If your business is outgrowing the one-size-fits-all structure of a PEO (Professional Employer Organization), you’re not alone. As companies scale, they often need more flexibility, direct control over benefits and payroll, and a better return on their investment. Exiting a PEO can feel overwhelming, but with the right guidance and a well-structured plan, it doesn’t have to be.
At EmphasisHR, we specialize in working with growing companies making the switch from a PEO model to a more agile, customized HR solution. We work exclusively on the Paylocity platform, offering a streamlined and expert-led experience to help you confidently take control of your HR operations.
Here’s your definitive PEO Exit Checklist to help ensure a smooth transition.
✅ 1. Review Your Current PEO Contract
Before taking any action, understand your exit terms:
- Notice Period – Most PEOs require a 30 to 90-day written notice.
- Termination Fees – Check for early termination clauses.
- Renewal Dates – Some contracts auto-renew annually; know your deadline to notify them.
- Final Invoicing – Clarify how final payments, benefits, and taxes will be calculated.
📌 Tip: Have a legal or HR professional review your contract before submitting notice.
✅ 2. Notify Your PEO in Writing
Draft a formal letter of termination, indicating your desired exit date. Be professional and clear. Keep documentation of all communications.
✅ 3. Select a Payroll & HR Technology Platform
This is where your next chapter begins. You’ll need a system that’s scalable, efficient, and easy to use.
💡 Why Paylocity?
Paylocity is a best-in-class platform that delivers everything from payroll to benefits administration to performance management, under one roof.
EmphasisHR is the only HR outsourcing partner that works exclusively on Paylocity. Our deep expertise ensures you get the most from your platform, starting from day one.
✅ 4. Choose Your New HR & Benefits Partner
Post-PEO, you’ll need partners to handle:
- Payroll administration
- Benefits enrollment & compliance
- Employee handbooks & policies
- Time & labor tracking
- Talent management
That’s where we come in. EmphasisHR acts as an extension of your team, providing full-service HR support while you retain full control.
✅ 5. Transfer Benefits Plans
Benefits can be one of the most complicated parts of the transition. Timing is critical to avoid gaps in employee coverage.
- Audit Current Plans – Identify what’s working and what’s not.
- Source New Benefits Providers – EmphasisHR helps you evaluate cost-effective, scalable options.
- Communicate with Employees – Provide clear guidance on the transition process, timelines, and new plan details.
- Handle COBRA and Compliance – Ensure all notices are sent and regulations met.
✅ 6. Rebuild Your Payroll & Tax Framework
Once out of the PEO, you’ll need to:
- Establish New Tax Accounts (federal, state, and local)
- Run Test Payrolls to validate accuracy
- Collect W-4s and I-9s from all employees
- Set Up Benefit Deductions within Paylocity
With EmphasisHR, we handle the details, from Paylocity implementation to your first paycheck, so nothing falls through the cracks.
✅ 7. Rehire Employees Under Your EIN
When you exit a PEO, employees are no longer co-employed under the PEO’s tax ID. You’ll need to rehire all team members under your company’s EIN and ensure all HR documentation is up to date.
We make this easy inside Paylocity, streamlining onboarding while ensuring compliance.
✅ 8. Communicate With Your Team
The transition out of a PEO can raise questions. Keep employees informed through:
- Town hall meetings or emails
- FAQ documents about benefit and payroll changes
- One-on-one support (which we can help deliver)
✅ 9. Ensure Compliance
PEOs often handled compliance behind the scenes. Once you’re independent, ensure you meet federal, state, and industry-specific regulations:
- ACA & ERISA compliance
- Employee classification
- Paid leave laws
- Tax reporting deadlines
With EmphasisHR, compliance is baked into our service model so you can sleep easy.
✅ 10. Schedule Your First Payroll with Confidence
The final piece of your transition? A successful first payroll run. We make sure everything is reconciled, calculated correctly, and delivered on time, within your new Paylocity environment.
Let Us Do the Work
Exiting a PEO is a major milestone for growing companies, but it doesn’t have to be stressful. With EmphasisHR by your side, you get a trusted Paylocity expert partner who’s been through this process countless times.
We manage the complexity so you can focus on growth.
Ready to Make the Move?
Schedule your free consultation today and take the first step toward a more customized, cost-effective HR solution. Let us do the work—so you don’t have to.
