NAPEO study: Businesses using outsourced HR faring better throughout the COVID-19 pandemic

October 10, 2023

Businesses that utilize an outsourced HR provider generally have fared better throughout the COVID-19 pandemic than others.New research from independent analytics and research firm McBassi & Co. supports the notion that outsourced providers played key roles in helping small and medium-sized businesses navigate pandemic-related challenges and legislation.The National Association of Professional Employer Organizations (NAPEO) commissioned this study to determine the effect outsourced HR providers had on businesses from early 2020 through July 2021.The McBassi study examined business operations, changes in employment and success in accessing government support initiatives, such as the Paycheck Protection Program, relative to comparable small businesses.According to the research, businesses that outsource their HR functions are:

  • 82 percent more likely to have their business operations back to normal – or better.
  • 71 percent more likely to have received a PPP loan in 2021. Employer service providers helped their clients provide the necessary information to be able to obtain that type of funding, which for many businesses served as a lifeline to maintain operations.
  • 18 percent more likely to have had their 2020 PPP loans forgiven. Employer service providers also helped their clients complete the necessary loan-forgiveness application and certify the loan was put toward authorized uses.
  • 58 percent less likely to have permanently closed. The study examined closure rates for businesses with 10 to 99 employees.
  • 32 percent less likely to have experienced a negative overall effect on business related to the pandemic.

Additionally, businesses that utilize an outsourced provider have experienced a 6 percent growth in employment since early 2020. Comparable businesses that don’t work with an employer services organization collectively have experienced a 1 percent decrease in employment over the past year and a half, according to the McBassi research.The study found the overall rate of employment change for employers with 10 to 249 employees from January 2020 through June 2021 was a 6 percent decline, with most of that drop occurring in the first half of 2020.These figures were tabulated based on U.S. Bureau of Labor Statistics data on labor and hiring turnover.Hiring challengesIt’s no secret that finding qualified job candidates is a challenge for businesses. However, recruiting challenges seem to be more problematic for businesses that work with an employer services organization.Why is that? Consider businesses that utilize outsourced HR tend to grow faster than those that don’t. Therefore, according to the McBassi research, businesses that utilize outsourced providers are more likely to have job openings – a larger number of openings in some cases – than businesses that are growing at a slower rate.Unfortunately, these challenges are expected to continue in the short term as people move back into or out of the workforce and people search for different job opportunities.Note: This study specifically examined the role Professional Employer Organization (PEO) providers have on small businesses. Syndeo provides services for some clients under the PEO designation, while others are classified under the Administrative Services Organization (ASO) umbrella.   About us: As the Heartland’s leading employer services company, Syndeo partners with local business owners to help them minimize risk, improve efficiency and maximize profitability allowing them the freedom to focus on growth and fulfilling their mission. Syndeo fulfills its mission by taking on all of the HR responsibilities for our clients’ workforce, including employee relations, benefits, risk management and payroll. Winner of the 2020 and 2021 Best of HR Services Award through ClearlyRated for providing superior client service. See our ClearlyRated profile here.

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