Spring Forward: Key Considerations for Exiting a PEO

April 16, 2024 | Denise Gelfand

As spring marks a season of renewal and growth, it’s a fitting time for companies to evaluate existing partnerships and strategies, including their Professional Employer Organization (PEO) arrangements. Conducting an annual assessment to determine whether your PEO still aligns with your evolving needs—or if it’s time to explore alternative solutions—is a smart way to safeguard your business and ensure you’re headed in the right direction. In this article, we delve into the important considerations when contemplating a PEO exit.

Assess the Effectiveness of Your PEO

Evaluate whether the PEO’s services still align with your current business goals and if you’re receiving the level of support and value you initially sought. Just as you declutter items in your home that no longer serve a purpose, it’s essential to reassess whether your PEO is still serving its original purpose effectively.

Consider whether your PEO has adapted to your company’s changes or growth. If you find that certain services are underutilized, no longer match your evolving requirements, or costs have increased significantly over time, it may be time to explore alternative solutions.

Take Inventory of Services & Costs

Much like decluttering a space, it’s crucial to take inventory of the services and costs associated with your PEO. Review contract terms to understand fees and charges so you can properly assess whether you’re getting the most bang for your buck.

Conduct a comprehensive review of each element to identify areas of inefficiency or unnecessary expenditure. Scrutinize the contract terms to understand the breakdown of fees and charges. This can be challenging due to the bundled bill rate and overall lack of transparency. You may be paying for services you never use, making unbundled solutions likely more cost-effective.

Identify Unbundled Solutions

Research alternative HR solutions that align with your business goals and fill in the gaps caused by any shortcomings of your current PEO arrangement. Evaluate factors such as:

  • Cost
  • Service offerings
  • Industry expertise
  • Technology capabilities
  • Cultural fit

With the rapid and constant evolution of HR technology, unbundled solutions offer greater flexibility and customization for a company’s unique needs. By selecting services aligned to your specific requirements, you can create a customized HR solution that maximizes value for your workforce while minimizing unnecessary expenses.

Develop a Transition Plan

Develop a comprehensive transition plan outlining the steps and timeline for exiting your PEO, beginning with a thorough contract review. Assign responsibilities to key stakeholders within the organization and establish clear communication with both the PEO and the new service providers. 

Consider factors such as employee onboarding, performance reviews, payroll processing, workers’ comp, benefits, benefits administration, and data migration. Collaborate with a PEO exit specialist, like PostPEO, for expert guidance to ensure a smooth transition process.

Evaluate Compliance and Regulatory Needs

Identify compliance and regulatory requirements with federal, state, and local regulations governing employment and HR practices. Consider factors such as tax filings, employee benefits administration, wage and hour laws, HR compliance, and workplace safety.

From handbook policies to tax credits, there are many sensitive areas that must be meticulously managed through an effective exit strategy.

Communicate with Stakeholders

Facilitate clear communication with all stakeholders throughout the PEO exit process. Inform employees about the reasons for the transition, how it may impact them, and any changes they can expect. Have a timeline and engage key decision-makers within your organization to ensure alignment and support for the transition plan.

By fostering open dialogue and transparency, you can minimize resistance to change and facilitate a more seamless adoption to new HR solutions. Transparency not only builds trust and confidence, but also ensures a smoother transition process.


As you embrace the arrival of spring, consider the importance of evaluating your PEO provider relationship. By regularly assessing its effectiveness and efficiency, reviewing services and costs, exploring unbundled solutions, addressing compliance needs, and maintaining open communication with stakeholders, you can pave the way for your business’s success. Like the growth and opportunities spring brings, transitioning away from a PEO opens the door to new possibilities and tailored solutions that better align with your evolving business needs.

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