In this week's issue...
When to switch from a PEO to direct
A PEO (Professional Employer Organization) is a solid play early on: turnkey HR, compliance guardrails, and pooled benefits
The question isn't whether a PEO is good… it's when you outgrow it 📈
I posted the chart above on LinkedIn recently, and the comments erupted into a great debate among business owners, brokers, and HR leaders. One comment summarized it best: "The PEO didn't get worse, the company got bigger. Nobody rechecks the math once 'fine' sets in."
Here is why the math breaks down as you scale:
Per-head scaling vs. fixed overhead: PEO costs scale with every single hire. Direct-model costs flatten out over time
Opaque billing: Percentage-of-payroll models and bundled admin fees often hide high margins as revenue and headcount rise
The graduation point: A PEO gives you instant strategic bandwidth and risk transfer early on, but eventually, transitioning to an in-house/a la carte stack yields massive savings and customized control
The financial crossover usually happens around 65 employees. Yet, due to pure inertia, most companies stay in "fine" mode and wait until they hit 275 employees to switch. Same curve, but hundreds of thousands of dollars wasted in the gap 💸
If you are scaling through that band, staying on a PEO out of habit gets expensive fast. Want a second set of eyes on your set up? Grab 15 minutes on my calendar!
Bring Your Bill Round 2 @ East Rutherford
Thank you to everyone who came out for our soft launch at The Galley in Chatham!
We are keeping the momentum going for the 2nd instance. Details:
⏰ Thursday, Oct 15 · 6–8 PM
📍 The Union Bar - 170 Union Ave, East Rutherford, NJ
Drinks, owners, and real cost reduction. Drop off a vendor statement, contract, or service agreement at the bar, and you'll get a professional feedback teardown in 2–3 business days. 100% free, no obligation
Lock in your spot or skip the wait and upload a bill now.
The ERC site: refreshed!
We shipped a cleaner, redesigned erccoach.com 🫧
Take a look to see how expense reduction coaching works, and where to start if a recurring bill has been bothering you!
Onwards and Upwards,
Joe Lapscher
Partner, ERC
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