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New Study Reveals PEO Impact Throughout the Pandemic

An industry study that closely examined the impact PEOs have had on business outcomes for their clients throughout the pandemic
Recently the National Association of Professional Employer Organization (NAPEO) and independent analytics and research firm, McBassi & Company, published an industry study that closely examined the impact PEOs have had on business outcomes for their clients throughout the pandemic.

With COVID-19 still prevalent in many regions, no final conclusions on small businesses or the economy can be made quite yet, but data points that have been gathered and analyzed so far over the last 6+ months give us some very interesting insights into how small businesses with PEO partnerships fared versus non-PEO small businesses.

Specifically this report took a comparative look at the data and answered questions like:

  • How likely were PEO clients vs. Non-PEO clients to receive a PPP loan?
  • How likely were they to receive a PPP loan in round one?
  • What was the likelihood of temporary closure for each group?
  • What was the likelihood of permanent closure for each group?
  • What was the PPP loan application success rate specifically for PEO clients?

What is a PEO?

Before diving right into the results, if you’re not exactly sure what a PEO is, here’s a quick overview.

Professional Employer Organizations (PEOs) provide comprehensive HR solutions for small businesses. Typically these HR solutions include things like:

  • Payroll processing and tax filing services
  • HR administration
  • Employee benefits services
  • Tax administration
  • Risk & compliance assistance

These are the core fundamental administrative areas that every small business needs to manage in order to function properly and minimize risk. Unfortunately, many small businesses don’t have the in-house budget or expertise required for a dedicated HR administrative team.

When you partner with a PEO, you get the benefit of their industry expertise, economies of scale, shared liability and risk, and a dedicated team of administration experts to manage your HR, payroll, and employee benefits for you. This frees up your time and resources so you can focus on growing a successful business while your PEO partner handles all the administrative workload and complexities for you.

Just remember, not all PEOs are created equal. There are PEOs in the market that are not IRS-Certified, which is an essential certification in order to provide you with the most accurate, compliant services. IRS-Certified PEOs have gone through a voluntary program that involves thorough background and experience prerequisites, strict financial requirements, independent audit standards, and required client contractual conditions that shift potential tax related exposures from your small business to the Certified PEO (CPEO).

A CPEO partner will give you the kind of confidence and peace of mind your most critical business operations demand. And yes, our HR and Payroll Services are IRS-Certified! We are committed to providing and upholding the highest possible standards for our customers.

Now that you have a general idea what a PEO is, let’s take a closer look at the findings of NAPEO and independent analytics and research firm, McBassi & Company.

PPP loan program – the cornerstone of small business survival
COVID-19, along with the subsequent government-mandated shut downs, created unprecedented economic challenges unlike anything we’ve ever really seen before. Small businesses, unfortunately, were hit particularly hard.

One of the biggest plans created to support at-risk businesses during COVID-19 has been the Paycheck Protection Program (PPP), introduced by the federal Small Business Administration.

The PPP loan program was created by the CARES Act in March 2020, designed to provide forgivable loans to businesses so they could continue to pay their employees and other critical operating expenses to help them weather the storm of the adverse effects of COVID-19.

This was a highly-necessary program that had to be rolled out very quickly, and as a result of its rapid launch there were many challenges. Everything from eligibility criteria, lack of clarity around how the funds must be used in order to qualify for loan forgiveness, and a convoluted application process just to name a few. Frankly, many small business owners felt like they needed a lawyer just to understand and navigate the myriad of complexities around the PPP loan program.

PPP loans and the startling PEO advantage

From the NAPEO study, the data revealed that PPP loans have been one of the biggest determinants of whether small businesses survived and stayed in business. And small businesses who had a PEO partner fared much better with the PPP loan program than those who didn’t.

Here’s a breakdown of PPP loan stats reflecting the impact of a PEO:

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98% of PEO clients’ PPP loan applications were successful

As previously mentioned, the loan application process was extremely complex and confusing. Many applications were rejected due to incorrect or missing information. Others tried and gave up because it was too complicated for them.

