Key takeaways:

• Reasons to outsource to a PEO in a recession:
  • Obtain business scalability
  • Reduce turnover
  • Improve cost-efficiency
  • Get help with compliance and policy changes
  • Improve communication
  • Prioritize business continuity

Some experts say that the U.S. may have entered into a recession since we’ve had two consecutive quarters of a gross domestic product (GDP) in the red. However, the jury is still out on whether or not we’re really in a recession, though one may be inevitable very soon.

When a recession is imminent, company leaders often worry about losing employees and revenue, and they’re likely to experience changes in the market that impact customer sentiment. Outsourcing to a professional employer organization (PEO) during a recession is strategically smart. Here are the key reasons why.

In a recession, it may be inevitable that a business will need to downsize and then upsize when things are looking better. These ups and downs are better handled by experts who can advise and guide accordingly. PEOs understand how to face the market with a business plan that will ensure sustainability and better decision-making to face whatever comes next.

When you’re worried about having to change size and deal with staffing issues, a PEO can help you manage upsizing and downsizing. This will improve your scalability and longevity.

In a recession, employees often have a lot of job uncertainty, and they may even leave their current roles for better pay or benefits. They will start to prioritize their financial and mental well-being in a crisis. They will want to work for a company that meets their family’s needs and goals.

A PEO can be a key component in boosting retention. The National Association of Professional Employer Organizations (NAPEO) reports that businesses that use a PEO have a 10% to 14% lower turnover than those that don’t. PEOs help companies create better HR systems and policies so that employee satisfaction increases and people don’t want to leave.

Companies can spend a lot of time and money on HR. There are lots of tasks to manage and administer, from payroll to benefits packages to hiring and recruiting to compliance. When these responsibilities are shared or taken on by a non-HR employee, they become cumbersome and mistakes are easily made. HR tasks can thus become very costly to a business.

Working with a PEO means your business has a dedicated expert handling these tasks. It improves efficiency and reduces costs. The NAPEO also reports that businesses that use a PEO are 50% less likely to go out of business when compared to other companies. The U.S. business failure rate is 8% overall but just 4% for companies that have used a PEO for at least four quarters.

The bottom line is significantly improved when a PEO comes in to tackle HR and compliance tasks. Otherwise, they become costly to a business, both financially and operationally.

The government often responds to a recession or crisis with tax benefits or federal programs that support businesses through the rough patches. For instance, during COVID-19, the federal government approved many incentives, like tax credits, for employers to keep people on the payroll and stay afloat during economic uncertainty.

These changing regulations are hard to navigate for the average business. Business owners may not always understand what benefits they qualify for or how to stay in compliance with government guidelines and restrictions. It can all be too much to manage on top of typical HR functions.

A PEO can step in and ensure the business is staying compliant and taking advantage of all applicable government programs. It is crucial to company health and employee satisfaction to have someone on board who understands all the moving parts and can advise accordingly.

In any crisis, employees will probably have a lot of questions. They may become distraught about the future of the business or their positions. They may not understand how to navigate their own financial concerns.

Employee communication is crucial in these periods of uncertainty. You need the ability to support workers, answer their questions and act as a resource for them. PEOs know the right systems to put in place to support and communicate with employees regularly. These organizations have the right policies to implement that will help improve employee satisfaction, even during a recession or other type of crisis.

Getting help from the experts means workers will feel more satisfied and supported with changes like a better benefits package or better benefits administration technology. Businesses that use a PEO are 28% more satisfied with their available healthcare benefit options than those without a PEO.

Business continuity is the concept that a business can continue operating normally through a crisis like an economic downturn. Putting a business continuity plan in place means that you have clearly defined steps to deal with a recession, reducing disruptions as much as possible.

For instance, the supply chain may be unsettled during a downturn, which could impact access to materials to create products as normal. A business continuity plan should outline where those materials would come from if a supply chain issue should arise.

PEOs can help organizations create these types of plans and strategies so they’re set up to deal with a recession or other crisis. Businesses can rest assured that they’ll know what to do to continue operations and support employees.

Your best bet is outsourcing to a PEO during recession fears. PEOs can help you put better HR practices and policies in place, comply with government regulations, communicate with employees and reduce costs.

The team at StaffLink is ready to help with bundled HR services, customized to meet your unique business needs. We are a national PEO that can deliver risk management, benefits administration, payroll and many other services. We can carve out whatever services you need since our PEO is boutique.

Our experts are ready to help your business in a crisis. Request a proposal or contact us at (954) 423-8262 for more information.