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What You Need to Know and Do to Successfully Switch PEO Providers

by Andrew Sowell, on March 27, 2023

Partnering with a Professional Employer Organization (PEO) greatly benefits many small and medium-sized businesses. While PEOs are a vital partnership to have as a small or medium-sized business owner, there can come a time to consider switching PEO providers. To ensure a smooth, successful transition to another PEO, there are important steps you need to take.   

When switching PEO providers, steps that should be followed include:

  • Assessing issues with current PEO

  • Researching and comparing capabilities of new PEOs

  • Working through a transition plan

  • Notifying employees of the upcoming change

Changing PEO providers can be a challenging experience, but our seven-step guide can help you avoid potential mistakes and change your experience from potentially frustrating and difficult to simple and hassle-free.

When is the Best Time to Leave a PEO or Switch Providers?

Before getting into the specific steps you should follow, it’s important to address one of the most common questions business owners have when it comes to switching PEO providers. When is the right or best time to switch?

To avoid tax complications, many businesses switch to a new PEO on January 1. However, you should also consider changing PEOs at the beginning of a quarter (April 1, July 1, October 1). Switching PEOs at the beginning of a quarter still offers valuable tax benefits while also providing a likely easier transition since there are fewer changes taking place compared the beginning of a new year.

Another detail to consider when choosing a new PEO is your organizations benefits renewal date. Since employee benefits are a major aspect of a PEO’s offering, this may be one of the primary reasons you’re looking to switch. If this is the case for your business, it’s wise to begin contacting new PEOs 60-90 days before your renewal date occurs. This timeframe gives you adequate time to communicate to with other providers to find out what your options are.

What Steps Do I Need to Follow When Switching to a New PEO?

Switching to a new PEO provider can be stressful without a strategic and organized plan. We’ve worked with numerous clients that have come to us from other PEOs and because of that, we’re experienced in terms of what steps will make the process easier for you.
Below, we outline the steps you should follow when switching PEO providers.

1. Outline the Issues with Your Current PEO That Are Causing You to Switch Providers

There can be various reasons why you are considering switching to another PEO provider. Listed below are some common issues of why you might want to switch:

  • High benefit renewals

  • Lack of service/responsiveness from the PEO

  • Current PEO’s technology isn’t up to par

  • Lack of HR expertise

  • Moving to a state that your current PEO isn’t licensed in

  • Personnel changes

  • New policies or service models

No matter what reasons from the list above, or otherwise, be sure to compile this list and provide specific details if possible. This list will serve as your “must-haves” when talking to other PEOs to determine their fit as a potential replacement for your organization.

2. Research, Compare, and “Try Out” Other PEOs

When you begin researching other PEOs, it’s important to discuss any of the issues you are having with your current PEO to ensure they don’t have the same problems. Be sure to elicit specific examples of how your concerns will be addressed. Don’t settle for “Sure, we can do that” responses.

For example, if you are unsatisfied with your current PEO’s technology platforms, ask to schedule a tech demo to see if they offer the level of service you are looking for. If you’re frustrated with a lack of communication from your current provider, use the research process as a test. How quickly do you get a response when contacting potential PEOs? This will serve as a good indicator of their level of service if you end up becoming a client.   

3. Come to an Agreement with Your New PEO

When you have decided to officially switch to a new PEO, you should expect a documented plan from them to make the transition as easy as possible. Your new PEO may also have a transition team dedicated to leading you through the process to ensure the change is efficient and accurate.

4. Gather the Necessary Resources and Get Ready for the Transition

Once you have received the documented plan from your new PEO, you should gather all the necessary information before letting your current PEO know you are switching. This is a precaution in case you lose access to the data once your current PEO knows you’re leaving. During this step, your new PEO should do all the heavy lifting while you gather all the information.

5. Notify Your Existing PEO of Your Intent

Each PEO agreement is different regarding the time requirement and how much notification you need to give l before switching. You can expect the time to be between 30 and 60 days. With that in mind, review your agreement and notify your existing PEO within the required timeframe that you plan to end the contract.

The termination dates and new PEO start dates should be strictly coordinated with your new PEO’s implementation team to make sure there will not be any lapses in coverage. Ideally, your new PEO has a transition team that assists you in communicating some of these details with your previous provider.

At LandrumHR, we have a dedicated transition team that providers you an email template, as well as other tools to communicate with your old provider. Our goal is to make the process as smooth and hassle-free as possible.

6. Inform Your Employees About the Upcoming Change

One of the most challenging parts of a PEO transition can be the experience for your employees. Change is difficult, even when it’s to a better system. Communication is extremely important in this step.

It’s essential to talk to your employees about the change to make them feel at ease with the transition. Your new PEO can also help with an employee announcement to inform your staff of the type of support they will receive.

Our implementation team at LandrumHR is proactively involved throughout the entire process. We communicate with your employees before the change occurs to ease any discomfort or concerns. During the onset of the switch, we provide a valuable orientation to all employees where we walkthrough our role, the new programs that employees will be accessing, and provide opportunities for employees to ask questions.

7. Check in With Your New PEO Regularly Before, During, and After the Change

As the transition can take 30 to 60 days, check in with your new PEO regularly to ensure everything is ready for the official start date. Ideally, your new PEO will maintain regular communication with you and provide status updates throughout the process without you needing to initiate contact.

Even after your new partnership has taken effect, keep a close eye on potential issues. Payroll, benefits, and timekeeping discrepancies can appear during this time as a result of the change in systems. Be sure you and your employees have easy access support so that any problems can be quickly resolved.

Ready to Switch to LandrumHR?

If you are thinking about switching PEOs or partnering with one for the first time, not only can we help, but we make the process simple and easy. Our team works with you every step of the way and keeps you informed to ensure you and your employees are satisfied.

We are a certified PEO with over 50 years of experience helping small and medium-sized businesses. We offer an extensive array of PEO services such as a robust health insurance package, HR Technology & Expertise, Workers Compensation Insurance, and employment law and regulations assistance to help you protect and grow your business.

Contact us today to learn more about how we can help make the business of people easier for you.

Andrew Sowell

Andrew Sowell currently serves as the Director of Business Development for LandrumHR. He received his degree in Business Marketing from Florida State University and has an extensive background helping business owners solve problems that impact the bottom line. His passion is consulting with business owners and highlighting areas where the company can save money, increase profits, improve employee engagement, and protect the business from compliance issues.

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