contracting With a PEO As a Means of Retaining Talent

Talent retention is currently one of the hottest topics in American business. As employers strive to meet the challenges of what is now being called the Great Renegotiation, they are looking at every possible means to keep the current workforce intact. For smaller companies, one possible strategy might be contracting with a professional employer organization (PEO).

Dallas-based BenefitMall acts as a general agency that connects carriers and brokers to provide employee benefits and HR services. They say there are currently more than 700 PEO providers across the country. BenefitMall also explains that contracting with a PEO is essentially entering a co-employment arrangement in which the PEO handles most HR functions while the client manages day-to-day operations.

PEOs and Company Growth

While companies engaged with PEOs typically have fewer than 80 employees, partnering with the PEO often leads to growth. In fact, companies with PEO contracts tend to grow 7-9% faster, on average. Their employee turnover tends to be 10-14% lower as well.

The reasons behind such statistics could explain why PEOs are starting to position themselves as partners capable of helping their clients retain talent. And now that talent retention has jumped to the top of the list of HR priorities at most companies, PEOs have a golden opportunity to present themselves as retention partners.

What a PEO Can Do

The simplest way to describe a PEO is to say that it is an HR specialist. A PEO takes on HR functions ranging from hiring and firing to payroll to benefits administration and compliance. Virtually anything an in-house HR department does can be handed off to a PEO. How does this help with retention?

  • Better Administration – Given that PEOs are the experts in HR, they can administer HR functions better. With better administration comes more streamlined operations capable of having a positive effect on employee perception.
  • More Responsive HR – PEOs can offer a more responsive HR experience on a daily basis. That makes for happier employees and a more favorable opinion of the company.
  • Benefits and Services – Through their connections with general agencies and brokers, PEOs can give companies access to more products and services. Just in the benefits space alone, more product choices give companies more opportunities to offer their employees the best possible benefits.
  • Compliance – HR is governed by a long list of rules and regulations at the federal, state, and local levels. By letting a PEO handle compliance, managers are freed to concentrate on more important things. Those more important things include developing solid relationships with workers.

The main thing to remember in all of this is that contracting with a PEO is essentially taking advantage of an HR organization’s expertise. Most companies address HR as a function of business despite the fact that their businesses do not specialize in HR. PEOs are the HR specialists. They are the best equipped to handle HR efficiently, effectively, and in full compliance.

PEOs and Business Expansion

Contracting with the PEO can even help with retention when a company decides to expand across state borders. A PEO can set up the necessary entities required to do business in another state. It can handle recruiting and hiring as well as all HR functions without the partner company having to get directly involved.

Companies continue to work hard at talent retention even as it appears employees are more willing to quit their jobs in search of greener pastures. If contracting with a PEO can significantly boost retention efforts, it is worth looking at. Whatever it takes is what companies need to do.