Transitioning from a PEO for Business Growth

In the dynamic landscape of business management, the choices you make can shape the trajectory of your company’s success. As leaders of small to mid-market businesses, you’re no stranger to the balancing act of optimizing resources, managing growth, and nurturing a productive workforce. One decision that’s gaining traction among businesses like yours, growing beyond 25 employees, is transitioning from a Professional Employer Organization (PEO) to an unbundled approach for employee benefits, payroll services (or HCMS), and human resources services. As business revenue and headcount grow, so do the needs and complexity.

If you’ve been contemplating leaving a PEO and exploring better cost and service for HR, benefits, and payroll, now is the time to evaluate alternatives. Human Resources for your business should be more than just payroll and benefits. Recognizing that HR encompasses a strategic spectrum that touches team capacity and performance, risk protection, leadership development, and compensation drivers is key to moving your business’ maturity to another level.

Based on our experience, we’ll delve into the benefits of transitioning from a PEO and why initiating the process now could be a game-changer for your organization.

1. Tailored Solutions for Your Unique Needs

While a PEO offers billing convenience by bundling services, their offerings might not always align perfectly with your business’s specific requirements.  PEOs employ a one-size-fits-all approach when it comes to policy, employee handbook decisions, and employment protocols.  This lessens the influence of your leadership in favor of the PEO’s cultural style.

Questions to ask as you research your HR solution:

  • Is it important that HR guidance is accessible, responsive, and relationship-driven rather than a help desk or generic email support model?
  • Is it important that expertise is broad and deep in all subjects of HR and that the work is proactive and tailored to your specific business?
  • Is it important that your HR partner views employee acquisition and engagement, leadership effectiveness, and risk mitigation as keys to drive profitability?
  • Is it important to handpick partners who specialize in each service area of HR, payroll, and benefits giving you the flexibility and control to choose partners that truly understand your industry, culture, and growth goals?

2. Streamlined Operations

As your business scales, the need for efficiency becomes paramount. By partnering with individual experts that can work together on a comprehensive plan for your employee benefits, payroll, and HR services, you can streamline your operations. Each partner contributes a dedicated focus, enhancing accuracy, speed, and overall effectiveness of your internal workflows. This shift empowers you to allocate resources more strategically and minimize redundancy.

3. Cost Optimization

While a PEO can provide a convenient package for businesses that remain under 25 employees, for larger businesses, they often come with a one-size-fits-all price tag and a lack of transparency in true administrative costs. Cost-effectiveness is compromised when there is a lack of control and flexibility when needing to customize your workforce priorities, benefits offerings, or payroll/HRIS modules.

A PEO frequently bundle services together and charge a flat rate. They charge as a percentage of payroll or as a flat monthly fee per employee. A 2019 study found that the average cost of a PEO was $1,395 per employee (NAPEO). Of course, true costs for PEOs will vary according to the requested services, the cost of insurance, an organization’s size and more. Specifically, in regard to health benefit plans, there is a lack of transparency such as no claims history and no negotiation at the renewal.

In contrast, the unbundled HR services approach enables access to expertise, systems, and data to negotiate and choose competitive pricing for each service. A true HR advisor will help guide you through the evaluation and selection of the benefit and payroll options to fit your business’s needs. The cost savings can be reinvested into growth initiatives or improving employee experiences, giving your business a competitive edge.

4. Enhanced Employee Experience

Your employees are the backbone of your organization, and their well-being should be a priority. A great employee experience is branded by factors such as clear communication, meaningful work, opportunities for growth and development, a positive workplace culture, work-life balance, recognition for achievements, supportive management, competitive compensation, comprehensive benefits, and a safe and conducive physical and virtual work environment. These are all intricate and interwoven workstreams that require tailored, careful HR strategy and execution. Unbundling services allows you to select the best partners to offer smart and responsive HR support, top-notch benefits, and efficient payroll services. This, in turn, enhances employee satisfaction, engagement, and loyalty.

5. Future-Proofing Your Business

Change is inevitable, and business needs evolve over time. You need an approach that future-proofs your business by providing the agility to adapt to changing circumstances.  With an unbundled approach, if your business expands into new territories, enters different markets, or encounters unique challenges, you can pivot your service partners accordingly without undergoing a complete overhaul. 

Initiating the Transition from a PEO: Gathering Proposals

You need a PEO exit strategy. Making the transition from a PEO to an unbundled approach requires careful planning and execution. The timing couldn’t be more perfect to synchronize the transition with open enrollment for benefits starting on January 1, 2024. Getting a plan together now and enlisting the guidance of a true HR Advisor or HR Consultant allows for a well-managed, seamless switch between service providers, minimizing disruptions for your business and employees and ensuring a smooth start to 2024.

Seize the opportunity to get accessible, responsive, and relationship-driven HR services for your business’s unique needs. Your journey toward unleashed potential begins today.

If you have any questions or would like advice specifically for your business, our team of HR experts are here to help.  Contact us through email:; website: or phone: 281-469-1800.  We would love to hear from you.

Graph showing how HR solutions change to unbundled HR services when a business grows in size and complexity
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