What CFOs Should Ask Before a PEO Contract Renewal
A PEO contract renewal is not paperwork, it’s leverage. The decision you make at renewal will shape margin, compliance exposure, and employee satisfaction for the next year (or longer). Treated passively, renewal bakes in rising costs and stale benefits. Treated strategically, it resets terms, clarifies service, and aligns your HR model to growth.
Why PEO renewal isn’t routine
Most providers expect scrutiny at renewal. That’s your window. Yet many finance teams treat renewal like housekeeping and accept opaque admin fees, benefit markups, and one-size-fits-all service tiers. A smarter approach treats PEO contract renewal as a reset across finance, operations, and compliance, grounded in benchmarks, service performance, and future scale.
1) What’s the full cost breakdown?
Start with clarity. Separate pass-through costs from provider markups. Request a line-item view of admin fees, per-employee charges, benefit load, payroll taxes, and any “misc” items (implementation, audits, software). Ask how each cost changed vs. last year and why. Then benchmark. If the math doesn’t hold, renewal is the moment to reprice, or to compare PEOs with competitive alternatives that fit your scale and footprint.
2) Are our benefits still competitive?
Benefits aren’t just a line item; they’re a retention lever. Benchmark medical, dental, vision, disability, and voluntary plans against peers by size and market. Confirm network strength for your headcount hubs and expected hiring. If benefits lag or employee feedback shows declining satisfaction, use PEO contract renewal to re-align: better carriers, smarter plan design, or a different model.
3) Does the model fit our scale and risk profile?
What worked at 40 employees may not work at 240 or across multiple entities. Stress-test your operating model: multi-state registrations, wage bases, workers’ comp, co-employment complexities, and private-equity roll-ups. In many cases, a Strategic PEO Advisory review surfaces hybrid options (PEO in some entities, ASO/payroll in others) that reduce cost and risk without breaking continuity.
4) What leverage do we bring to renewal?
Leverage comes from facts: current invoice analysis, third-party benchmarks, service SLAs, ticket response times, compliance audit results, and employee sentiment. Package the data and set targets: total cost, benefit competitiveness, service standards, and timeline. In a disciplined PEO contract renewal, your ask is specific, and measurable.
5) What are the risks of staying vs. switching?
Model both paths. Staying can mean ongoing cost creep, stagnant benefits, or reactive compliance. Switching can introduce short-term friction but may improve service and total cost of employment. Build scenarios (stay / reprice / partial switch) with ramp plans for payroll cutover, benefits effective dates, data hygiene, and change management. Decide on facts—not inertia.
How to run renewal like a CFO
Frame renewal as a project with owners and dates.
Benchmark costs and plans against peers and prior terms.
Audit compliance coverage (classifications, registrations, tax handling, workers’ comp).
Define SLAs for service and escalation.
Align the operating model to your growth plan (entity roll-ups, new markets, headcount goals).
Sequence the transition if you change models: payroll calendars, carrier effective dates, open enrollment timing, and employee communications.
When a switch is the right call
Choose to move if you see persistent cost opacity, inconsistent service, or model misfit. A well-managed transition minimizes disruption: freeze data, reconcile taxes, time your cutover to payroll cadence, and communicate early with employees. With the right plan, a switch tightens compliance, upgrades benefits competitiveness, and lowers total cost of ownership.
Final word
A PEO contract renewal is one of the few moments each year when you hold structured leverage. Use it. Demand transparency, test fit, and negotiate with benchmarks. If the provider can’t meet the bar, change the model, not your standards.
For unbiased guidance, talk with the PEO advisors at Dinsmore Steele. We help CFOs turn renewal cycles into value creation—no vendor bias, just smarter strategy.
