Maximizing ROI of Using PEO

This report delves into the benefits of partnering with Professional Employer Organizations (PEOs) for small and mid-sized businesses, with a particular focus on the impact these partnerships have on both businesses and their employees. As the fifth installment in NAPEO’s series of white papers, it aims to enhance understanding within the business community and the general public about the economic value provided by the PEO industry. Using comprehensive survey data from business owners and their employees, the report compares various key performance areas between companies that use PEO services and those that do not. The analysis covers business growth, competitiveness, innovation, customer service, employee satisfaction, and the ability to meet business challenges.

The findings underscore the broad range of positive outcomes experienced by businesses that work with PEOs, especially in regions like Nevada and California, where Northern Nevada's premiere PEO services, such as those offered by The Applied Companies, are increasingly recognized for their value. The Applied Companies not only provides comprehensive PEO services in both California and Nevada but is also a leader in executive search recruitment. As a firm that is proud to serve numerous clients nationwide, The Applied Companies has established itself as a trusted partner in helping businesses achieve operational excellence and long-term success.

The Return on Investment (ROI) of Using PEO 

Laurie Bassi and Dan McMurrer, McBassi & Company, September 2019

Businesses that engage with Professional Employer Organizations (PEOs) like The Applied Companies can achieve significant value in several key areas. These advantages can be grouped into three broad categories:

1. Enhancing the ability to attract, motivate, and retain employees.
2. Allowing businesses to concentrate on their core operations by outsourcing HR responsibilities.
3. Cutting costs associated with HR functions.

While previous studies have focused on the first two categories—highlighting improvements in business success, employee satisfaction, and other performance measures—this report centers on the third: cost savings. Specifically, it examines the ROI that businesses can expect when using PEO services in Nevada and California, based solely on reduced HR-related expenses.

Key Findings: The analysis demonstrates that businesses using PEO services from The Applied Companies can expect an average annual ROI of 27.2%, derived from savings in the following areas:

• HR Personnel Costs: PEO clients typically require fewer in-house HR staff, leading to substantial savings.
• Health Benefits: PEOs often negotiate better health insurance rates, resulting in lower costs for clients.
• Workers’ Compensation: PEO clients benefit from reduced workers’ compensation premiums.
• Unemployment Insurance: Though data is limited, many PEO clients report savings in unemployment insurance costs.
• Other HR Expenditures: Additional savings are achieved through reduced spending on external HR services.

For every $1,000 spent on PEO services, businesses can expect to save approximately $1,272, yielding a net benefit of $272.

Additional Value from PEO Nevada and California: Beyond cost savings, PEOs in Nevada and California, such as those provided by The Applied Companies, also help businesses lower employee turnover and drive business growth. PEO clients report higher employee retention rates and faster growth compared to non-PEO firms. Additionally, fewer PEO clients express concerns about hiring, retaining, and motivating employees, highlighting the broader advantages of PEO partnerships.

Strategic Insights for Businesses: Businesses with higher HR costs or those struggling with employee retention are particularly well-positioned to benefit from PEO services. The findings indicate that PEOs in Nevada and California, particularly those offered by The Applied Companies, can be critical partners in helping businesses achieve not only cost savings but also long-term growth and stability.

Research Methodology: The ROI estimates are based on data from 132 PEO clients and 44 non-PEO businesses, gathered through a comprehensive survey. The cost savings were calculated by comparing the HR expenses of PEO clients to those of similar non-PEO businesses, with adjustments made for various factors to ensure accurate comparisons.

Analysis of Business and Employee Survey Results: The analysis, based on survey data from 101 firms (71 PEO clients and 30 non-PEO clients), provided clear evidence that companies working with PEOs outperform their non-PEO counterparts in several critical areas. PEO clients reported stronger business growth, improved employee satisfaction, and better HR practices. The data also revealed that businesses partnering with PEOs, particularly those utilizing Northern Nevada's PEO services as well as those served by PEO companies in California, like The Applied Companies, were better equipped to meet business challenges and foster a more positive work environment.

Key Takeaways on PEO in Nevada and California Partnerships: The findings from this report highlight the significant benefits of PEO partnerships for both businesses and employees. PEO clients experience enhanced business performance, greater employee satisfaction, and reduced operational challenges. These results emphasize the value of PEO services, especially in competitive markets like Nevada and California, where PEO providers such as The Applied Companies are playing a critical role in helping businesses succeed.

This analysis reinforces the value of PEO partnerships, particularly in competitive markets like Nevada and California. By providing substantial cost savings and enhancing overall business performance, The Applied Companies plays a vital role in helping companies achieve a strong return on investment. Moreover, as a firm that is proud to serve numerous clients nationwide, The Applied Companies continues to drive business success across various regions. Contact us today!