“What is our industry’s new normal?” Click To Tweet

Like almost every other industry, professional employer organizations (PEOs) have been forced by the global pandemic to ask themselves this question. As we review the last few years—both before COVID-19 and during it—we find that, despite the hardships suffered by organizations across the globe, PEOs have had an unprecedented opportunity to show their value by proactively working with our partner companies to help them solve challenges they never dreamed of.

As we look toward 2021 and beyond, PEOs, including Genesis HR Solutions, are uniquely positioned to provide opportunities and positivity to our clients. Here’s a summary of PEO history, what we’re seeing now, and what may lie ahead for PEOs.

Get an in-depth look at professional employer organizations and why you should consider partnering with one. Download Everything you need to know about PEOs: A step-by-step guide.

PEO History & Highlights

  • The predecessors to PEOs first appeared in the 1970s in response to employers’ need for staffing and human resource administration.
  • In the 1980s and 1990s, PEOs as we know them today emerged.
  • Between 2008 and 2017, the number of worksite employees employed in the PEO industry grew at a compounded annual rate of 8.3%, from about 1.8 million to 3.7 million. (NAPEO)
  • In 2014, legislation passed that authorized the Internal Revenue Service (IRS) to develop a program for Certified Professional Employer Organizations (CPEOs).
  • Over the past 15 years, employment at SMBs using PEOs has grown between 7% and 9% faster than small to midsize businesses overall. (NAPEO)
  • Today, PEOs provide services to an estimated 175,000 small and mid-sized businesses, and employ close to 4 million people.

Not only do PEO clients get expertise from their PEO partners, they no longer need to do the grunt work for the administration of their company’s HR, benefits, tax, payroll, and compliance issues, giving them time to focus on the core functions of their business—and focus on growth.

Notable PEO Statistics

  • From 2008 to 2017, the number of worksite employees employed by PEOs grew at an annual rate of 8.3%. This percentage growth in the PEO industry is 14 times higher than that of employment in the United States economy as a whole. (Extensis Group)
  • The number of employees and expected change in business revenues is notably higher for PEO clients versus non-PEO clients. (NAPEO) For 2018 to 2019, the growth rate of employees of PEO clients grew at 5.6%, versus 1.4% for non-PEO clients. The growth rate of business revenue was at 13.5% for PEO clients, versus 8.5% for non-PEO clients.
  • Administrative costs are around $450 lower per employee for businesses that use a PEO. (NAPEO)
  • Privately held businesses that use PEOs are approximately 50% less likely to fail (permanently cease operations) from one year to the next when compared to similar companies in the overall U.S. population of private businesses. (NAPEO)

The Current State of the PEO Industry

First and foremost, we need to recognize the extent to which COVID-19 changed the world. While we don’t have many hard numbers to look at from March 2020 forward, we can clearly see the toll a global pandemic has placed upon our economy, employers, and their employees.

As an industry, PEOs were well equipped for the way this pandemic changed our partner companies and their employees’ lives. For businesses who partnered with our PEO received immediate and regular support. Legislation was changing quickly and employers had to immediately comply; the PEO partnership provided the expertise to interpret the new requirements – family leaves of absence, tax deferrals, COBRA payments, unemployment, workplace safety, to name a few – and provide guidance on compliance. In addition, these businesses already benefited by having the technology platform that allowed for remote employee communication related to payroll and benefits. PEOs were positioned to provide stability during a challenging time.

As always, our industry continues to look ahead to the future, assessing ways we can better serve our clients’ needs as they relate to human resources, tax administration, benefits, and payroll. We anticipate even more shifts in a post-COVID-19 world.

4 PEO Trends To Watch In 2020 & Beyond

1. Implementing a “new normal” across industries.

As we enter the latter half of 2020, leadership teams continue to grapple with the navigation of their workforces. PEOs are best suited to help companies like yours deal with big adjustments, including remote work. At the beginning of 2020, the idea of a completely remote workforce was unfathomable, but today, the idea of continued—and likely permanent—remote work seems extremely likely for many. According to one study, “Close to 80% of organizations surveyed said they have implemented or expanded universal work-from-home policies as a result of COVID-19, while 67% expect these policies to remain in place either permanently or for the long-term.”

