Partnering with a Professional Employer Organization (PEO) is meant to simplify operations, reduce risk, and control labor costs. But not all PEO relationships deliver on that promise. In fact, many CEOs, CFOs, and business owners eventually find themselves asking an uncomfortable question: Is our PEO actually helping us—or just another vendor?
Here are the most common reasons companies switch PEOs, the red flags to watch for, and how to evaluate providers the right way.
Red Flag #1: Rising Costs with No Clear Explanation
One of the biggest frustrations is unexplained cost increases. Medical renewals spike, workers’ comp rates climb, fees become harder to track and are often bundled in ways that lack transparency.
If your PEO can’t clearly explain what you’re paying, why it increased, and what alternatives exist, that’s a sign to reassess. A strong PEO partner should proactively review costs, offer plan design strategies, and benchmark your pricing against the market.
Red Flag #2: Limited Benefits and Weak Employee Experience
Many companies switch PEOs because their benefits no longer compete. Employees complain about narrow provider networks, high deductibles, or lack of plan choice.
Not all PEOs offer the same benefit platforms. Some are locked into a single carrier or funding model. Others provide access to multiple medical plans, alternative funding options, and ancillary benefits that improve recruitment and retention. If your PEO can’t evolve as your workforce grows, it may be holding you back.
Red Flag #3: Poor Workers’ Comp and Risk Management Support
Workers’ comp should be more than a policy—it should be a strategy. Delayed claims handling, no safety guidance, and stagnant EMR scores are common reasons companies leave their current PEO.
When comparing providers, look at how claims are managed, whether safety programs are included, and if alternative workers’ comp structures are available. Long-term savings often come from prevention and advocacy, not just rates.
Red Flag #4: Reactive HR and Compliance Support
If you only hear from your PEO when something goes wrong, that’s a problem. Employment laws change constantly, and reactive support exposes your business to risk.
High-performing PEOs provide proactive compliance guidance, HR best practices, and access to specialists, not just a help desk. The goal is to reduce risk before it becomes a lawsuit or penalty.
Red Flag #5: Lack of Strategic Partnership
Many companies switch PEOs because the relationship feels transactional. No strategy reviews. No growth planning. No insight into how labor costs impact the business long-term.
A PEO should act as an extension of your leadership team, especially for growing organizations.
How to Compare PEO Providers the Right Way
When evaluating a new PEO, decision makers should look beyond the headline rate. Key questions to ask include:
What medical and workers’ comp options are available?
How is compliance risk shared?
What level of HR and payroll support is included?
Can the solution scale as we grow?
Thinking About Switching PEOs?
Switching doesn’t have to be disruptive, and in many cases, it leads to immediate improvements in cost control, quality benefits, and risk management.
If you’re questioning your current PEO, a side-by-side comparison can quickly highlight whether a better-fit option exists. 📩 Email Sales@BACbenefits.com or call 321-441-9056 to schedule your free PEO cost analysis.