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Estimated PEO Cost
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Understanding PEO Costs
Professional Employer Organizations (PEOs) provide comprehensive HR outsourcing including payroll, benefits, workers compensation, and compliance management. PEO costs vary based on company size, industry, location, and the scope of services required.
Most PEOs charge either a flat per-employee-per-month fee or a percentage of total payroll. Typical costs range from $75 to $150 per employee per month for small businesses, with volume discounts available for larger employers.
Workers compensation insurance is often the single largest cost component in a PEO arrangement. States like California and New York have higher base rates, while industries like construction and manufacturing carry significantly higher premiums than office-based businesses.
Frequently Asked Questions
How much does a PEO cost per employee?
PEO costs typically range from $900 to $1,500 per employee per year, or roughly $75-$125 per employee per month. The exact cost depends on the number of employees, industry, state, workers compensation rates, and the specific services included in the PEO arrangement.
Is a PEO cheaper than doing HR in-house?
For most small and mid-size businesses (5-150 employees), a PEO is significantly cheaper than maintaining a full in-house HR department. Businesses typically save 20-35% on HR administration costs through economies of scale on benefits, workers comp, and payroll processing.
What factors affect PEO pricing?
Key factors include: number of employees, industry risk classification, state workers compensation rates, benefits plan selections, claims history (experience modification rate), and the scope of HR services required. High-risk industries like construction will pay more than low-risk office jobs.
How does workers compensation affect PEO costs?
Workers compensation is often the largest variable cost in a PEO arrangement. Rates vary significantly by state and industry, from as low as $0.50 per $100 of payroll for office workers to over $15 per $100 for high-risk construction work. Your experience modification rate (X-Mod) also impacts pricing.
What is included in PEO pricing?
Typical PEO pricing includes payroll processing, tax filing, HR administration, employee benefits (health, dental, vision), workers compensation insurance, compliance management, employee onboarding, and access to HR technology platforms.