So maybe you’ve thought long and hard about your company’s HR and benefits programs, and determined it would be better off migrating from its Professional Employer Organization (PEO).That’s understandable. While PEOs can serve a practical purpose when an organization is young and company leaders lack the time and resources to effectively manage their own benefits, PEOs can become downright burdensome once a company starts to grow. Then it’s time to look at other options that can provide better, less expensive, more highly customized benefits and services.
“Many firms often stay too long with a PEO when an in-house HR team supported by a full-service business insurance broker can provide more services and ultimately achieve the intended goal: attracting and retaining a high-quality, diverse workforce,” advises Jacob Schaaf on Bizjournals.com.
That said, change can be difficult, and moving away from the status quo can be challenging, even when everyone agrees your PEO is no longer effective. The good news, however, is that your transition away from a PEO to an insurance broker can be wrapped up in as few as 60 days with the appropriate strategy and resources.
As such, here are some tips for getting started with your migration away from your current PEO.
- Assemble paperwork that details your PEO’s benefit plans, rates and employer contributions. You’ll also need a summary of your benefits-eligible employees, their dependents and their key demographics.
- Shop around for a broker that specializes in PEO exit strategies. The broker should be able to comprehensively and objectively evaluate your payroll, human capital management and benefit administration systems along with the technology used to enable those functions. It should also bring to the table knowledge and experience in health insurance; business insurance services; workers’ compensation and employment practices liability insurance. If you’ll be re-establishing a 401(k), you’ll need a qualified pension adviser. Your broker should also be able to commit to ongoing advice and counsel before, during and after the transition.
- Learn what you need to do to keep your business compliant and functioning smoothly during the transition process. Your goal should be to keep your employees from experiencing friction or interruption of services in the interim.
- Determine whether you’ll need to add new staff to handle new internal functions, or whether current staff will need training in executing your new plan.
- Note that certified PEOs may be exited mid-year without tax penalties, but you may wish to wait until Jan. 1 to exit a non-certified PEO. Otherwise, employment taxes you’ve already paid through the year won’t count toward your business, so you’ll essentially be double taxed for the year to date.
- Leverage the expertise of your broker when it comes to custom-designing a new benefits plan that fits your needs.
- Plan how your changes will be communicated to employees, including the publication of a new employee handbook.
Leaving your PEO doesn’t have to be long and convoluted, especially if you find a broker who can walk you through the process. Talk to Mike Gazzano, a partner with Lockton Companies, to learn more about viable, cost-effective alternatives to your current PEO.