NAPEO (National Association of Professional Employer Organizations) recently released compelling new research comparing businesses that partner with a PEO to those that operate without that support. The white paper highlights several critical factors, including growth rate, employee turnover, and overall resilience, revealing the ways in which PEOs can be a game-changer for businesses.

Here’s a look at NAPEO’s key findings and how partnering with a PEO can help your business establish strong roots for lasting growth.
 

Accelerated Growth Rate

Using data from over 15,000 client businesses representing more than 300,000 employees, the study compared year-over-year growth from January 1, 2023, to January 1, 2024. Data was collected from 23 different PEOs across various sizes, ensuring a thorough sample.

PEO clients grew at a rate of 4.3% annually, over twice the growth rate of comparable businesses in the ADP National Employment Report, which reported a growth rate of 1.9% among similar-sized companies.

In addition to ADP data, the report compared growth rates with broader benchmarks like the Bureau of Labor Statistics’ CES and QCEW series, as well as small business employment indexes from Intuit QuickBooks and Paychex. Businesses utilizing PEOs consistently outperformed these national averages. PEO clients' stronger growth is attributed to their ability to focus more on core business strategies while the PEO manages HR and employment services, helping companies streamline operations and improve employee-related functions.
 

Lower Employee Turnover

This study indicates businesses that partnered with a PEO experience significantly lower employee turnover rates compared to similar businesses not using a PEO. Data from 20 PEOs, encompassing nearly 20,000 clients and 360,000 employees as of January 2024 were compared against figures from the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS). To accurately compare with the broader market, it was necessary to adjust for the higher growth rates of PEO clients.

This study found that PEO clients have an annual turnover rate that is 12% lower than companies that don’t utilize a PEO.

PEO clients are more appealing employers, often offering a broader range of employee benefits and professional HR management, which contributes to their lower turnover rates. These businesses not only grow their employee base more rapidly but also retain talent more effectively.
 

Maintaining Resilience

Clients of PEOs demonstrate significantly higher resilience compared to companies that don’t use PEO services. These findings are based on a matched pairs analysis, where PEO clients and non-clients were compared based on identical characteristics: industry sector, employee size group, and state. A total of 2,030 companies were analyzed, including 1,015 PEO clients and 1,015 matched non-clients.  The analysis included data from the Paycheck Protection Program (PPP), US Department of Labor, and Bureau of Labor Statistics.

From 2020 to 2023, the average one-year non-survival rate for PEO clients was 4.98%, while it was 7.50% for non-PEO users, demonstrating a significant advantage of using this type of service.

Businesses using a PEO exhibit greater resilience, meaning they can survive and thrive during challenging economic times. Specifically, non-PEO clients are 50% more likely to fail annually than those using PEO services.
 

What Makes Landrum HR Solutions Different

At Landrum HR Solutions, we pride ourselves on being a second-generation, family-owned business with deep roots in the communities we serve. Our commitment to exceptional customer service sets us apart. We treat every client like a valued member of our family. Just as the statistics show PEO clients experience accelerated growth rates, lower employee turnover, and increased resilience, our personalized approach and extensive industry expertise empower businesses to thrive. Partnering with us means not just gaining a service provider, but a dedicated ally invested in your long-term success and stability.