Professional Employer Organizations promise simplicity. They bundle payroll, HR, and benefits into one monthly fee and offer access to large group health insurance rates. For early-stage companies, this can make sense. But as companies grow past 50-100 employees, the economics often shift dramatically. Many employers in PEO arrangements are overpaying by 20-40% compared to what they could secure independently, according to industry analysis.
Why Employers Leave PEOs
Cost. PEOs typically charge 2-12% of total payroll in administrative fees — on top of benefits costs. For a company with $5 million in payroll, that is $100,000-$600,000 in annual fees.
Control. PEOs own the master health insurance policy. You have limited ability to customize plan design, change carriers, or access your own claims data.
Co-employment risk. The co-employment model creates legal complexity around hiring, firing, and workforce management.
Flexibility. As your workforce grows and diversifies, a one-size-fits-all PEO arrangement often fails to serve your employees well.
How the Transition Works
Step 1 — Benchmark your current costs. Nyala Health conducts a full analysis of your current PEO fees, benefits costs, and plan design against the open market. Most employers are surprised by what they find.
Step 2 — Source independent coverage. We go to market across our 195+ carrier relationships to find group health, dental, vision, life, and disability coverage that matches or exceeds your current benefits at a lower cost.
Step 3 — Coordinate the transition timeline. PEO contracts have specific termination windows. We map your transition around your renewal date to ensure zero coverage gap for employees.
Step 4 — Support open enrollment. We manage the employee communication and open enrollment process so your HR team is not overwhelmed.
Step 5 — Ongoing advisory. Once you are out of the PEO, Nyala Health serves as your independent benefits advisor — reviewing your plan annually and benchmarking costs to keep you competitive.
What to Watch Out For
- Timing is critical — most PEO contracts require 30-90 days notice.
- Carrier underwriting takes time — start the process at least 90 days before your intended transition date.
- Employee communication matters — a well-managed transition protects morale and retention.