Professional Employers Organizations, or PEOs, are a great option that enables smaller businesses and organizations to access high-quality employee benefits and retirement packages, payroll solutions, and HR administration at a reasonable cost. However, for growing companies, companies looking to merge, or companies needing to bring in talent from a remote workforce with varying compliance needs, it’s easy to simply outgrow a PEO. Read on to learn more about when a PEO stops making sense, and to learn how Bryson can help you identify the best fit for your company’s current and long-term needs.

Why go to a PEO in the first place?

Small companies in the range of 10-50 employees will find the most value with PEOs in the first place. PEOs work by outsourcing your HR needs to a separate company and having them handle all of your needs associated with these processes. Many smaller companies opt to work with PEOs for their HR needs because it is cheaper, with many operating on a “per-employee-per-month” basis that stays at a lower cost for employers than bringing someone in-house full-time.

How do they become less effective options?

The most common case in PEOs becoming less effective for a company is when that company approaches or starts to surpass 100 employees. By this point, the per-employee-per-month fee begins to surpass the cost to bring HR in-house with a dedicated internal team. Having an in-house HR team additionally provides the benefit of more customizability for benefits to align with company culture, more control over critical HR functions, support for growth of a workforce across state lines, and a guarantee that your HR fully understands your compliance needs and risk ratings.

Additionally, with a growing workforce of employees, this will allow your company to be fully autonomous, removing co-branding of employment relationship and allowing more workforce scalability by keeping all employee records in-house. With PEOs, your data is less accessible than keeping them in-house. When your company grows, you want your company culture and benefits to grow with it, and with a PEO it can often feel limiting to lock that customizability behind another company. When partnering with Bryson, we can assist with due diligence reviews that ask questions about your company’s specific strategic position and where you want it to be in the future so you can best understand your needs.

Additional considerations for companies in the M&A space:

Whether you’re a business that is looking to be acquired, you’re looking to merge with or buy out another business, or you’re a private equity firm looking to merge two companies together, there is always going to be hiccups in unifying benefits across two separate entities. In the case of one Bryson client, we helped two companies join together while coming from two separate benefits plans. One of the companies was on a PEO and the other was working with a broker. We helped them find success by consolidating both companies onto one plan with better technology, minimal disruption, and rich benefits for the employees.

So, when is it right for me to leave a PEO?

For some companies, it can be when the company has 50 employees and you begin to adopt remote talent with more compliance requirements to meet, while for others it might not be until you reach 100 employees and the cost of working with a PEO begins to exceed bringing on in-house talent. For some, it can even be when your benefits packages feel too constricting and limiting to the company culture you want to cultivate. Ultimately, there is no definitive answer for exactly when to exit a PEO. When partnering with Bryson, you can feel confident knowing that we can assist you with making strategic decisions with full understanding of what they mean for the short- and long-term success of your business. These decisions aren’t easy, but partnering with Bryson makes it much simpler.