What Every Business Owner Should Know About PEOs 

Running a small business means balancing growth with responsibility. You are focused on increasing revenue, strengthening your team, and staying competitive. At the same time, you are managing payroll, employee benefits, compliance, workplace policies, and risk management. As your business grows, so do those responsibilities. 

The question many owners face is simple. How do you continue scaling without letting human resources (HR) administration slow you down or expose your company to unnecessary risk? 

That is where understanding the impact of a professional employer organization (PEO) becomes important. 

According to research from the National Association of Professional Employer Organizations (NAPEO), businesses that partner with a PEO tend to outperform similar companies in growth, retention, profitability, and long-term stability. 

Here is what the numbers show and why they matter for your business. 

Growth Isn’t Just About Revenue  

Scaling a business requires systems that support hiring, payroll, benefits administration, compliance, and risk management. Without that foundation, growth can stall. 

According to NAPEO, businesses that partner with a PEO grow twice the rate of those that don’t. 

Faster growth isn’t accidental. When business owners aren’t buried in HR administration, they can focus on revenue-generating initiatives, strategic expansion, and customer acquisition. A PEO offers the operational backbone for sustainable growth. 

Employee Retention Directly Impacts Your Bottom Line 

Employee turnover is expensive. Between recruiting costs, training time, lost productivity, and cultural disruption, replacing employees drains both time and money. 

NAPEO research shows that businesses working with a PEO experience employee turnover rates that are 12% lower than businesses that do not use a PEO. 

Lower turnover often stems from stronger benefits offerings, improved HR processes, and better employee support. When employees feel supported and have access to competitive benefits, they are more likely to stay, reducing the constant hiring cycle many small businesses struggle with. 

Access to Competitive Benefits Levels  

Small businesses frequently compete with larger organizations for talent. One of the biggest challenges is offering competitive benefits. 

Among businesses with 10–49 employees, 52% of PEO clients offer a retirement plan, compared to just 23% of non-PEO businesses.  

Through the co-employment model, PEOs allow small businesses to access the buying power of large groups for benefits such as health insurance and retirement plans. This enables small employers to compete more effectively with recruiting and retaining top talent. 

Compliance Support Reduces Risk 

Employment laws and regulations continue to evolve at the federal, state, and local levels. Payroll tax compliance, Affordable Care Act (ACA) requirements, workplace safety standards, and employment classifications can quickly become overwhelming. 

Small and midsize businesses that use a PEO are 50% less likely to go out of business compared to similar companies that do not partner with a PEO. 

While no single factor guarantees business longevity, structured HR compliance support, payroll accuracy, and risk management strategies play a critical role in long-term stability. 

PEO Partnerships Drive Measurable Financial Impact 

Administrative efficiency has financial implications. Payroll errors, compliance penalties, inefficient benefits management, and turnover all create unnecessary costs. 

On average, businesses using a PEO see a 27% return on investment in cost savings. In addition, PEO-supported businesses report higher median profitability compared to similar businesses that do not use a PEO. 

These findings imply that outsourcing HR is not just an operational choice but also a financial strategy. 

The PEO Model Is Widely Adopted for a Reason 

PEOs are not a niche solution. The industry serves more than 200,000 businesses and millions of worksite employees nationwide, generating hundreds of billions in annual gross revenues. 

This level of adoption reflects a broader trend. Small businesses are seeking strategic HR partnerships to stay competitive, compliant, and growth-focused. 

What This Means for Small Business Owners 

Overall, NAPEO’s statistics reinforce that partnering with a PEO helps businesses grow faster, retain employees longer, improve profitability, and strengthen long‑term stability. 

For business owners dealing with hiring challenges, rising benefit costs, and changing compliance rules, the co‑employment model offers practical support and a clear path to growth. 

If you’re evaluating how to strengthen your business operations while positioning your company for long-term success, it may be time to explore whether a PEO partnership aligns with your goals. Contact GMS today to learn more!