How Do I Know When I’ve Outgrown My PEO?

If you’ve been working with your PEO (Professional Employer Organization) for a substantial period of time, it might be difficult to imagine “the long road” of terminating the partnership, conducting all associated accounting/housekeeping, and then reconfiguring your in-house HR staff to make the transition forward seamless. Fortunately for you, we’ve been reflecting on the PEO conundrum for quite a while recently and encourage you to read our article on “How to Smoothly Transition Away from Your PEO.” Also, the end of this article offers some practical, pain-free (and actually free) options for approaching this transition intelligently and strategically.

But first, let’s see if any of this sounds familiar. These are just some of the telltale signs that you’ve outgrown your PEO:

• You intuit (or can concretely confirm) that your PEO is following a “one-size-fits-all” approach that doesn’t adequately address or complement the changes happening within your business. For instance, perhaps your business is growing or diversifying its offerings but your PEO’s service offerings remain best-suited for a small business, startup, or even another unrelated industry.
• While you’re noticing this first issue, you also detect (as one often does) the increased cost of your PEO: a direct result of the growth of your business. Remember that PEOs essentially absorb a set percentage of your profits, so the more you make yearly, the more you pay yearly.

• If the performance of your PEO decreases while the overall cost increases, you begin to question the value and necessity of keeping your PEO partnership intact.

• As financial and strategic considerations paint a less-than-flattering view of the situation, you might also be noticing issues in terms of HR or administration services. We’ve covered these potential issues in a related article. To summarize, it’s not uncommon for “outsourced” HR through PEOs to lead to the following problems: slow or ineffective employee onboarding; a deterioration in company culture due to the outsourcing of HR; slow or delayed access to necessary HR documents; and unconsolidated/disorganized institutional knowledge that could serve as valuable data than enhances your business.

Taken in sum, these issues amount to a serious problem and cause for reflection. Remember that you shouldn’t face this dilemma without talking to the people this most affects: your employees and existing HR staff. Dedicate meaningful time to talk with your employees about their evaluation of the pros and cons of the existing PEO partnership. It’s possible that they’ll voice their appreciation for the arrangement, but it’s also possible that they will share valuable insights about how the PEO partnership has negatively impacted company culture, created increased turnover among new employees, complicated administrative tasks, or generated other issues you weren’t anticipating. If their feedback (qualitative) matches your own financial or strategic misgivings (mostly quantitative), it might be time to consider ending your PEO partnership and heading to greener pastures.

How Payday Can Help You Determine Which PEO Decision Is Best for Your Business

Although we offer extensive services to assist with Payroll, HR, and Compliance Solutions, we understand that ending a PEO contract feels a bit daunting. That’s why we recommend you first capitalize on our free PEO Migration Checklist. 

Along the way, were here to provide the information you need to make a final PEO decision and determine whether Payday is best suited to help you with this transition. Our overriding goal is to understand your specific situation, including which HR tools your company truly needs. We’re excited to work closely with you to identify which approach best suits your organization (not your industry as a whole, or a past version of your business). We’re invested in offering you services that integrate seamlessly with your business and help you secure the future you’re seeking for your company.

To start the conversation please contact us today.