Top 10 Reasons to Exit a PEO

August 5, 2021

Is a Professional Employer Organization Model (PEO) still the right choice?

The Difference Card works with many employers-  both within the Professional Employer Organization model and outside of the PEO model.

However, there comes a time when some companies realize they have outgrown their PEO model. The efficiencies of outsourcing no longer outweigh the administrative charges and excess costs involved.

In an effort to bring our clients the most cost-effective health plan possible, we have partnered with Payroll Mart, a payroll and HR Services firm, to bring you the Top 10 Reasons to Exit a PEO.

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Top Ten Reasons to Exit a PEO

    1. 1. Save Money on Administrative Fees

    The typical PEO administrative fees are often more than 3x the market rate for payroll and HR outsourcing services. By choosing the right vendor with Payroll Human Capital Management (HCM) Technology and building the right support team, the Employer is positioned to save hundreds of thousands of dollars each year with they choose to exit a PEO.

    1. 2. Lack of Pricing Transparency

    The PEO model is confusing and not transparent. Employers often feel like they are getting overcharged and most savvy business owners are not comfortable with this arrangement. Lack of fee transparency is one of the leading reasons for leaving a PEO.

    1. 3. Control & Personalization

    Every business is unique and deserves model that represents their company, employees, and situation accurately. These businesses deserve more than a PEO can offer. By breaking from a PEO, business owners are better equipped to control their expenses and can benefit from guidance of advisors at The Difference Card and PayrollMart.

    1. 4. Health Insurance Renewals

    Another disadvantage to a PEO is the high renewal rates. This not only affects the company’s relationship with their current PEO, but can also impact its relationship with other PEO’s down the road. Due to their high renewal rate, other PEO’s will be unwilling to take them on. This leaves the company with little options to exit. The Difference Card is an effective strategy to reduce these health insurance renewal increases, while maintaining the benefits coverage for the organization. The Difference Card can often improve benefits without increasing the premium.

    1. 5. Health Insurance Pricing

    The advantage of utilizing a PEO for Health Insurance Savings is shrinking. The savings gap is rapidly closing, especially if a company experiences high growth with a healthy population. The Difference Card can provide savings to an employer that will minimize the gap between the PEO rates and the community rated marketplace.

  1. “We’ve seen that as a group starts to grow, they eventually get to the point that if they stay with a PEO they end up leaving a lot of money on the table. Between the overinflated payroll admin costs, workers compensation costs, and healthcare costs, it can get inflated very quickly. – Paul Aemisegeo, PayrollMart” 

  2. Watch the webinar: A Guide to Exiting a PEO.
    1. 6. Low-Risk Workers Compensation
  3. When it comes to PEO Worker’s Compensation rates, there is little advantage that a PEO provides. This is due to the fact that white and gray collar companies with a good claims history can match, and sometimes beat, PEO Worker’s Compensation rates.
    1. 7. High-Risk Workers Compensation

     Another drawback of a PEO is that PEO’s are reluctant to take on high risk worker’s compensation. They will write a group and place the Worker’s Compensation in a separate high-risk pool, so it is not on their books and no longer their responsibility. Working with a trusted health insurance advisor is a great way to get access to the same High-Risk Pools without the need for a PEO.

    1. 8. PEO Renewal Tactics

    PEO’s have a tendency to deploy difficult renewal tactics – like renewing at a time during the year when it makes it more difficult for a company to leave or change plans –  such as June. Or, they will choose a quarterly renewal based on your start date rather than annually aligned with beginning or mid-year renewal dates. For example: With an October Renewal, they will try to lock in the client by mid-July and promise a lower administrative fee.

    1. 9. Data Withholding

    Every employer knows that good decisions are based on good data. Access to accurate and detailed HIPPA-compliant census information and claims utilization data is at the core of The Difference Card plan design model. PEO’s are notorious for holding back information from their clients- making it impossible for the employer to access access dependent census information and workers comp claims/loss runs.

    1. 10. Renewal Negotiation Weakness

    Without access to detailed reporting and data, the Employer Group and their Advisor may find it hard to to put together a complete PEO Request for Proposal which would allow them to shop other PEO model options and the Non-PEO Administrative Services Only (ASO) Health Insurance Market.

  4. Ready to leave your PEO?

    Overall, a PEO may not be the best solution for your company.

    If you are considering leaving your current Professional Employer Organization, request a proposal with The Difference Card to see if we can match or improve the benefits you are currently receiving with your PEO.

    Request a Proposal


  1. Watch the webinar: A Guide to Exiting a PEO

  2. Difference Card webinar for exiting a PEO

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