5 Red Flags It’s Time To Switch PEO Providers

If you run a growing business, you already know that HR, payroll, compliance, and benefits take up valuable time. That’s why many small and mid-size companies turn to a Professional Employer Organization (PEO). On paper, it sounds like the ideal solution: less admin, more support, and proactive expert guidance to help you scale.

But not all PEOs live up to that promise.

Instead of making life easier, some add stress with clunky systems, surprise costs, and support that leaves you hanging when you need it most. HR still feels reactive, and your business is responding to compliance issues after they’ve already happened. What should feel like a growth partner often turns into yet another headache.

If this sounds familiar, you’re not alone. We hear the same frustrations from business owners and finance leaders who have switched from substandard PEOs to Deel. And they’re right to expect better. After all, a PEO should help your business grow and move faster, not slow you down.

So, ask yourself: Have you spotted any of these red flags with your current provider? If so, it may be time to consider a switch.

1. Slow, unhelpful support and outdated channels

One of the clearest signs your PEO isn’t meeting expectations is the quality—and speed—of the support you receive.

When you have a compliance question or payroll issue, you can’t afford to wait days for a reply from your PEO’s HR Business Partner. Or if your PEO provides generic, canned responses instead of tailored support for your business and employees, that’s a red flag. The best PEOs act like an extension of your team, offering personalized, expert guidance you can trust.

If your chat support feels like communicating with a bot and not a real person, it may be time to consider a PEO change. Most PEOs offer a mix of support channels, but it can be inconvenient if your provider doesn’t offer live chat or support via Slack.

2. High administrative fees

High admin fees are a PEO red flag that can quickly eat into your budget. These fees should cover core services like payroll, benefits administration, HR compliance, and HR technology.

The problem often lies in the percentage-of-payroll (POP) pricing model. Under this model, fees are tied to gross payroll size and bundled with taxes and workers’ comp, increasing your admin costs as salaries or headcount grow—without any added value.

A per-employee, per-month (PEPM) model, by contrast, is straightforward: no flat fee per employee, predictable and transparent. If your admin costs keep climbing without explanation, the pricing model may be to blame.

3. Hidden and surprise costs

Even if your admin fees look reasonable, your PEO may still be adding costs you can’t see. Some providers roll everything—wages, payroll taxes, benefits, insurance, and admin services—into a single lump sum. This lack of transparency makes it nearly impossible to separate true service costs from extras.

Another common red flag is markups on health insurance or employee benefits. These charges are often buried in bundled pricing and only show up later as higher-than-expected invoices. Over time, these hidden costs throw off budgets, disrupt financial planning, and make it difficult to forecast spend with confidence.

If you’re left guessing where your money is going each month, your PEO isn’t delivering the clarity you need.

4. A point solution that doesn’t scale with your business

Your PEO vendor should offer other solutions across payroll, HR, hiring, and employee management to support all your employee types, no matter where they live.

A point solution might cover payroll or compliance in the short term, but it can’t easily keep up with the diverse needs of your growing business. Instead of being a long-term partner, your PEO feels like a dead end.

The right provider should offer solutions for global payroll, EOR, contractor management, employee development, compensation and performance management, IT management, and more—all from the same platform.

5. Diminishing ROI and value

A PEO is supposed to save you time, reduce risk, and make managing your US employees easier. It should help your business grow, attract, and retain talent with attractive employee benefits. If your PEO isn’t delivering on these expectations, that’s a serious problem.

When your PEO can’t deliver value across HR, payroll, compliance, benefits, and risk management, it’s a clear sign you deserve better. If you’re looking for a clear way to present this information to leadership and earn their buy-in to switch PEO providers, consider downloading our PEO business case builder.

Deel PEO does more for your business

If you’re ready to leave behind high fees, clunky systems, or limited support, Deel PEO gives you a better way forward. Whether you’re hiring US employees for the first time or expanding into new states, we take on the employment burden so your team can focus on growth.

With full-service coverage across all 50 states and global support built into the same platform, Deel delivers what most PEOs can’t.

We combine HR, compliance, payroll, and benefits in one place—backed by expert guidance and always-on support—so you can finally have a partner that scales with your business.

• Compliance support and answers at the federal, state, and local levels
• Market-leading employee benefits, including exclusive access to Aetna international plans for globally mobile employees
• Flexibility to keep your company’s existing health plans if you want
• Payroll and tax administration done for you
• Global HRIS and payroll platform for one consistent and easy user experience
• Risk mitigation and coverage for employment liability insurance, workers’ comp, and employee termination support, so you’re protected
• 24/7 employee and admin support, plus a dedicated HR Business Partner as your day-to-day and strategic expert

Explore how Deel’s in-house PEO can help you offer better benefits and stay compliant from day one, or book a demo to see the platform in action.