Tips for Transitioning into a PEO Relationship

So you've chosen to work with a Professional Employer Organization to help manage the employer part of your business. The good news is you're not alone; the PEO industry has boomed over the last decade, and for good reason.

The National Association of Professional Employer Organizations has found that PEOs significantly impact small to midsized businesses. PEO clients not only grow faster than average but also have lower employee turnover rates. In addition, their clients are more likely to be profitable and have double the median annual revenue growth on average. This allows the business to improve not just HR performance but business results as a whole.

So, congratulations on the new relationship! But … what now?

The transition stage can be a time of great uncertainty and anxiety, especially for employees who are now technically becoming co-employees of a wholly separate organization. However, when managed wisely, the transition process can be remarkably smooth.

What does the transition stage include?

Certain responsibilities for the employees, such as payroll processing and payroll taxes, must be formally moved from the client company to the PEO. This typically includes introducing new HR technology or merging existing systems with those of the PEO. It also involves securely transfering of vital employee data, and informing employees about upcoming changes. Additionally, providing training on the PEO's HR technology and self-service tools becomes essential to facilitate the transition.

The employer should create a dedicated transition management team.

The PEO, as your new partner, will serve as an invaluable resource for information and assistance. However, the transition will go more smoothly if the employer also creates their own team to manage the process on their side

The employer's active involvement is crucial in the process. They must maintain the relationship with the PEO and any other service providers, making them also own the transition process. The PEO provides invaluable guidance, yet having an internal team ensures efficient coordination and a seamless transition experience.

Similarly, develop a detailed transition plan.

In general, the PEO will handle in taking the lead in handling the transition. After all, a business owner may be new to HR outsourcing, whereas this is what the PEO does day in and day out. That said a detailed transition plan should outline timelines, roles, and responsibilities during the shift from in-house HR to the PEO.

It helps prevent misunderstandings, sets clear expectations, and keeps all parties on track. Additionally, this plan clarifies how each HR function will be managed during the transition, making sure nothing gets overlooked.

Coordinate with the PEO.

Collaborating closely with the PEO is key in the process. This is a perfect opportunity to build a strong working relationship. Introduce people from your business to the PEO team and make sure they grasp your company's culture, values, and HR processes. Strong relationships thrive on mutual understanding and shared goals, setting the stage for a successful partnership.

Be respectful of the employees.

This is a time of uncertainty, and often anxiety, for the employees involved. You want to ensure that the transition to the PEO does not disrupt service to the employee. This empowers them to focus on their work rather than on their worries about benefits packages like health insurance, and retirement plans. Keep their needs in mind and maintain open communication.

In fact, many worry that this partnership may affect the employment relationship with their employees. We addressed this misconception in our blog "How HR Outsourcing Can Benefit Your Employees", where we explore the employee benefits of a PEO partnership.

Maintain open lines of communication between all stakeholders and parties.

Maintaining open and consistent communication is crucial to avoid disruption. If the transition process presents possible pitfalls, it's only because the employer, the employees, and the PEO fail to communicate clearly. This lack of communication revolves around expectations, activities, and requirements with each other. 

To that end, don’t hesitate to address any concerns, provide feedback, and request adjustments as needed. Maintaining open lines of communication is central to creating a strong partnership.

Finally, document and keep records.

To avoid confusion during the transition, it's crucial to keep everything well-documented. Uncertainty can cause problems, so it's important to record each step, starting from the agreement with the PEO to the planning phase. By documenting everything clearly, everyone involved can easily access and understand the details.

For additional insights into outsourcing HR functions, you may find our blog "What HR Functions You Can Outsource" helpful. Another resource about managing this process comes from the Society for Human Resource Management, titled "Outsourcing the HR Function". If you need further assistance, you can directly contact CoAdvantage for further guidance and support.

Ready to optimize your HR operations and boost business productivity? Consider partnering with CoAdvantage, a nationwide Professional Employer Organization (PEO). With our comprehensive and cost-effective HR solutions, including but not limited to: HR administration, HR technology, workers' compensation management, and tailored health insurance packages. From payroll taxes to compliance and risk management, we've got you covered. 

Let us handle the complexities of HR management so you can focus in growing your business. Fill out the form below to discover how CoAdvantage can support your company's success!