How much does a PEO cost?

Advertised prices, verified

How a PEO quote is built

1. The PEO underwrites your business. Quotes are individual because the PEO is taking on risk: your state, industry classification, claims history and payroll size drive its workers' compensation and unemployment cost assumptions before any service fee is added.
2. The administrative fee is set, flat or as a share of payroll. A flat per-employee monthly fee stays predictable as wages rise; a percentage of payroll grows with every raise and bonus you pay. Ask for the same quote expressed both ways, because the crossover point depends on your average salary.
3. Pass-through costs are layered on. Benefits premiums, employer taxes and workers' comp are collected by the PEO and passed to insurers and authorities. These belong on separate invoice lines; a single blended rate makes it impossible to see what the PEO itself is charging.
4. You compare the fee, not the invoice total. Two PEOs quoting the same business can differ mostly on benefits plan choices rather than on their own fee. Strip the quote to the administrative fee per employee per month and compare that number across vendors, then compare the benefits value separately.

Flat fee or share of payroll: which costs less

A flat per-employee fee is easier to audit and does not penalise pay rises: employ the same ten people at higher salaries and the PEO's take stays the same. Percentage pricing is often quoted to smaller or lower-wage employers because it looks small, but it scales with total payroll, so the same service costs more every time compensation grows. Vendors in this index that publish pricing overwhelmingly advertise flat monthly amounts, and the median across the 7 vendors with a verified price is $499 per month.

Watch the boundaries of the fee. Setup or implementation charges, minimum headcounts, per-run payroll charges, off-cycle payment fees and early termination clauses all change the effective price. A PEO agreement is also a relationship you may one day unwind: ask what leaving costs, and who owns the workers' compensation claims history and state unemployment rate when you go, because those follow your business and affect what you pay after the PEO.

What you get for the fee, and when it stops being worth it

The fee buys consolidated payroll and tax administration, access to the PEO's benefits plans, workers' compensation coverage under its program, and HR compliance support. For small employers the benefits access is frequently the decisive item, since group rates on the PEO's plans can beat what a small company obtains alone. The industry association NAPEO reports that businesses using PEOs are measurably more likely to survive and grow, though such figures describe the population, not any single firm.

The model fits less well as you grow your own HR function: at some headcount you are paying for administration you could run internally, and the percentage model in particular becomes expensive at scale. It also does not cover hiring where you have no entity at all; that is employer-of-record territory, priced separately and compared on its own page here. Pricing and plan documents control; nothing on this page is legal, tax or benefits advice.

Common questions

What are the two PEO pricing models?

A flat fee per employee per month, or a percentage of total payroll. Flat fees stay constant as wages rise; percentage pricing grows with every raise. Ask any vendor to express its quote both ways so you can see the crossover for your salary levels.

What is a pass-through cost on a PEO invoice?

Money the PEO collects and forwards rather than keeps: benefits premiums, employer payroll taxes, workers' compensation premiums. You would owe versions of these without a PEO, so only the administrative fee is the true price of the service.

Why will no PEO publish an exact price for my company?

Because the quote embeds underwriting: your state, industry risk class, claims history and payroll size change the PEO's own costs, especially for workers' compensation. Published figures are starting tiers; the itemised quote is the real number.

Is a PEO cheaper than hiring through an employer of record?

They are different products. A PEO co-employs staff on your own US entity and is typically priced lower per employee; an EOR is the sole legal employer where you have no entity, with fees at a different level, with a median of $499 among vendors here that publish prices.

Coverage by country

• Employer of record vendors covering Singapore
• Employer of record vendors covering Mexico
• Employer of record vendors covering Spain
• Employer of record vendors covering Colombia
• Employer of record vendors covering United Kingdom
• Employer of record vendors covering France
• Employer of record vendors covering Hungary
• Employer of record vendors covering New Zealand