PEO Contract & Exit Terms: What You Need to Know
When choosing a Professional Employer Organization (PEO), understanding the contract terms is just as important as evaluating the services they provide. One of the key areas often overlooked is the
contract and exit terms. Here’s a breakdown of what you should look for before entering into a PEO agreement.
1. How much notice is required to terminate the contract (30/60/90 days)?
Understanding the notice period required to terminate your contract with a PEO is essential. It’s common for PEO contracts to require 30, 60, or even 90 days’ notice before you can terminate the agreement. Be sure to check the terms to make sure you are not locked into an agreement for longer than you’re comfortable with. Additionally, ask if there are any penalties associated with early termination.
2. Is there a “termination with cause” clause?
A “termination with cause” clause is a provision that allows you to end your contract if the PEO fails to meet specific requirements or standards. This clause is important to protect your business in case the PEO doesn’t deliver on their promises or fails to provide the expected services. Ensure that the contract includes this provision to give you leverage if the partnership doesn’t meet your expectations.
3. Can someone review the contract with you?
PEO contracts can be complex, and it’s crucial that you fully understand the terms before signing. Ask if someone from the PEO or an independent consultant can review the contract with you. Having a clear understanding of the contract terms can prevent future misunderstandings or legal issues. An expert can help you navigate any potential concerns and ensure you’re making an informed decision.
Having clear contract and exit terms in place will help protect your business, offering flexibility if the PEO is not the right fit. It’s always better to understand these terms upfront to avoid complications later.
Pro Tip:
There are over 600 PEOs nationwide. Work with a PEO Broker (like us!) to get side-by-side comparisons and unbiased guidance—at no cost to your business.
Need help getting started?
📧 Email: Suzanna@PEOForTheCEO.com
📅 Book a free consultation here!
Download the Full PEO Evaluation Checklist
Want to make sure you’re covering all your bases? Download our full PEO Evaluation Checklist today and make your decision with confidence!