We recently worked with a client who utilized our PEO Comparison Service and discovered a new PEO that not only offered superior service and a more efficient payroll platform but also resulted in annual savings of nearly $60,000. However, their excitement was dampened when they informed their current PEO about their decision to switch. They soon realized they had signed a two-year contract with steep penalties for early termination.
The lesson here is clear: Avoid locking yourself into lengthy contracts. At PEO Spectrum, we never advocate for our clients to sign long-term agreements. A PEO contract should always include a 30-day termination clause, a standard practice among reputable PEOs. Your business should stay with a PEO because of the quality of their service, not because you’re bound by restrictive terms.
In our client’s case, they found themselves in a predicament when they attempted to terminate their contract with their current PEO. They were informed of daily service fees for each employee for the remainder of the two-year term, amounting to a staggering $200,000. This revelation came as a shock, especially considering the pressure they were under and the challenging circumstances posed by the pandemic. As a result, they had to delay their transition to the new PEO, navigate legal options, and endure continued inefficiencies with their existing payroll system.
The key takeaway from this cautionary tale is to always scrutinize the terms of your PEO contract. Whether you’re seeking cost reductions or exploring new options, ensure that your contract does not bind you to lengthy commitments. When you engage with PEO Spectrum, rest assured that we prioritize your interests and will always advocate for contracts that include a 30-day termination clause with notice.