When was the last time you reevaluated your PEO arrangement? If the answer is “only when renewal rolls around,” you’re making the same mistake that too many business owners do. Waiting until your renewal date to shop for a new Professional Employer Organization (PEO) could cost you better rates, better services, and, ultimately, better results for your business.
Here’s why acting early is a game-changer—and how it positions your business for success.
The Problem with Waiting Until Renewal Dates
When your PEO sends out its renewal notice, it’s a signal that they’ve already done the math. By then, they have set their rates based on factors like claims history, market averages, and internal policies. If their new rates seem uncompetitive, your instinct may be to shop around. But here’s where it gets tricky—most other PEO providers are unlikely to offer competitive pricing after the renewal date from your current provider is finalized.
Why? Because by that time, employment and claims data are locked in, and alternative PEOs won’t have the same flexibility to offer you the best available rates. Starting earlier allows other PEOs to evaluate your needs comprehensively and propose solutions without the tight constraints of a renewal deadline.
The Higher Cost of Waiting
Did you know the industry average for medical premium renewals increases by 7-9% annually? But depending on your claims data compared to your current premiums, that increase could be much higher—sometimes as high as 20-30%. If your claims exceed your premiums, your PEO may pass on a significant increase to maintain their profit margins.
Waiting to shop for an alternative PEO until you receive an unexpected high increase can be a costly mistake. Many PEOs require your renewal paperwork before they’ll provide a quote, and if your renewal rate is too high, some may decline to quote altogether. This can severely limit your options and leave you stuck with an inflated renewal rate.
That’s why being proactive is key. Shopping for alternatives before your renewal gives you maximum leverage. It allows you to generate multiple quotes, compare options, and decide whether to stick with your current PEO, switch to a new one, or renegotiate the rate with the quotes we’ve gathered through our RFP process. Don’t wait—take control now to avoid unnecessary costs later.
Why Timing Is Everything
Shopping for a PEO before your renewal date allows you to keep the upper hand. Starting early has several key benefits, including:
- Comparison Shopping: You’ll have the time to explore multiple PEOs and compare rates, services, and benefits.
- Negotiating Power: Early outreach signals you’re serious about finding the best fit, giving you better leverage to negotiate lower costs or enhanced services.
- Transition Planning: Switching PEOs can involve onboarding processes, transitions for benefits, and employee communications. Starting early ensures everything unfolds smoothly, avoiding disruption to your workforce.
- Control Over Data Sharing: Early shopping puts you in control of sharing your employment and claim data with prospective PEOs, helping them craft a proposal that truly meets your needs.
How Early Should You Start?
Ideally, begin researching alternative PEOs 3 to 6 months before your renewal date. This timeline ensures you have ample space to:
- Analyze your current provider’s strengths and weaknesses.
- Solicit proposals from multiple PEOs.
- Ask detailed questions about their offerings.
- Transition seamlessly if you decide to switch providers.
The right PEO can be a strategic partner that fuels your business growth—but only if you take a proactive approach. Don’t wait until renewal season to find out if you could find a better option.
Need help navigating your PEO options? Our team of experts is here to guide you. Contact us to schedule a free consultation.
