NOVEMBER 2023CIOAPPLICATIONS.COM8CXO InsightsIN MY VIEWALLY LAMSON, AREA VICE PRESIDENT, EQUITY M&A, GALLAGHER'm fascinated by the rationale of growing employers surrounding the decision to stay in a professional employer organization ("PEO"). PEOs have obvious benefits such as offloading HR responsibilities and allowing smaller companies to access group health insurance benefits as part of a larger group. It is a neat package that wraps up the administrative aspects of running a business: payroll and benefits administration, worker's compensation and some HR. The bundle is extremely appealing, particularly in the M&A space where there are so many decisions to be made and terms to be negotiated. A PEO is one solution which solves many of them, so it makes sense, even if it is imperfect. But as your company grows in the number of full-time employees, it is unwise not to consider the Law of Diminishing Marginal Returns. There is a tipping point in terms of number of employees where it makes sense to bring all (or most) of the PEO functions in-house, or outsource to a third party that is not the PEO, because sharing the burden of the overhead with the PEO favors the PEO instead of you, the employer. If an employer understands all of the costs associated with staying in the PEO, and consciously decides those costs are worth avoiding the aggravation associated with the extraction and ongoing administration, then that is what works for them. However, like all misconceptions, I suspect that many employers don't fully realize how high the cost of staying in the PEO actually may be and "No Decision" is still a decision. When is it Time to Leave a PEO?My colleague, Chris Baldwin, Business Development Leader ­ HR Technology Practice, shared the following signs for when it is time to consider exiting a PEO: · Cost & Strategy. A broker can take your census to the market and find out what health insurance plans are available "Am I the only one who thinks it's an impossible task?"- The Wizard of OzLIONS, TIGERS AND HOW TO GRIN AND BEAR APEO EXTRACTIONIAlly Lamson partners with fast-growing employers of various sizes, advising them on the best practices in employee benefits with an eye toward growth. Having been trained as a lawyer, Ally is conscious about pulling in Gallagher's legal compliance team, as needed, to ensure companies are aware of their obligations as they grow. She works closely on PEO extractions with her colleague and friend, Molly BelmontAlly Lamson
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