A PEO broker is paid by the PEO you select, not by you. The payment is a share of the PEO's administrative fee, and it is usually ongoing for as long as you remain a client. In most cases your administrative rate is the same whether you arrive through a broker or go direct to the PEO.
We are a PEO broker, so this page explains how our own industry is paid, including the parts that are uncomfortable. The figures are aggregate ranges from the partner agreements we hold. We do not name which PEO pays which rate, because those agreements are confidential, and the ranges are enough to answer the questions that matter to a buyer.
Who wrote this. PEO Consulting Partners is an independent PEO brokerage and consulting firm, placing clients since 2015: 100+ clients placed, 36 PEOs compared, and every comparison reconciled plan by plan and tier by tier on the same enrolled population. Client figures on this page are de-identified and aggregated. No client is named and no figure is matched to a PEO.
What the commission is a percentage of
The commission is a percentage of the PEO's administrative fee, not of your total invoice. That distinction matters, because a PEO invoice is large. It includes wages, payroll taxes, health premiums and workers' comp, and the broker is paid on none of it. The administrative fee is the PEO's own charge for running payroll, HR, benefits administration and compliance, and it is usually a small share of the total bill.
Across the partner agreements we hold:
- The administrative-fee commission ranges from 10 percent to 30 percent.
- Some agreements add an override on the workers' comp fee, and a smaller percentage of medical premium on the PEO's own master plans.
- Some state no rate at all and set it per deal, before the client contract signs.
A worked example
A client pays the PEO $60,000 a year in administrative fees. The PEO pays the broker 20 percent of that fee, so $12,000 a year. The client pays the broker nothing, and the $60,000 is the same either way: with the broker, the PEO keeps $48,000; without the broker, the PEO keeps all of it.
Most commissions are residual rather than one-time: the broker is paid each year the client stays, which is why a good broker has a reason to keep helping after the sale, at renewal and when something goes wrong. Some agreements carry charge-back provisions, under which the broker returns commission if the client leaves early.
Where the conflict of interest actually sits
The conflict is not that the broker is paid. Every insurance distribution channel is paid, and the PEO's direct sales rep is paid too. The conflict is that commissions are not uniform, so a broker can earn materially more placing you with one PEO than another.
Put numbers on it. PEO A pays the broker 30 percent of its administrative fee. PEO B pays 10 percent. On the same $60,000 of administrative fees, placing you with PEO A earns the broker $18,000 a year and placing you with PEO B earns $6,000. Three times the money on one outcome does not make the recommendation corrupt. PEO A may well be the right answer. But you are entitled to know the difference exists, and to ask about it.
There is a quieter second conflict. A broker only earns on PEOs it holds agreements with. A PEO that is right for you but is not a partner of that broker never appears in your comparison, and nothing in the process tells you it is missing. A comparison of six PEOs looks complete whether or not the best one for you was ever in it.
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Five questions to ask any PEO broker
- How many PEOs can you quote, and which major ones can you not represent?
- Does your compensation change by which PEO I select, and by how much?
- Is the commission recurring or one-time?
- Can I see each PEO's administrative fee as its own line, rather than a bundled total?
- Will the PEO confirm in writing that my rate is the same without you in the deal?
Reluctance on question one, two or four is the signal to walk. A broker who will not say which PEOs it cannot represent, will not say whether its pay varies, or will not show you the administrative fee separately is asking you to trust a comparison you cannot check.
What a broker is actually worth
The case for a broker is that PEO pricing is far wider than buyers expect, and the cheapest-looking quote is often not the cheapest. On one recent 39-employee comparison, three PEOs returned administrative fees priced on the same census at $24.00, $32.15 and $150.00 per employee per month: a six-fold spread for the same group. The lowest fee did not win, because medical premium and workers' comp treatment moved the total the other way.
That is the work: putting every quote on the same census, separating the fee from the pass-through costs, and finding where the real money moves. Our guides on how to compare PEO quotes apples to apples and what a PEO actually costs show the method.
Whoever you work with, get one direct quote yourself, from a PEO the broker also quoted, as a control group. If the broker's version of that PEO's price matches or beats what the PEO quoted you directly, you have evidence the broker is not adding cost. If it does not, you have learned something important.
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FAQ
How do PEO brokers get paid?
A PEO broker is paid by the PEO you select, not by you, as a share of the PEO's administrative fee. The commission is usually ongoing for as long as you stay a client. In most cases your administrative rate is the same whether you arrive through a broker or go direct.
Does using a PEO broker cost more?
In most cases, no. The commission comes out of the administrative fee the PEO charges anyway, so a client paying $60,000 a year in administrative fees pays $60,000 with or without the broker. Ask the PEO to confirm in writing that your rate is the same without the broker in the deal.
What percentage commission does a PEO broker earn?
Across the partner agreements we hold, the commission ranges from 10 percent to 30 percent of the PEO's administrative fee. Some agreements add an override on the workers' comp fee and a smaller percentage of medical premium on the PEO's own master plans, and some state no rate at all and set it per deal before the client contract signs. The broker is not paid on wages, payroll taxes or the rest of the invoice.
Is a PEO broker biased?
The conflict is not that the broker is paid; every insurance distribution channel is. The conflict is that commissions are not uniform, so a broker can earn materially more placing you with one PEO than another, and a broker only earns on PEOs it holds agreements with, so a PEO that is right for you but is not a partner never appears in your comparison. Neither makes a recommendation corrupt. You are entitled to know both exist.
What should I ask a PEO broker before working with one?
Five questions: how many PEOs can you quote and which major ones can you not represent; does your compensation change by which PEO I select, and by how much; is the commission recurring or one-time; can I see each PEO's administrative fee as its own line rather than a bundled total; and will the PEO confirm in writing that my rate is the same without you in the deal. Reluctance on the first, second or fourth question is the signal to walk.
Is a PEO broker worth it?
Usually, because PEO pricing is wider than buyers expect. On one recent 39-employee comparison, three PEOs priced administrative fees on the same census at $24.00, $32.15 and $150.00 per employee per month, a six-fold spread, and the lowest fee did not win because medical premium and workers' comp treatment moved the total the other way. Get one direct quote yourself as a control group.