Did you know that 98% of businesses that work with Professional Employer Organizations (PEOs) would recommend one to a colleague?
But what happens if you're in that 2%?
Most business leaders that feel uncomfortable with their PEOs results have outgrown their PEO. And that's a good thing! Your PEO should help you grow. But that bootstrapping human resources consultant you partnered with during your startup phase may not have the strategies, processes, or capabilities to help you succeed with your business now.
So, how do you know when it's time to pass the baton to another PEO?
4 Signs That It's Time to Move On
1. Your PEO Only Offers All-Inclusive Packages
This is, by far, the most common issue your business will face as it grows with a PEO. Most PEOs only offer one service package that includes everything from HR administration to benefits.
As you grow, you'll probably shed some of those needs. If your PEO isn't willing to provide a la carte services, you will be overpaying. The only required services for a PEO should be payroll as well as benefits or workers compensation.
2. Your PEO Has Too Many Clients
Choosing a PEO with thousands of clients is not always a good thing. Typically, this happens to businesses that choose national PEO chains. These massive organizations certainly have experience and fancy offices, but they don't always have your best interests in mind. If you feel more like a number than a partner, it's time to consider other options.
3. Your PEO Is More Focused on Their Goals Vs. Your Growth
Businesses rely on their PEO to help them grow and tackle their HR headaches. At the same time, the PEO relies on the business to grow and evolve. However, your PEO should never focus on their growth over your growth. But some PEOs are so focused on achieving the next goal that they miss out on the bigger picture. You should switch PEOs if you ever feel like their needs come before your needs.
4. Your Benefits Have Lost Their Competitive Edge
The benefits landscape is constantly evolving. Each year, rates, package details, and considerations on benefits packages change. In addition, new competitive packages pop up. Companies rated highly on benefits see 53% lower attrition. Inadequate benefits are the reason that 50% of employees leave their company.
Benefits are feast or famine. If you feel like your benefits are more famine than feast, it's time to change PEOs. You should also look out for workers' compensation insurance as well. If your PEO isn't giving you world-class workers' comp insurance, consider other options.
You Have to Part Ways to Grow
Once you've decided that it's time to move on to greener pastures, you have plenty of choices at your fingertips—time to narrow those choices down. You should start by checking the certifications of any PEOs you're considering. Only 15% of PEOs are certified by the IRS. This certification isn't an endorsement by the IRS. Instead, it showcases that a PEO adheres to specific standards and services.
Choose a PEO that works with you. Over time, you may find that certain HR components are time and productivity saps for your internal teams. Your PEO should be able to rapidly take over those needs without forcing you to pay for unnecessary services.
Are You Ready to Evolve?
Many PEOs are built to only handle startups. But the value of PEOs shouldn’t stop growing when you start growing. A PEO should still be able to help you with critical functions like payroll and tax remittance to eliminate internal errors and reduce HR strain. When your company feels like it's outgrown its PEO, it's time to find a best-in-class, IRS-certified PEO with flexible service options.
Want to know if your current PEO is providing best-in-class services for you? Download our "Grade Your PEO Scorecard."
The IRS does not endorse any particular certified professional employer organization. For more information on certified professional employer organizations, go to www.irs.gov.
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