insight
Small business talent challenges: How a PEO can help
A PEO (professional employer organization) like ADP TotalSource® provides small businesses with HR support that can help alleviate talent challenges by:
- Attracting the right talent for your business
- Streamlining the recruiting and hiring processes
- Improving the onboarding experience
- Building an upskilling program that develops employees and improves retention
Along with that, partnering with a PEO gives small businesses an opportunity to access benefits often only larger companies can access, further helping smaller businesses compete for talent. PEOs will also assist by providing guidance with local, state and federal employment laws as you add employees and expand into new states, something small businesses can have trouble tracking on their own.
Table of Contents
- How do small businesses attract top talent without a big budget?
- Why do candidates drop out of the hiring process?
- What’s a simple onboarding plan for a very small team?
- How do we retain and develop people once they’re here?
- What does a PEO change for talent (and what do we still own)?
- PEOs by the numbers: How they help with talent challenges
- Want to learn more about PEOs and talent?
How do small businesses attract top talent without a big budget?
Today, establishing yourself as a business with a clear employer value proposition (EVP), focusing on mission, culture, purpose and/or transparency, can make you stand out in a crowded market. Many small businesses are under the impression that they simply can’t compete for talent. This is far from true, as attracting top talent doesn’t necessarily require a huge budget.
Keep in mind these essentials as you build out your talent program:
- Make sure you’re offering “table stakes” benefits like health insurance, 401(k) retirement plans, paid time off (PTO), employee development and more
- Post anticipated pay ranges and advancement pathways in all job listings
- Promote flexible scheduling that emphasizes work-life flexibility, which can be a critical differentiator for smaller teams
While this may seem like a lot, it’s the going rate for today’s job market. And partnering with a PEO can help with your talent strategy, as you’ll get the benefits buying power and access to HR expertise that can help build out your EVP and assist with recruitment.
Why do candidates drop out of the hiring process?
A poor recruitment experience with a company can often lead to candidates withdrawing from the hiring process. This usually comes down to factors within a business’s control, such as lack of transparency or structure, inconsistent timing and possibly an overall lack of professionalism. As with many things, this can all come down to communication.
Some key steps to reduce candidate drop-off are:
- Posting accurate job descriptions with clear language
- Establishing 48–72-hour turnaround times as candidates move throughout the hiring process
- Keeping managers available throughout the process and ensuring that they are well prepared for interviews
- Using light scorecards or structured question sets to help promote consistency
- Making faster offers to candidates deemed worth proceeding with
A PEO can help to streamline and professionalize the hiring process in ways like automating job postings and offer letters, performing background checks, accelerating onboarding and helping you deliver a positive experience for candidates.
Explore Onboarding Checklist for New Employees
What’s a simple onboarding plan for a very small team?
Building an onboarding structure that can be repeated and refined helps to save time for your business and your employees, while building trust amongst new hires. This is vital, as new hires may get a lasting gut reaction towards your business over the first several days. Use this simple framework as part of a clean onboarding plan:
- Before Day 1: Begin employee paperwork (such as, I-9, employment tax forms, direct deposit) and set up records; alert team to new hire; stay in touch with the new employee to build comfort and connection
- Days 1–2: Continue to build a connection with the new hire; complete pending paperwork and any remaining administrative work; introduce the hire to your team; designate a guide or “work buddy” for the employee
- First 30 days: Establish clear goals, review job responsibilities and perform weekly check-ins
- At 60 days: Discuss progress, hurdles and opportunities
- By 90 days: Celebrate milestones and further outline next steps
Most PEOs handle the administrative side of onboarding, automating crucial paperwork, filing and registration, while the business itself will have to focus more on forming a connection, introducing the work and building an inclusive culture.
How do we retain and develop people once they’re here?
Getting a top-tier hire in the door is one thing but keeping them as part of your business for the long run is another matter entirely. Employees are human; they’re most likely to stay where they feel valued, supported and can grow.
