TSA Renegotiation
Stop overpaying for HR transition services. Renegotiate the terms.
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A realistic TSA HR cost benchmark reflects a function that is rarely the largest line but is almost never trivial, often 10 to 20 percent of the total bill. HR costs what it does because payroll, benefits, and the HR information system touch every employee and cannot be interrupted for a single cycle. Holding those charges down is a steady, underrated part of TSA cost reduction.
HR is a meaningful TSA cost because it is broad rather than deep. The carved out business shared the parent payroll platform, benefits programs, and HR information system, and every one of those services touches the entire workforce. The cost is driven less by complexity than by headcount, repeated every pay and benefits cycle.
That breadth makes HR continuous and unforgiving. Employees must be paid correctly and on time, benefits must stay live, and statutory filings must continue without gaps. A failure here is immediately visible to the workforce, so buyers tend to be conservative, which keeps services on the TSA longer than strictly necessary.
The benchmark figures here are indicative ranges across carve-outs, not fixed prices. The consistent pattern is the charge basis: HR is usually priced per employee, so cost scales directly with headcount. A buyer who understands the per head economics can predict the HR bill and challenge the parts of it that do not hold up.
Payroll is almost always the heaviest HR line. It runs every cycle, it has to be exact, and it depends on the parent payroll engine, tax registrations, and accumulated year to date earnings data. Because the consequences of an error are immediate and public, payroll is the service buyers are most reluctant to move.
That reluctance has a cost. Payroll usually exits at a clean calendar break, often the start of a tax year, so that earnings data and tax reporting can be cut over without splitting a period. A buyer who misses that window can wait many months for the next one, paying for seller payroll the entire time.
Buyers should pressure test the payroll charge against the seller actual cost per payslip. Payroll is a mature, automated process, so a high per employee rate often carries allocated HR overhead the carved out business will never consume. The number should reflect running the payroll, not subsidizing the parent HR department.
Benefits administration is usually the second HR cost. Health plans, retirement programs, and insurance are often provided through the parent, and moving employees onto new arrangements means selecting carriers, negotiating rates, and running an open enrollment. None of that can be rushed without risking gaps in employee coverage.
The cost here is partly administrative and partly a question of timing. Benefits typically move at a plan year boundary, so the exit has to align to the renewal calendar rather than to the buyer preference. Until the new plans are live, the seller continues to administer the existing programs and charges for the service.
Buyers should map every benefit to its renewal date early and plan the transition around those dates. Standing up new benefits is a project with a long lead time, and starting it late forces either a coverage gap, which is unacceptable, or an extension of the seller administration, which is expensive.
The HR information system sits underneath payroll and benefits and quietly gates both. Employee records, organizational data, and self service all live there, and until the business has its own platform it depends on access to the parent system. This overlaps with IT cost, because the HRIS migration is a data and systems project.
Around the core system sit shared HR services: recruiting support, learning platforms, the case management desk, and reporting. These are individually small but collectively add up across a large workforce. They are also the easiest to over scope, because it is tempting to keep convenient parent services running rather than stand up replacements.
The HRIS should be treated as an early priority, because reporting, self service, and clean employee data depend on it. The surrounding shared services should be scoped tightly and exited promptly. Keeping a learning platform or a reporting feed on the TSA out of convenience is a recurring charge with little operational justification.
Start with the per employee charges, because that is how HR is priced. Benchmark payroll, benefits administration, and HRIS access against the seller actual cost to provide, and challenge rates that carry parent overhead. On a large workforce, a modest per head reduction compounds into a meaningful saving across the agreement.
Plan the exits around the calendar. Payroll moves cleanly at a tax year boundary and benefits at a plan year renewal, so the buyer should build the transition plan backward from those dates. Missing a window is the single most common reason HR services overstay on a TSA and accrue avoidable cost.
Then control scope. Stand up the HRIS early to unlock reporting and self service, exit low value administrative services first, and resist keeping convenient parent services running. Managed this way, HR stays a predictable, declining line rather than a quiet source of recurring charges the buyer never quite gets around to ending.
HR is typically a mid sized workstream, often in the range of 10 to 20 percent of total TSA cost. It rarely rivals IT, but payroll, benefits administration, and the HR information system add up quickly because they touch every employee and cannot be interrupted.
Payroll is almost always the heaviest HR line. It runs every pay cycle, it must be accurate, and it depends on the parent payroll platform and tax registrations. Benefits administration is usually second, because moving employees onto new plans requires open enrollment, carrier setup, and careful timing.
Payroll cannot fail, so buyers are cautious about cutting over. It depends on the parent payroll system, tax registrations in every jurisdiction, and year to date earnings data. Most buyers exit payroll at a clean calendar break, often the start of a tax year, which can keep the service live longer than the buyer would like.
Benchmark per employee charges against the seller actual cost, plan the payroll and benefits cutover around a clean calendar break, and stand up the HR information system early since it gates self service and reporting. Removing low value administrative services first keeps the cumulative HR bill in check.
Why finance is the second heaviest workstream and how to control it.
Read the article →Why IT dominates the bill and where the cost concentrates.
Read the article →How transition cost splits across IT, finance, HR, and operations.
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Fixed-fee proposal in 48 hours. Senior team on day one. The first conversation is always free.
Seven buyer-side moves to exit a Transition Services Agreement on time and below budget. The mark-up, the extension-fee curve, exit sequencing, and the 11-month calendar.
Work backwards from the first payroll cycle. Tax registrations and HRIS data have long lead times the TSA clock does not forgive.
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