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Is Your Company Facing High Employee Turnover? A PEO Might Help

PEOs help companies reduce employee attrition by 10-14%. Here are the reasons why.

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Kris Hoppe
Jul 20, 20174 minutes
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Most business owners know the high costs of employee turnover. But how can your company stem the loss?

According to a study by SHRM, the average cost-per-hire for companies is $4,129. And when it comes to replacing highly-trained executives, the cost can run into hundreds of thousands of dollars — a steep price to pay.

Facing Fierce Competition

In highly competitive industries like tech startups and PR and marketing agencies, companies face substantially higher employee turnover rates.

According to the Bureau of Labor Statistics, the average employee’s tenure at a job is about four and a half years. In many tech companies, that tenure is only one year. And at ad agencies, the annual turnover rate is a whopping 30%.

The reason might not be what you expect: much of the turnover is actually due to competition for highly-skilled employees instead of employee dissatisfaction. Still, companies in the agency and tech worlds see the direct impact on employee happiness, knowledge-loss, and, of course, cost.

If you run a small- to medium-sized agency or tech company, it can be difficult to compete with the Googles and Amazons with deep pockets and lavish employee perks. But don’t be discouraged. There are some highly effective steps you can take.

Related article: Get 110 Ideas to Increase Employee Retention with Our Free eBook

How a PEO Boosts Employee Retention

Joining a PEO may increase your company’s overall success and retention rate. According to a study conducted by NAPEO, companies using a PEO have 10-14% less employee turnover than that of comparable companies.

A PEO — or Professional Employer Organization — provides payroll administration, access to employee benefits, and help with taxes and other forms for small- to medium-sized businesses. Essentially, they level the playing field for small businesses, enabling them to provide their teams with access to high quality benefits at affordable costs.

This outcome is especially impactful for tech companies and agencies that face fierce competition for talent. So, why do PEOs increase employee retention? Here are just a few reasons:

1. Increase Company Stability

According to the U.S. Small Business Administration, only about half of businesses survive the first five years of business. That’s a daunting hill to climb, but using a PEO can help increase predictability in a company’s earlier years.

As the same NAPEO study states, businesses that use PEOs are 50% less likely to go out of business from one year to the next when compared with similar companies. Obviously, if your company is more stable and predictable, you’ll be more likely to keep the talent that makes your business a special place to work.

2. Offer the Best Benefits

A huge challenge facing small- and medium-sized businesses is offering a competitive benefits package. And understandably, people who possess a competitive skillset are looking for a company that will take care of them.

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PEOs bundle businesses together under one plan, so they can access the same high-quality benefits usually offered to enterprise-level companies. Employees who have access to great perks and benefits are more likely to stay, which is a win-win for everyone.

3. Focus on Running the Business

Let’s be honest — payroll and benefits administration is complicated. Between federal, state, and local payroll taxes, and different plans with complex copays and deductibles for employees, many companies have to hire personnel full-time to manage all the complexities.

The alternative for many fledgling companies is to take their own precious time working on all the back-end tasks to run a business smoothly. Companies who are part of a PEO no longer have to focus so much on the back-end administration. Instead, they can focus their attention on growing their team and running their business in the best way possible.

Justworks Is a PEO

Justworks is a tech-forward PEO. We administer payroll and offer competitive benefits, such as access to health insurance, 401(k), One Medical, Teladoc, and CitiBike. Justworks also has an easy-to-use platform, so you won’t have to sign your employees up for benefits or figure out how to approve someone’s PTO. You can learn more about us here.