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Leaving a PEO? Here's What You Need to Know.

Professional Employer Organizations (PEOs) are organizations developed to help companies outsource two key components as they relate to their workforce; risk and administrative.

Under the agreement, employees are moved to the PEO’s Federal Employer Identification Number (FEIN) number and then the PEO takes on daily tasks like payroll, employee benefits, worker’s compensation, risk/safety management, training and development. The PEO also takes on the liability of compliance associated with worker’s compensation, payroll, employee health benefits and employment practices and liability. This shift of the employee produces what is often referred to as co-employment.

For many small employers, the idea of outsourcing their back office and the risk associated with it is a welcomed concept. When you throw in large group benefits, due to the PEO’s buying power, it can seem like a win/win for the organization.

However, more often than not, employers are quickly disenchanted due to poor systems, poor organizational reporting and general transparency and control over their own organization.

I often tell employers that it is simple to snap your fingers and “turn the lights on” in the PEO. In essence, the PEO plugs the employer and employees into their existing systems and voila… the lights are on. At that point, all benefits and processes are moved to the PEO.

In a vast contrast, when you prepare to leave a PEO, it can be a huge undertaking. An organization will need to have a payroll and HR system built and ready, employee benefits implemented and ready, as well as worker’s compensation and employment practices and liability insurance in place too.

Before leaving a PEO, it’s critical to take into consideration where the 401K exists and whether or not you will need to pry that out of the PEO as well. Do you have “run-out” periods associated with Flexible Spending Account (FSA) and commuter benefits? Do you have a detailed and phased communication to the employees about the transition?

Our client executives at OneDigital are experts on employee benefits, but we are also problem solvers. In many cases, we work with our prospects to perform a detailed cost analysis in an effort to build transparency around the costs associated with their PEO. Once a prospect decides to leave the PEO, our team can vet potential human resource management system (HRMS) and payroll technology partners, build transition plans and timelines and bring various external partners to the table for other lines of insurance.

If you are looking for a strategic partner to grow with, OneDigital is #Trustworthy and #Relentless. To discover the right program for your company, reach out to your OneDigital consultant.


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