5 Reasons Why Transitioning to a New PEO Mid-Year Can Immediately Benefit Your Small Business
Switching Professional Employer Organizations (PEOs) mid-year might sound like an overwhelming task, but for small businesses, it can be a game-changer.
1) Cut costs: According to NAPEO, companies using a PEO have an ROI of 27.3%. This is based on potential savings in five areas:
1) HR personnel costs
2) Health insurance
3) Workers comp
4) Unemployment insurance
5) Other services such as payroll and retirement plans
Some companies implement a PEO so they don’t have to hire an internal HR representative, with the cost of the PEO typically being less than hiring 1 full-time W2 and contributing to benefits and payroll taxes.
2) Reconfigure benefits strategy: Companies will often change up their benefits package since there’s an opportunity for stronger coverage and the potential for cheaper rates, sometimes up to 40%.
Businesses are generally prohibited from changing their plans and contribution structure outside their renewal month, unless they are changing PEOs mid-year.
For companies not on a PEO, they can offer national plans through a top carrier to help support a workforce in multiple states.
Companies already using a PEO may wish to change their health insurance providers or offer additional carriers depending on which PEO they select.
3) Get ahead of renewal 120 days before: This is a little known opportunity to not have a business’ renewal rates factor into their upcoming renewal, depending on when they renew with their PEO.
For example, if an employers' renewal is in January and they’re considering switching to a new PEO in October or earlier, then competing PEOs do not have to factor in renewal rates during initial underwriting. If a renewal is over 20%, many PEOs outright refuse to generate a quote for the business due to higher than expected risk (where there’s smoke, there’s fire).
Many PEOs ProHealth Advisors partners with will even offer a renewal cap or a specific not to exceed rate. This is an opportunity to receive at least a 15-month quote while locking in more security with rates.
4) Compliance: Companies not using a PEO and that have employees in multiple states tend to struggle when keeping up with ever-changing federal, state, and local payroll tax laws.
Fines for violations can range anywhere from a couple hundred to thousands of dollars.
A PEO is akin to a coat of armor around a business, with taking on payroll and tax compliance liability. This provides businesses peace of mind and allows them to focus on running their business.
5) Wage base reset: The amount paid into FICA and SUTA towards wage bases can be credited or carried when switching payroll from one CPEO to another CPEO.
This helps a small business reduce unnecessary expenses by preventing a new employer tax restart with the change of employer.
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