Have you outgrown your PEO?
In a company’s early days, engaging a professional employer organization (think TriNet, Sequoia One, or ADP PEO, etc.) is practical. Outsourcing employee management tasks such as employee benefits and payroll allow a small employer to focus on building its core business. But there’s a tipping point when using a professional employer organization (PEO) no longer makes good business sense.
The Tipping Point
PEOs typically charge either per employee or as a percentage of your payroll. As you grow from a small group to a large group employer, the convenience model breaks down. Frankly, you’re paying too much. Because once you qualify as a large group employer, you gain the power to negotiate and reduce your health insurance rates.
With a PEO:
- You are paying a fee per employee per month (PEPM) in addition to what you pay for benefits
- The PEPM cost typically ranges between $50 - $125
- So, let’s say you have 100 employees and your PEPM is $75. This would be an annual cost of $90,000.
5 Inflection Points
Is it time to move off your PEO? If any of these points reflect your business, you’re ripe for a change:
- You’re already a large group employer (see table below)
- Your PEO costs your business more than hiring an in-house HR generalist
- You’re planning for high growth over the next 12 months
- You’re competing for talent, and you need a better benefits package for recruiting
- You’re focused on employee retention/experience (pay and benefits are two top factors driving employee satisfaction)
Large Group Definition
“Large group” is defined at the state level. If your state isn’t listed, then Large Group is defined as greater than 50 employees.
Leaving your PEO
Don’t cancel your PEO contract until you have everything in place. Choosing the right partner will alleviate most of the work and avoid the common pitfalls associated with a transition.
For example, PEOs don’t typically align their contract renewal with open enrollment. A partner will help you navigate the timing, so you don’t have gaps in coverage that could result in needing COBRA. Additionally, your partner should help identify solutions and integrate tech stacks that are no longer bundled.
Why Choose Lumity?
If making a change seems daunting, you don’t have to do this on your own. Lumity specializes in PEO migrations. We’ve helped employers such as Greenhouse make a seamless transition in 8 weeks. We’ll serve as your project manager to guide you, and your employees, through the process.
Data drives better benefits
Our technology, paired with attentive service, can significantly reduce healthcare costs for you as well as for your employees. With some basic information about your business needs and anonymized employee demographics, we can quickly benchmark the results you can expect. We’d like the opportunity to learn more about your business goals. Contact us today to discuss whether we’re the right partner to help you achieve them.