“PEOs mobilized on an unprecedented basis to guide their clients through the PPP loan application process, providing them the required documentation to secure PPP loan proceeds and to navigate PPP loan forgiveness”

Dan McHenry

McHenry Consulting

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More PEO clients received PPP loans in Round 1 of funding ($350,000 or less)

49.7% of PEO clients received Round 1 funding vs. 28.9% of all small businesses

“This indicates that PEO guidance enabled many PEO clients to receive and benefit from their loans before many other comparable small businesses”

McBassi & Company

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PEO clients were over 10X LESS LIKELY to be temporarily closed compared to all small businesses as of July 31, 2020

Only 1.3% of PEO clients were temporarily closed compared to 14% of all small businesses

“This finding reflects the key role of PEOs as knowledgeable partners positioned to help clients maneuver through the numerous new regulations necessary before being able to reopen safely for business”

McBassi & Company

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Permanent closures for PEO clients were LESS THAN HALF the national rate as of July 31, 2020

0.6% of PEO clients were permanently closed compared to 1.5% of all small businesses

“Our extensive work with clients on PPP loans was vital to keeping the numbers of closures down… We saved a large number of jobs and prevented businesses from closing, particularly with our restaurant clientele”

One PEO

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PEOs shined when they were needed most

One thing is clear, COVID-19 has had a huge impact on businesses big and small, and it has greatly affected those working for and in those businesses.

As businesses across the country faced shut downs, the PPP loan program became the life raft many needed in order to stay afloat. PEOs have and will continue to help their clients navigate the program’s complexities, as well as running safe operations throughout the pandemic.

“Helping their clients navigate the COVID-19 legislation has been one of the finest hours for PEO companies. It allowed them to showcase their services, expertise, and systems at a time when their clients were desperate for help.”

Craig Babigian

VP PrismHR

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PEO clients received PPP loans at MORE THAN 2X the rate of the national average for small businesses

65.9% of PEO clients received PPP loans compared to 30.1% of all small businesses

b3lineicon|b3icon-round-arrow-right||Round Arrow Right

98% of PEO clients’ PPP loan applications were successful

As previously mentioned, the loan application process was extremely complex and confusing. Many applications were rejected due to incorrect or missing information. Others tried and gave up because it was too complicated for them.

“PEOs mobilized on an unprecedented basis to guide their clients through the PPP loan application process, providing them the required documentation to secure PPP loan proceeds and to navigate PPP loan forgiveness”

Dan McHenry

McHenry Consulting

“This indicates that PEO guidance enabled many PEO clients to receive and benefit from their loans before many other comparable small businesses”

McBassi & Company

b3lineicon|b3icon-round-arrow-right||Round Arrow Right

More PEO clients received PPP loans in Round 1 of funding ($350,000 or less)

49.7% of PEO clients received Round 1 funding vs. 28.9% of all small businesses

b3lineicon|b3icon-round-arrow-right||Round Arrow Right

PEO clients were over 10X LESS LIKELY to be temporarily closed compared to all small businesses as of July 31, 2020

Only 1.3% of PEO clients were temporarily closed compared to 14% of all small businesses

“This finding reflects the key role of PEOs as knowledgeable partners positioned to help clients maneuver through the numerous new regulations necessary before being able to reopen safely for business”

McBassi & Company

“Our extensive work with clients on PPP loans was vital to keeping the numbers of closures down… We saved a large number of jobs and prevented businesses from closing, particularly with our restaurant clientele”

One PEO

b3lineicon|b3icon-round-arrow-right||Round Arrow Right

Permanent closures for PEO clients were LESS THAN HALF the national rate as of July 31, 2020

0.6% of PEO clients were permanently closed compared to 1.5% of all small businesses
b3lineicon|b3icon-round-arrow-right||Round Arrow Right

PEOs shined when they were needed most

One thing is clear, COVID-19 has had a huge impact on businesses big and small, and it has greatly affected those working for and in those businesses.

As businesses across the country faced shut downs, the PPP loan program became the life raft many needed in order to stay afloat. PEOs have and will continue to help their clients navigate the program’s complexities, as well as running safe operations throughout the pandemic.

“Helping their clients navigate the COVID-19 legislation has been one of the finest hours for PEO companies. It allowed them to showcase their services, expertise, and systems at a time when their clients were desperate for help.”

Craig Babigian

VP PrismHR

b3lineicon|b3icon-round-arrow-right||Round Arrow Right

PEO clients received PPP loans at MORE THAN 2X the rate of the national average for small businesses

65.9% of PEO clients received PPP loans compared to 30.1% of all small businesses

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