Evaluating service providers is essential to effective business management, and it should include routinely reviewing the relationship with your Professional Employer Organization (PEO). If you’ve considered the alternatives and decided switching to a new PEO will better serve your business, you’ll need to follow a well-thought-out transition process.
Fortunately, this process doesn’t have to be cumbersome or costly. By exploring your options and developing a well-structured transition plan, you can seamlessly switch PEOs and benefit immediately from the new arrangement.
The Benefits of Switching PEOs
If you’ve been working with a PEO, you’re likely familiar with its numerous benefits, including cost savings, greater employee benefit options, and help managing compliance risk. But there’s much more a great PEO can offer your business. Research has found that organizations working with a PEO experience faster growth, lower turnover, and are less likely to go out of business.
As time passes, you may find that your needs have changed, and your current PEO may no longer be the best fit for your business. Once you decide to move to a new PEO, you have an opportunity to find a new provider that offers the following benefits:
- Support for business growth: A new PEO may better support your evolving business by managing your increasingly complex payroll, facilitating hiring across state and international borders, and performing due diligence for a merger, sale, or acquisition.
- Improved cost-effectiveness: A PEO with more favorable pricing can help you realize immediate and long-term savings, for example, with innovative technology that automates HR processes and frees up more of your time. The right PEO may also offer enhanced support for employee well-being, potentially reducing healthcare claims and helping you manage healthcare costs more efficiently.
- Better service: White-glove PEO service provides a single point of contact and proactive HR expertise without call centers and long resolution times.
Top Questions to Ask When Switching to a New PEO
Given the impact on your budget and workforce, transitioning to a new PEO requires careful planning. As you prepare to make a switch, consider the following questions:
What are the services we need from our next PEO?
Determine how your next PEO can address your needs across the entire employee lifecycle, including recruitment support and onboarding, performance management, training, compensation and payroll, and legal compliance. The ideal PEO should offer customized services to match your unique needs and budget.
How do we evaluate the different PEOs out there?
There’s a vast pool of PEO providers to choose from, so it’s best to select one that has experience in your industry and familiarity with the HR challenges you face. For example, if you operate a private equity, venture capital, or fintech firm, a PEO focused on blue-collar industries may not be the best fit.
Other factors you should consider when evaluating PEOs include:
- Breadth of services: Can the PEO offer access to affordable benefits, compliance support, and customized solutions to meet your needs?
- Reputation: What do customers say about their experience with the PEO? Is the PEO’s client retention rate above 90%?
- Financial and compliance history: Does the PEO comply with regulatory, financial, and operational standards, and is it Employer Services Assurance Corporation (ESAC)-accredited?
- Technology: How does the PEO leverage its tech platform to automate workflows and improve the efficiency of HR processes?
- Provider network: Which insurance carriers and partners does the PEO work with?
- Pricing: Does the PEO offer competitive, transparent pricing?
When is the best time to switch PEOs?
The start of a calendar year or quarter is a popular time to switch PEOs, however a company can switch PEOs at any time during the year or quarter. If your company switches PEOs mid-quarter, you want to have a plan to manage any payroll tax transition or health insurance deductible carryovers.
What’s involved in the PEO transition process?
Switching PEOs can be a simple process if you understand the steps to take before, during, and after the transition. Here are the actions you can expect to take once you’ve identified your new PEO and you’re ready to make the switch:
- Evaluate contracts: Before notifying your current PEO, ensure you understand the contract termination clauses. Also, review the services included in the new PEO contract, including pricing for base and add-on services.
- Transfer employee data: Work with your new PEO to ensure the secure movement of employee data from your old PEO.
- Communicate with employees: Notify employees of the change and give them ample time to understand how it will affect their benefits and access to personal HR information, such as pay stubs. If the transition occurs mid-year, explain the credit employees will receive from new benefit carriers for previously paid healthcare deductibles.
Select the PEO That Best Fits Your Business
Aspen HR is dedicated to helping your small or mid-sized business manage HR smarter and more cost-effectively, so you can attract the best talent and have more time to focus on the growth of your business.
If you’re considering switching to a new PEO that matches your long-term strategic goals, discover Aspen HR by speaking with one of our experts.
