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PEOs Offer Small Employers a Fighting Chance at Success

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					    Professional Employer Organizations Offer
    Small Employers a Fighting Chance at Success


    As employment costs continue to grow for most businesses across the country, employers
    must take a hard look at one of the highest cost centers in their organization: labor costs.
    Loosely speaking, these areas can include health insurance premiums, workers’
    compensation costs, employment compliance, payroll/tax costs, salaries, and overhead
    relating to employee administration.


    Unfortunately, according to the Small Business Administration (SBA), small businesses
    bear the largest burden of managing these labor costs. They report that a small business
    (under 20 employees) spends an average of $7600 per employee annually managing
    regulatory compliance, compared to large companies (over 500 employees) that only pay
    on average $5300 per employee (a 45% discrepancy).


    This cost differential is easy to understand, as many expenses relating to compliance are
    ‘fixed’. That is, a firm of 20 employees incurs many of the same base expenses as a firm
    with 200. In large firms, these fixed costs of compliance are spread over a large employee
    base, which results in lower costs per individual. This phenomenon
    is known as economies of scale and it results in an obvious
    advantage to large firms over smaller ones.


    Further hindering small employers is their ability to attract top
    talent away from their larger competitors. They are often limited in
    the variety of health insurance plans they can offer, have limited
    buying-power for workers’ compensation, and overall, have less
    flexibility in administering these plans. The net result is typically
    higher premiums with fewer options.




9000 Sunset Blvd, Suite 900, West Hollywood, CA 90069
www.cpehr.com | info@cpehr.com | 800-850-7133
    The challenge facing virtually all small employers is how to create their own economies of
    scale, reduce their labor costs and improve benefit options? One solution is to outsource
    their Human Resources to a Professional Employer Organization.


    What is a Professional Employer Organization?

    Professional Employer Organizations, or PEOs, were established in the early 1980s, primarily
    offering insurance and payroll services to small and mid-sized employers. In the early days,
    the PEO industry was also known as “Staff Leasing” or “Employee Leasing.”


    As employment and labor laws became more complex in the
    ‘80s and ‘90s, the PEO industry expanded to include many
    other aspects of employee relations and HR compliance. In a               A PEO firm can help
    PEO relationship, a PEO shares many of the responsibilities of              small employers
    being an employer with their clients. These responsibilities            successfully reduce costs
    include: processing payroll, filing payroll taxes, providing
                                                                             by pooling hundreds,
                                                                                 and sometimes
    health insurance for the staff, issuing workers’ compensation
                                                                            thousands, of businesses
    insurance, and assisting their clients to comply with relevant            under one umbrella
    state and federal labor law regulations.                                       program.


    A PEO firm can help small employers successfully reduce
    costs by pooling hundreds, and sometimes thousands, of businesses under one umbrella
    program. PEOs aggregate workers’ compensation insurance, health plans, retirement plans,
    and legal expertise. They are also in the position to establish relationships with regional
    insurance companies to offer lower premiums with better plan options. The net result is that
    small employers gain access to the PEO’s buying power and economies-of-scale.




9000 Sunset Blvd, Suite 900, West Hollywood, CA 90069
www.cpehr.com | info@cpehr.com | 800-850-7133
    Proven Systems and Robust Resources

    Beyond negotiating rates and plans, PEOs maintain the internal resources to support
    programs that help keep insurance premiums down into the future. Many PEOs offer health
    and wellness incentives, Work/Life balance programs, or discounts to health clubs and gyms.
    Research consistently shows that a healthy lifestyle inside and outside the workplace makes
    significant, positive impacts on the cost of health insurance premiums. In regards to safety
    and workers’ compensation, the PEO creates effective injury and illness prevention plans,
    conducts on-site safety inspections, and offers safety incentives to reduce the frequency of
    workplace injuries. These programs ultimately result in fewer workplace injuries and more
    competitive insurance premiums.


    While many small employers try to ‘go at it alone’, partnering with a PEO offers them a
    competitive advantage in terms of reducing labor costs, providing their employees enhanced
    benefit programs, and reducing workplace injuries. If you are small business trying to make it
    in today’s tough economic environment, a PEO may just be the answer you are looking for.


    About CPEhr

    Celebrating its 30th anniversary this year, CPEhr provides human resources solutions to over
    75,000 employees through a high-touch service model. Services include:

        Employment compliance;                 Training;
        HR administration;                     Medical benefits;
        Payroll;                               Workers’ compensation insurance.

    With corporate headquarters in Los Angeles, CPEhr is one of the largest, privately held
    Human Resources Outsourcing and PEO firms in the state.




9000 Sunset Blvd, Suite 900, West Hollywood, CA 90069
www.cpehr.com | info@cpehr.com | 800-850-7133

				
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Description: In today's uncertain, challenging economic environment, virtually all small employers are challenged how to create their own economies of scale, reduce their labor costs and improve benefit options. One solution is to outsource their Human Resources to a Professional Employer Organization.