Whether or not companies choose to embrace remote work permanently, those who partner with an experienced PEO will have an advantage over their peers. At Genesis, we are helping our clients navigate flexible work arrangements, create work from-home policies, and outline best practices on how to best manage remote workers. On-boarding new hires in a remote setting is also a new challenge that requires adjustments and the PEO technology platform provides a great foundation for electronic on-boarding and benefit enrollment and communication.

67% of organizations expect work-from-home policies to remain in place either permanently or for the long-term.

And PEOs do more than simply create policies—we also assist our clients in finding answers to questions about topics ranging from compliance (specifically regarding wage and hour issues), to company culture, to remote work management, and coach teams on productive communication and other matters.

2. Continued Benefit Plan Administration Oversight

Small and midsize business owners and leaders will continue to face frustrations dealing with benefits administration—thus, the need for a partner who can manage the universe of benefits will continue.

With a PEO, businesses have one partner who handles all essential pieces of their HR infrastructure as it relates to employee benefits, including finding the right benefits and benefit partners, researching affordability, contract negotiations with benefits partners, and communication with employees about their benefits.

At Genesis HR, we eliminate the hassle of finding and managing the best plans for your organization. Our benefit plan administration services include the following:

  • Making complex benefit plan administration choices easy to understand
  • Managing insurance carrier relationships
  • Organizing and managing your annual benefit strategy reviews, benefit orientation meetings, open enrollment communication plan, customized online benefit enrollment, and tracking of benefit eligibility
  • Selecting best-in-class insurance partners. Our partnership with Blue Cross Blue Shield (BCBS) of Massachusetts, one of New England’s premier health care providers, is just one of many benefit offerings that allow you to attract and retain the best employees. (Read more about why BCBS is a leading health insurance provider.)

3. Leading Inclusion In The Workforce

In light of the current civil rights issues, many companies want to know how to navigate diversity and inclusion in the workforce. PEOs will play a vital part in helping employers do just that. In our view, making public statements with regard to such causes is not enough; businesses must implement real changes to become more inclusive.

This effort will require education, training, an understanding of the challenges surrounding diversity and inclusion, reimagining recruitment strategies, and growing diverse leadership teams. For many company leaders, taking this on alone seems daunting. Fortunately, that’s where PEO partnerships are invaluable. Leveraging the resources and expertise within the PEO will be an ideal place for businesses to start in assessing their position on diversity and inclusion and creating a plan for change.

4. Helping Companies Stay Compliant

Like benefits administration, employer compliance is an aspect of business ownership that isn’t going anywhere. Ever-changing laws, state variances, and company size qualifications can be difficult to understand, making it that much harder for businesses to comply.

COVID-19 has introduced new challenges. It’s imperative to make sure your business is following federal, state, and local regulations with regard to employee work hours and flexible work arrangements. Even when you have access to COVID-19 resources, taking the time to digest them and see how they apply to your business can be overwhelming.

Genesis HR simplifies compliance, helping you can stay in front of regulations that impact your business. From hot topics like building reopening and safety guidelines, to layoffs, furloughs and terminations, to evergreen items like the Affordable Care Act, employee classification, and employee records, you can rest assured we are here to help you make sense of it all.

Let us help you grow your business—tomorrow, next month, and over the next decade.

Genesis HR Solutions has been New England’s premier PEO since 1991, removing the worries of HR management so our clients can focus on what they do best. Although much has changed in 2020 alone, we continue to grow our company by providing small and midsize businesses the expertise they need to grow theirs.

If you’re a company or nonprofit looking for a solution to specific HR challenges, we’d love to see if Genesis HR is a good fit for you. A free discovery call is a great first step in figuring this out—just click here to schedule your call with our team.

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