Avoiding Common Mistakes When Leaving a PEO: Insights and Tips

Learn how to avoid common pitfalls during a PEO exit with OutSail's expertise, ensuring a smooth transition in HR, payroll, and benefits functions.

Brett Ungashick
OutSail HRIS Advisor
October 13, 2023
Checklist highlighting OutSail's strategies to navigate PEO exit challenges

Leaving a Professional Employer Organization (PEO) can be crucial for your company's HR, payroll, and benefits functions. However, this transition has its share of potential pitfalls. In this article, we will explore common mistakes made when leaving a PEO and the significant impacts they can have on your business. But fear not, because we'll also delve into how OutSail can help you avoid these errors with their valuable insights and tips.

Common Mistakes and Their Impacts

1. Inadequate Cost Analysis

A mistake often made during the transition from a PEO is failing to conduct a comprehensive cost analysis. The financial implications of such a move can be significant. Without a clear understanding of these implications, your company might be setting itself up for budget overruns and unexpected expenses.

Impact: The impact of an inadequate cost analysis can be severe. Your company could find itself spending far more than initially anticipated. This, in turn, can significantly strain your financial resources. Unplanned expenses can disrupt your budget and potentially lead to financial instability. These financial challenges can also trickle down, affecting your employees and overall business operations.

2. Failure to Account for All Services

PEOs typically offer various services, including HR support, payroll management, and benefits administration. A common mistake during the exit process is failing to account for and seamlessly transition all these services. Overlooking critical services can leave your company with substantial gaps in its HR and administrative functions.

Impact: Failing to account for all services can be operational disruptions and reduced efficiency. For example, if you don't ensure a smooth transition of payroll processing, it can result in payroll errors and unhappy employees. The failure to transfer benefits administration can leave your workforce without crucial insurance coverage, potentially leading to employee dissatisfaction and retention issues.

3. Lack of a Comprehensive Plan

Exiting a PEO is a complex undertaking that requires meticulous planning. A common mistake is rushing into the transition without a well-thought-out and comprehensive strategy. This lack of preparation can lead to confusion, missed deadlines, and costly errors.

Impact: A lack of a comprehensive plan can be multifaceted. Delays in the transition process can harm your company's internal and external reputation. Delays can result in employee uncertainty, leading to unhappiness and decreased morale. Furthermore, disorganization can lead to missed deadlines, negatively affecting the seamless continuation of critical HR and payroll functions.

4. Legal and Compliance Oversights

Adhering to employment laws and regulations is a fundamental aspect of HR management. However, failing to ensure legal compliance during the PEO exit is a mistake that can have long-lasting consequences. Non-compliance can expose your company to lawsuits and fines, financially draining and damaging your reputation.

Impact: The impact of legal and compliance oversights can be severe. Legal issues can tarnish your company's image and damage its reputation. The financial burden of dealing with lawsuits, penalties, and regulatory fines can also be substantial. These legal challenges can divert financial resources from business growth and development, affecting your company's long-term prospects.

OutSail’s Insights and Tips

OutSail is your trusted ally in avoiding these common mistakes during a PEO exit. Here's how they can help:

Expert Guidance

One of the key services OutSail provides is expert guidance. Leaving a PEO can be daunting, with complex financial considerations and associated risks. OutSail's experts are well-versed in the intricacies of PEO exits. They help you understand the financial implications and risks, ensuring you have a clear and informed picture of the costs and potential savings. This expertise allows you to make decisions based on solid financial analysis.

Thorough Analysis

A crucial aspect of a successful PEO exit is a thorough analysis of the services provided by your PEO. OutSail assists in meticulously accounting for all these services and ensures a seamless transition to an in-house model. By minimizing disruptions and maintaining operational efficiency, you can ensure a smooth transition, preventing any loss of productivity or quality of service.

Customized Plans

Every company's needs and circumstances are unique. OutSail understands this and is committed to helping you craft a comprehensive and customized plan for your PEO exit. This tailored approach ensures that your transition aligns perfectly with your company's requirements, allowing for a smooth and efficient exit process.

Legal Compliance

Navigating employment laws and regulations can be a complex and potentially risky endeavor. OutSail's experts are well-versed in these legal complexities. They provide invaluable assistance in ensuring your PEO exit fully complies with all relevant laws and regulations. This reduces the risk of legal issues that could otherwise plague your exit process.

Practical Examples

Let's consider a hypothetical scenario to illustrate the importance of these insights and tips:

Scenario: Company A decided to exit its PEO without conducting a cost analysis. They assumed managing HR, payroll, and benefits in-house would be more cost-effective. However, they failed to account for the intricacies of payroll processing and benefits administration.

Impact: Company A faced increased payroll errors and a delayed benefits transition, leading to employee dissatisfaction. They also realized they were spending more than anticipated due to the underestimated costs of in-house management.

Now, let's see how OutSail could have made a difference:

Company A consults with OutSail, which conducts a thorough cost analysis, highlighting potential cost savings. OutSail ensures a seamless transition of payroll and benefits, reducing errors and delays. Their customized plan and legal expertise guarantee a successful exit.

Outcome: Company A saves money, avoids operational disruptions, and maintains legal compliance, ensuring a smooth PEO exit.


If you're planning to leave a PEO, the process can be complicated and overwhelming. However, common mistakes can be avoided, and their negative impacts can be minimized with the help of OutSail's insights and tips. Our guidance will enable your company to navigate this transition successfully, ensuring financial stability, operational efficiency, and legal compliance.

When considering a PEO exit, don't go it alone. Trust OutSail's expertise and let them guide you through the process, ensuring you avoid the pitfalls that others often stumble upon. Your business deserves a seamless and cost-effective transition, and OutSail is here to make that a reality.

1. What are some common mistakes made when leaving a PEO?

Common mistakes include inadequate cost analysis, failure to account for all services, lack of a comprehensive plan, and legal/compliance oversights.

2. What are the impacts of these mistakes on a business?

These mistakes can lead to financial strain, operational disruptions, decreased morale, missed deadlines, legal issues, and damage to the company's reputation.

3. How can OutSail help businesses avoid these mistakes during a PEO exit?

OutSail provides expert guidance, thorough analysis of PEO services, customized exit plans, and assistance with legal compliance to ensure a smooth transition and minimize risks.

4. Can you provide a practical example illustrating the importance of OutSail's insights and tips?

In a hypothetical scenario, Company A faces increased errors and delays during their PEO exit due to inadequate planning. With OutSail's assistance, they could have conducted a thorough cost analysis, ensured a seamless transition, and maintained legal compliance, resulting in cost savings and operational efficiency.

5. Why should businesses trust OutSail for guidance during a PEO exit?

OutSail offers expertise, customized solutions, and legal compliance assistance to navigate the complexities of a PEO exit successfully. Trusting OutSail ensures a smooth transition, financial stability, and legal compliance for businesses.

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Meet the Author

Brett Ungashick
OutSail HRIS Advisor
Brett Ungashick, the friendly face behind OutSail, started his career at LinkedIn, selling HR software. This experience sparked an idea, leading him to create OutSail in 2018. Based in Denver, OutSail simplifies the HR software selection process, and Brett's hands-on approach has already helped over 1,000 companies, including SalesLoft, Hudl and DoorDash. He's a go-to guy for all things HR Tech, supporting companies in every industry and across 20+ countries. When he's not demystifying HR tech, you'll find Brett enjoying a round of golf or skiing down Colorado's slopes, always happy to chat about work or play.

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