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How Much Does It Cost to Use a PEO?


The cost of using a professional employer organization (or PEO) is usually determined by the size of a company. Most commonly, it's calculated as a percentage of the company's annual payroll.

Most small to medium-sized companies can expect to spend around 2.51% to 2.92% of their total payroll on a PEO service.

This is not the only pricing model used by employee leasing companies. Some PEO services may charge a flat fee per employee per month.
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Unfortunately, there is no fool-proof way to estimate the cost of using an employee leasing company. We recommend getting quotes from a few different PEO companies before making a final decision.

PEO pricing may vary based on:

1. The size of your company. How many employees do you have? How much do you plan to grow?

2. Total payroll cost. PEO fees are usually based on your company's annual payroll spend. In some cases, it may be based on a set percentage of each employee's salary.

3. Services needed. A professional employer organization can provide many services. The cost will be determined by 1) the amount of assistance you need and 2) the level of benefits you provide to your employees. A PEO can handle many of the follow tasks, including:
  • Human resources (HR) coordination and compliance
  • Payroll services
  • Recruiting and employee training
  • Employee handbook creation
  • Background checks and drug screening
  • Group health and life insurance plans
  • Industry-specific regulatory compliance
  • Employee benefits
  • 401K and retirement planning
  • Worker's compensation
  • Risk assessment and management
  • Tax planning and reporting
There are many benefits to using a professional employer organization. Outsourcing HR and other tedious administrative tasks can help you focus on your core business activities. This can really make a difference for startups and other small businesses. You may even be able to save money and reduce turnover in the process.

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