The Silver Bullet for Small Businesses to Lower Labor Costs and Increase Productivity

Helping small businesses compete with bigger companies for employees is the most overlooked benefit of using a PEO (professional employer organization) or other shared HR service.

When a small business calculates their labor costs, they rarely take into account the turnover rate.  Why is this?  The lost production for a company with 20 to 50 employees is dramatic when turnover is factored into the equation of profit and loss. 

Even a low turnover rate of 10 percent doesn't sound too bad.  But for a small business with 35 employees, that means 3 to 4 employees PER YEAR, will leave that company and need to be replaced.  Without even taking into account the cost of finding a replacement, imagine the costs associated with training and the opportunity cost lost while the new employee gears up to replace the lost employee.

If a small business were to cut turnover in half, then those associated costs would be cut in half, correct?  I would argue that it would be an even greater savings due to natural attrition of those one or two lost, as opposed to the 3 or 4, of which 2 are likely vital to a company's operations.

How can a PEO help?  By allowing the small business to focus on its core competencies and offering a more cost effective benefits package that competes with what a Fortune 500 company offers its employees, such as:

1. Major medical healthcare
2. Vision
3. Dental
4. 401(k) plans
5. Life and AD&D
6. Accident
7. Hospital Indemnity
8. Short- and Long-Term Disability
9. Cancer
10. Legal
11. Pet
12. Roadside Assistance
13. Credit Card Protection
14. Identity Theft Protection

With options like this, a small business is better able to compete to keep their most valuable assets.  Their employees.