One of the first questions business owners ask when considering a PEO is: “How much will this cost?” Unfortunately, there’s no simple answer because PEO pricing varies significantly based on your business size, industry, location, and the services you need.
However, understanding typical pricing models and cost ranges will help you budget appropriately and evaluate proposals more effectively.
Common PEO Pricing Models
PEOs typically use one of three pricing structures:
Percentage of Payroll: The most common model charges 3-12% of your total gross payroll. For example, if your annual payroll is $1 million and the PEO charges 8%, your cost would be $80,000 per year. This model scales with your business—as payroll increases, so does your PEO cost.
Per-Employee-Per-Month (PEPM): Some PEOs charge a flat fee per employee per month, typically ranging from $100-$200+ per employee. A company with 25 employees paying $150 PEPM would pay $3,750 monthly or $45,000 annually. This model provides predictable costs regardless of salary levels.
Flat Monthly Fee: Less common for small businesses, some PEOs charge a flat monthly administrative fee plus separate charges for specific services. This model works best for larger companies with more complex needs.
What Influences PEO Costs?
Several factors affect your final PEO pricing:
Company Size: Larger companies typically receive better per-employee rates due to economies of scale. A 5-person startup might pay $200 PEPM while a 100-person company might pay $120 PEPM.
Industry Risk: High-risk industries (construction, manufacturing, transportation) usually pay more due to increased workers’ compensation costs and regulatory complexity. Low-risk industries (professional services, technology) typically receive more favorable rates.
Geographic Location: PEOs operating in multiple states charge more due to complex compliance requirements. Single-state operations are usually less expensive.
Benefits Selection: Rich benefits packages with low deductibles and comprehensive coverage cost more than basic plans. Your benefits choices significantly impact total costs.
Claims History: Your workers’ compensation claims history affects pricing. Companies with clean safety records receive better rates than those with frequent claims.
Services Required: If you need specialized services like HR consulting, recruiting support, or dedicated account management, expect to pay premium rates.
Typical Cost Examples
To give you realistic expectations, here are approximate costs for different business scenarios:
Small Business (10 employees, low-risk industry): $1,500-$2,500 per month or $18,000-$30,000 annually
Mid-Sized Business (50 employees, moderate-risk industry): $7,500-$12,000 per month or $90,000-$144,000 annually
Growing Business (100 employees, professional services): $12,000-$18,000 per month or $144,000-$216,000 annually
These ranges include comprehensive services: payroll, benefits, workers’ comp, compliance, and HR support.
Hidden Costs to Watch For
Some PEOs advertise attractive base rates but add charges that inflate your actual costs:
Implementation Fees: One-time setup charges ranging from $500-$5,000
Technology Fees: Separate charges for HRIS platform access
Administrative Fees: Per-check processing fees or document fees
Benefits Markup: Hidden margins on insurance premiums
Exit Fees: Charges for leaving the PEO before contract term ends
Always request a complete breakdown of all fees before signing any agreement.
Is a PEO Worth the Cost?
While PEO services represent a significant investment, most businesses save money overall through:
- Reduced benefits costs (20-40% savings on insurance premiums)
- Eliminated HR staff salaries and overhead
- Fewer compliance penalties and legal issues
- Reduced workers’ compensation claims and premiums
- Decreased employee turnover (better benefits = better retention)
Many businesses find that PEO services pay for themselves while dramatically improving their HR operations.
Getting the Best PEO Pricing
Most business owners don’t realize that PEO pricing is negotiable. However, successfully negotiating requires industry knowledge, understanding of competing offers, and leverage.
This is where working with a PEO broker provides immediate value. At PEO Consulting Partners, we help clients reduce PEO costs by up to 40% through expert negotiation and competitive bidding.
Ready to see what a PEO would actually cost for your business? Start your free consultation and receive detailed pricing comparisons from multiple top-rated PEOs within 48 hours—with no obligation.