Shape Your Business Strategy Based on Business Priorities, From Employee Retention to HR Outsourcing

After several years of uncertainty, business and HR leaders are beginning to see the return of growth opportunities and are taking steps to make the most of a more stable business environment. They remain optimistic about their success in the next 12 months, despite the persistence of a few economic worries from previous years.

Our Priorities of Business Leaders survey, conducted with Bredin from August 1 through August 29, 2023, determined the top HR management priorities and challenges of 600 U.S. companies with 5–500 employees. We found that 76% of respondents anticipate higher revenue in the next 12 months and 9 in 10 expect to add headcount.

We also learned that these business leaders plan to use HR technology and tools to help them find and keep customers, build the most effective teams, and simplify their operations to achieve their goals. They’re looking to outsource HR tasks and expand the use of artificial intelligence (AI) to save time, money, and focus more on their key objectives.

Here are some of the insights we gained from our survey that you can consider using to inform your business strategy over the next several months.

Businesses Are Challenged by Economic Headwinds

With prices remaining high and the labor pool depleted in certain industries, businesses are wary of macroeconomic conditions. The top business challenges cited by respondents overall as extremely or very challenging included rising interest rates (65%), inflation (63%), and the threat of an economic slowdown (63%), in other words, they’re worried about the economy.

Businesses of different sizes reported slightly different top challenges. Those with 20–49 employees cited finding and retaining qualified employees as their number-one challenge, while those with 5–19 and 50–99 employees listed winning new customers and staying current with technology among their top challenges, respectively.

HR Challenges and the Complexity of Multiple Locations

Risk management (56%) followed by leadership development (54%) and attracting talent (53%) were the top reported challenges in human resources.

Risk management and compliance can become even more difficult when a business has multiple locations or employees working in different states. Here is what those businesses found to be the most difficult compared to the overall top HR challenges.

Finding and Retaining Talent Is a Top Priority

To maintain and grow their workforce in the current economic environment, business and HR leaders are prioritizing employee retention, developing leaders, improving total rewards, and offering competitive benefits. The top reported people management priorities included improving career planning and skill-building (54%), evolving benefits to attract and retain high-quality employees (53%), and improving performance management (48%).

Improving benefits (46%) was their top overall tactic for retaining employees, while their greatest challenges to managing their compensation and benefits program varied by business size.

• 5–19 employees: Cost of benefits
• 20–49 employees: Aligning wants with employee benefits
• 50–99 employees: Regulatory compliance
• 100–500 employees: Compensation and benefits administration

HR Management Costs a Significant Amount of Time and Money

Sixty-four percent of companies reported spending over 570 hours a year on HR administration, equivalent to more than 25% of the average workweek for an individual, and the largest businesses in our survey reported HR administration costs as much as $350,000 annually.

In fact, businesses stated they are spending an average of 70% more time on HR administration than last year across all company sizes.

According to the leaders in our survey, the most time and money was spent on tasks such as:

• 401(k) or other retirement plan management — businesses in our survey reported spending the most time managing their retirement plan (an average of 80 hours annually).
• Benefits administration — benefit costs rose 4% in the 12 months ending September 2023.¹
• Payroll processing — these businesses reported spending an average of 76 hours per year is on payroll processing.
• Managing multiple locations — close to $300,000 is spent annually on HR administration costs according to the businesses surveyed with locations in more than one state.
• People management — employee career planning and skill-building are among these businesses’ top stated priorities, costing an average of 10% of their time according to the respondents.
• Maintaining regulatory compliance — failure to comply with federal and state regulations can cost businesses hundreds to thousands of dollars depending on the infraction.

The Artificial Intelligence (AI) Opportunity

AI has the potential to be a powerful tool for businesses when used with care. Overall, leaders reported being somewhat enthusiastic about AI as an opportunity. According to the respondents, it is currently used most often to:

• Automate workflows (41%)
• Grow sales (39%)
• Provide business intelligence/analytics (37%)

As the use of AI continues to grow, these businesses plan to use it in the next 12 months to:

• Support customer service/experience (54%)
• Strengthen IT operations/data security (53%)
• Screen candidate resumes and/or applications (52%)

More Businesses Plan on Outsourcing HR Administration

With so much time and money tied up in HR administration, many businesses are looking to outsourcing as a way to simplify the process and save both time and money. Nearly 80% of respondents were very or extremely likely to outsource one or more HR admin tasks in the next 12 months, an increase from 17% in 2023.² Some of the tasks they were extremely or very likely to outsource include payroll processing (45%), recruiting and onboarding (38%), HR management (35%), employee benefits (35%), and 401(k) administration (25%).

Benefits from outsourcing HR administration reported in our survey include:

• Improved employee retention
• Increased productivity
• Improved regulatory compliance
• Better analytics and reporting
• More effective employee recruiting

The top benefit varied by business size:

• 5–19 employees: Improved employee retention.
• 20–99 employees: Increased employee productivity.
• 100–500 employees: Better analytics and reporting.

Currently, 51% of these businesses outsource at least some aspects of HR administration to solutions including a Professional Employer Organization (PEO). A PEO is an all-in-one HR, payroll, and benefits solution that helps businesses save an average of 27% annually on HR-related costs.³

PEOs provide services to 173,000 small and mid-sized businesses, employing 4 million people.³ Roughly three in five respondents currently not using a PEO plan to use one in the next 12 months, with little variation by company size.

Business Growth and Efficiency Starts With Smart HR

Business leaders have access to more tools, technology, and guidance than ever to help them simplify HR, support their teams, and take advantage of new opportunities, such as AI. Make the most of this exciting time by working with Paychex to access expert HR advice and tools that help make it easier to manage rising benefits costs and time-consuming HR tasks. Paychex offers HR guidance and all-in-one technology to help you meet your challenges and achieve your priorities, from finding and keeping talent to managing benefits, payroll, risk, and compliance.

To get the complete results of our survey, including breakouts by industry and demographics, download the Priorities of Business Leaders report, covering business outlook and challenges, HR challenges, the artificial intelligence (AI) opportunity, people management, HR management, and PEO awareness and usage.

¹ U.S. Bureau of Labor Statistics, 2023.

² 2023 Priorities of Business Leaders Report, Paychex.

³ NAPEO.org.