Start simple to show your appreciation for the employee and share potential pathways with them
- Schedule regular 1:1s with managers as a time to touch base on progress, provide feedback and more
- Recognize all wins, big and small, early and often, to show the employee their good work is being seen
- Offer a training program that keeps employees invested and prepares them for leadership roles
- Nurture a positive culture where employees feel trusted and respected
- Create simple development and succession plans to help employees see where they might go next
- Crucially, build a learning and development program that gives employees the opportunity to upskill and expand their knowledge bases
PEOs are excellent options to help with employee retention, as they extend your HR capacity through learning and development planning and tools, succession planning, best practices, and guidance about benefit plans that support employees and build loyalty. Improving retention rates doesn’t happen overnight; it’s part of a structured, long-term effort to create an employee-focused workplace, and a PEO can significantly help with that.
What does a PEO change for talent (and what do we still own)?
PEOs can help reinforce your company culture, not replace it. A PEO, such as ADP TotalSource, won’t “take over” everything in regard to talent at your business, but will help take on your administrative burden and handle talent questions you may have, giving you more time to focus on your employees and your culture.
In a PEO, this is how responsibilities are typically divided:
| Talent Function | You | PEO |
|---|---|---|
| Recruiting & Hiring Decisions |  You own |
N/A |
| Employee Offer Letters & Payroll Setup | N/A | PEO manages |
| Choose Employee Benefit Offerings | You help |
PEO helps |
| Employee Benefits Access | N/A | PEO manages |
| Benefits Administration | You help |
PEO helps |
| Talent Compliance & HR Policy Support | N/A | PEO manages |
| Performance, Engagement & Culture | You own |
N/A |
| Employee Engagement and Retention Strategies | You help |
PEO helps |
Think of a PEO as your go-to partner for HR expertise and behind-the-scenes employer administrative tasks in regard to talent, giving you more freedom to handle the more human, face-to-face aspects of employee management.
PEOs by the numbers: How they help with talent challenges
Small businesses that partner with PEOs have been proven to see concrete improvements for their business. Data from a 2024 NAPEO study shows that businesses that partner with a PEO see improved employee retention numbers, as these clients report turnover to be 12% lower than non-PEO employers. The same study shows that employee growth rates for businesses in a PEO partnership are double those of businesses who do not use a PEO. These statistics are proof of how PEOs can positively impact the hiring, growth and stability of small businesses.1
Want to learn more about PEOs and talent?
Bringing a top-notch talent strategy to your small business shouldn’t feel like a massive lift. A PEO like ADP TotalSource can bring the right administrative support, tools and guidance to your business, helping you to find, hire and retain exceptional employees that make your business stand out. Read more about how ADP TotalSource helps small businesses like yours:
- Understand how ADP TotalSource supports your employees
- See all ADP TotalSource features
- Read how one Florida business What is the cost of a PEO?
- Choosing the right PEO for your business
Explore Employee Onboarding Guidebook
FAQs about PEOs and talent challenges
Can we speed up hiring without losing quality?
Yes, by establishing a standard process, you can improve time-to-hire rates. Consider standardizing job descriptions, establishing 24–72-hour SLAs, bringing a consistent structure to interviews, and automating scheduling and follow-ups. While a PEO won’t own your recruiting and hiring from start to finish, the structure, automation and guidance they provide can drastically quicken the process.
Does a PEO help recruit or just process paperwork?
While a PEO can offer some limited guidance during recruiting, it does not act like a recruiting agency, and decision-making will always fall to the business itself. PEOs are primarily in charge of and can assist with the HR administrative infrastructure once you’ve hired an employee, including onboarding paperwork or app, payroll, employee benefits, employment tax filings, HR compliance, compliance guidance and resources, and more. This helps to keep the process running smoothly and efficiently. Some PEOs also have applicant tracking system capabilities allowing their clients to post jobs and track applicants through the recruitment process, offer letters, and background checks.
Will a PEO replace our ATS or managers?
A PEO does not and will not replace managers or recruiters. Your team will spearhead the hiring process, while a PEO will help to reduce the HR administration burden so you can keep your focus on people, not paperwork. Some PEOs like ADP TotalSource also have applicant tracking system capabilities that allow their clients to post jobs and track applicants through the recruitment process, offer letter and candidate acceptance.
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1 https://napeo.org/wp-content/uploads/2025/03/2024-white-paper-final.pdf
