Why to Transition Away From a PEO and How to Do It

Professional Employer Organizations (PEOs) have attracted many small to mid sized employers in California as an affordable solution to HR, liability, and managing the cost of health and workers’ compensation insurance. However, are PEOs as beneficial to businesses as they once were?

Some companies are a great fit for PEOs, but it takes a specific type of company to mesh with the PEO niche. For many businesses in California, providing the benefits of a PEO outside of the PEO structure results in a higher quality of service at a lower cost to the company.

If you are an employer considering a transition out of your current PEO relationship, the following questions will be important in your analysis. Sometimes calculating the cost/benefit analysis of a PEO can be difficult, and it can be very beneficial to reach out to a company that understands the nuances of PEOs and the alternatives. New City Insurance is well suited to help California businesses determine whether or not their PEO is the best option for them.

 What to consider when evaluating your PEO

1. Is similar or better health coverage at a comparable or reduced rate available to my business outside my PEO?

2. Am I able to obtain workers’ compensation and employers practice liability insurance at comparable coverage levels and cost outside of my PEO?

3. Is the HR service from my PEO so valuable that I would have to hire my own HR personnel to replace it?

4. Will my State Unemployment Income (SUI) rate increase or decrease by leaving my PEO?


If you are uncertain about any of these questions, it can be very beneficial to perform an analysis on your business’ PEO relationship. Many times employers find that what was once a beneficial relationship is no longer the best available coverage and service.

PEOs charge an administrative cost or fee. This fee is usually charged per month or per employee. This fee allows PEO’s to profit, but it takes more out of the employer’s bottom line. Looking into stand-alone coverage can provide better alternatives with no admin costs.

Consultations are free and will fully evaluate the cost to your business within a PEO and outside of a PEO, so you can make sure you are getting the best deal for your company.

Call New City Insurance Today for a Free Consultation – 888.786.5839

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