Like any business arrangement, PEO and client co-employment relationships are subject to change. For some client companies, that may be a simple redefinition of the terms. For others, it may mean completely dumping their old PEO for a new one. In both cases, business owners often have one question: When should I make a change?
Unfortunately, the answer to that question isn’t necessarily easy.
Many factors will play into how a company should time a PEO switch or renegotiation of existing PEO terms. Generally speaking, the end of October is the most ideal for initiating changes for some very practical reasons.
The PEO industry is geared toward the end of the calendar year
First, many things in the PEO industry are geared towards the end of the calendar year and the month of January in particular. This includes payroll, open enrollment, health insurance renewal, and, of course, those pesky W-2’s. PEOs do 80 percent of their business in December, the very last month of the year, before partially wiping slates clean come January 1st.
The last quarter is a hectic time for businesses
Secondly, the last quarter is also a hectic time for businesses. Employees are taking vacations while companies themselves are making last-ditch pushes to meet goals and secure deadlines before the winter holidays.
When both a potential PEO and a potential client company are scrambling at year’s end, the probability of errors goes through the roof.
A general rule of thumb
But remember, this is a general rule of thumb, not set in stone. Every company and PEO client are different in scale, complexity, and market, which can either shrink or expand that ideal window for making a switch. For example, the process of making a PEO change can take anywhere from 30 to 60 days. For larger more complex businesses in niche markets, that process could take as long as 90 days, or three months, to account for due diligence time and ensure a smooth transfer. Smaller companies can sometimes get away with making their decision in November. But, not allotting your company enough time to make the right decisions can result in a disastrous contract, riddled with potentially costly mistakes, unwarranted risk exposure, and unnecessary services. Just remember, the last quarter of the year is a hectic time for both PEOs and businesses. To be safe, I recommend that companies should make their decision by October if they are going to make a switch. This will provide ample time for a smooth transition from your old PEO to a new one.
Is it time to change PEOs or stay with what you have?
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