Once you are in a PEO contract, there are substantial considerations involved in getting out. You must have a checklist and some guidance in the timing and proper replacement of benefits, payroll, and taxes. There is hope for a smooth transition if you prepare early, develop a competent team of professionals, and prepare a good implementation plan.
First and foremost, the benefits of moving away from a PEO should clearly outweigh the current state of affairs – from a customer service, expertise, and overall cost perspective. Clients we have helped move away from a PEO have saved anywhere from $50,000-$150,000 in a given year! Read more about one of these in this case study. Your business may or may not have the same options for cost savings in making a transition – that’s why fully evaluating your options is most critical, before providing notice to exit.
Once you’ve decided that moving away from a PEO is right for your business, the following are issues we can help you incorporate in your PEO exit strategy:
If you terminate mid-year, the PEO will have to complete final taxes up to that date and provide W2’s for that period.
Your HR Consultant will recommend a new payroll processor and time the transition so the new processor can provide uninterrupted service.
You will need to issue or reissue an employee handbook.
Your HR Consultant will recommend a good benefits broker and begin the process early enough to choose the best package of benefits for your company.
In most cases, the PEO will be responsible to maintain COBRA for qualified participants prior to your termination. This is a good thing because bringing COBRA participants into a situation where the carrier might see you as a start-up could create problems.
Each employee may have to arrange transfer of their PEO 401(k) into an individual IRA and if rules permit, later transfer it into your 401(k) once you have established one.
Be sure to carefully check the PEO’s policy regarding “leave” before signing up or terminating.
If you are considering moving away from a PEO contract and “unbundling” human resources, payroll, and employee benefits, contact us for a no-cost consultation. We have experience in “unbundling” and in most cases provide our clients with significant cost savings, improved support, and streamlined HR, benefits, and payroll services.
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