How Much Do PEO Services Cost?
For most companies, cost is a major factor when considering a potential professional employer organization (PEO) partner. Usually when a company starts looking into PEOs, it is because the complexity or cost of their HR needs have grown to the point that it is more beneficial to have them handled by an organization that specializes in HR. It essentially comes down to finding a PEO partner that not only justifies the cost, but saves you money in the long run.
What Is a PEO?
A PEO is a company that provides outsourced human resource services, typically for midsized and smaller businesses. They handle tasks such as HR management, ensuring compliance with employer-related laws, and benefits and payroll administration. When you have only a few employees, it may be easy to handle these duties on your own. But, as a business grows, HR needs become more complex and require more knowledge. Hiring a PEO gives your business access to expert knowledge and provides your employees with benefits they may not have otherwise.
Beyond that, PEOs minimize your exposure to risk and liability, as they are a organization dedicated purely to HR tasks. The also help to contain rising HR costs, attract and retain talented employees, and maximize efficiency. Perhaps the biggest benefit of hiring a PEO is that all of of these features come from a single vendor; instead of paying multiple sources for things such as benefits, payroll, or workers' compensation, all of this is handled by a single group.
How Does PEO Pricing Work?
Typically, PEOs charge for their services one of two ways: as a flat fee per employee, or as a percentage of the total payroll. Many businesses prefer a PEO that charges a flat fee per employee, per month because it does not directly tie the cost of the PEO to employee compensation. Costs for a PEO that charges a percentage of the total payroll average between 2 and 12 percent of the total payroll.
It is important to note that there may be additional fees outside of the standard rates for any other features or tasks your PEO performs. This isn't necessarily a bad thing, though, as one PEO that charges more for their services may offer enough benefits to offset the higher cost. It sounds cliché, but you get what you pay for.
As discussed above, PEO pricing typically works by either charging a flat fee or by taking a percentage of the total payroll. These costs vary, as the size of your business and the number of employees directly impact the price. Here are a few examples of PEOs and their particular pricing models:
Insperity charges a percentage of your payroll, which varies according to the number of employees you have as well as which PEO services you select.
Justworks charges a flat fee per employee, per month.
- Up to 24 employees costs about $50 to $60 per employee, per month without benefits or $70 to $80 per employee, per month with benefits
- 25-99 employees costs $40 to $50 per employee, per month without benefits or $60 to $70 per employee, per month with benefits
TriNet also charges a flat rate per employee, per month.
- 5-9 employees costs $155 to $165 per employee, per month
- 10-19 employees costs $140 to $150 per employee, per month
- 20-29 employees costs $135 to $145 per employee, per month
- 30-49 employees costs $125 to $135 per employee, per month
If the PEO you are considering handles any recruiting or training in addition to other tasks, you can expect to pay more. The number of employees that receive benefits and their wage type also affect cost, as employees with benefits and wage workers bring higher costs.
Additional PEO Considerations
Cost is important when it comes to choosing a PEO, but it is far from the only factor that should be considered. Savings are a major aspect of choosing a PEO since, in the long run, they are supposed to save you money. Weigh all of the costs that a PEO allows you to cut against the cost of hiring them.
A PEO also provides peace of mind, because you know that your business is compliant with all the most recent employment laws and HR practices. And while this peace of mind doesn't have a price tag of its own, it definitely saves you money in the form of legals fees and unemployment costs.