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How to Improve Your PEO Relationship

For many HR organizations, outsourcing some or all of their HR functions is crucial. They are facing a gap between business growth but insufficient HR budgeting and staffing. As HR Tech Weekly writes, “This creates productivity and efficiency gaps that HR must overcome.” For many HR groups (especially in small businesses), a professional employer organization (PEO) is the best – or, in some cases, the only – way to bridge that gap.

But outsourcing can be a worrisome topic, especially when it comes to business-critical activities. How can you ensure your PEO relationship performs at peak?

Assign your PEO to the tasks where they will provide the most benefit.
Businesses routinely outsource transactional HR tasks, like payroll, to third-parties, but given the gap described above, “companies are getting much more serious about enabling digital transformation,” says Tony DiRomualdo, senior research director in The Hackett Group’s Global Human Resources Executive Advisory Program. PEOs with extensive experience and expertise in HR can help organizations meet modern needs.

Think strategic and long-term, not just transactional and short-term.
Ultimately, most successful PEO relationships are long-term, collaborative, mutually beneficial investments that pay dividends in empowering your in-house people to focus on core areas of business. Therefore, vendors should be managed not just according to short-term expectations, but in terms of how they fit into the organization’s long-term objectives. Given the opportunity, a good PEO will strengthen both.

Develop clear and appropriate Service Level Agreements (SLAs).
The SLA is what sets and defines expectations for everyone. They should be as detailed and specific as possible to give employers the ability to measure service quality and improve their governance of the PEO. Then, revisit these documents as needed. Over time, needs will change, and the applicable SLA and governance strategy may need to be updated.

Communicate, communicate, communicate.
The organizations must be able to communicate quickly, efficiently and effectively. The Society for Human Resources Management recommends sharing information openly and meeting with your PEO as needed (in person when reasonable). Communication should include managers and members of the workforce as well; everyone needs to understand how any changes will impact them.


CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.