PEO costs: What your business needs to know

As HR leaders increasingly look for ways to streamline their operations, reduce risk, and scale efficiently, professional employer organizations (PEOs) have emerged as a powerful solution.

But how much does a PEO actually cost? Is the investment worth it — and what factors influence the price?

In this article, we’ll unpack everything you need to know about PEO pricing. Whether you’re evaluating providers for the first time or reassessing your current setup, this article will help you understand the true cost of a PEO, what you get for your money, and how to assess value for your business. So let’s jump straight in.

How much does a PEO cost?

The short answer is: it depends. This is because most PEOs offer two common pricing models, as follows:

1. PEO cost per employee per month (PEPM)

This is the most common structure for small and mid-size businesses, and can range from anywhere between $40 and $250 per employee per month.

For example, if you have 20 employees and your PEO provider charges $200 per employee, you’ll pay $4,000 per month.

A lot of companies prefer this model because it is predictable and scales linearly with your workforce, making it easier to budget.

2. PEO cost as a percentage of payroll

Another option is to charge costs as a percentage of your payroll. This approach is often used by larger businesses (or those with fluctuating headcounts or compensation levels).

Under this model, most providers charge between 2% and 12% of your gross payroll. So if your monthly payroll is $100,000 and your PEO charges 5%, you’ll pay $5,000 per month.

This structure ties the PEO price directly to your compensation, which can be an advantage or a disadvantage depending on your workforce profile.

Breakdown of estimated PEO costs (based on provider type):

Note that while these approaches are the most common, some providers also offer other pricing models, including:

• Tiered pricing
• Usage-based pricing
• Hybrid pricing
  
  

What’s included in PEO pricing?

Understanding what you’re paying for is essential, as there may be key services not included. Most PEO costs include:

When dealing with a PEO provider, it’s hugely important to ask for a detailed breakdown of what’s included in the PEO pricing, especially if the service quoted is in the lower range. This is because some providers charge extra for certain services, such as compliance audits, offboarding, or legal advice.

See also: Does your business need a PEO or an employer of record (EOR)?

What factors affect PEO cost?

Several variables can also influence the final cost of a PEO, including:

1. The size of your company: Larger teams may get volume discounts. However, very small companies (e.g., under 10 employees) might face higher per-head rates.
2. The amount of compensation you pay: Higher salaries can increase costs under payroll-percentage pricing models.
3. Your industry risk profile: Businesses in construction, healthcare, or other high-risk fields may potentially face higher workers’ compensation insurance rates.
4. How customized your benefits are: If you provide (or want to provide) tailored benefits for your employees, this can increase the PEO price — especially if you want to retain your current plans rather than use the PEO’s pooled offerings.
5. Your location: PEOs must manage compliance and payroll in each jurisdiction, so if you have a multi-state or international setup, it may cost more.
6. The level of service: The level of service you are receiving also impacts the price. For instance, full-service, white-glove PEOs typically charge more than tech-focused, self-serve models.

Hidden costs to watch out for

Unfortunately, not all PEO providers are transparent in their pricing models. When researching partners, it’s important to be aware of:

• Setup or onboarding fees (are they flat, or per employee?)
• Year-end fees for tax documentation
• A la carte charges for HR training, terminations, or custom policies
• Early termination fees in long-term contracts

As a result, it’s a good idea to ask for a sample invoice or pricing schedule before signing.

See also: Does your business need an ASO or a PEO?

PEO vs in-house HR: Cost comparison

When considering a PEO, the big question is whether it’s more cost-effective than an in-house team.

While this will vary based on a number of circumstances, here’s a basic comparison:

As you can see, a PEO can potentially reduce your overhead by as much as 30 to 50%, especially for small and mid-sized teams without a dedicated HR department.

Choosing a PEO based on cost and value

When evaluating PEO pricing, don’t just look at the sticker price. Make sure you take into account:

• What exactly is included
• The transparency of the costs
• The level of support provided
• The PEO’s industry expertise
• The available tech integrations
• The flexibility to scale or exit

Remember: A lower PEO cost isn’t always better if it comes at the expense of compliance, usability, or service.

The real question isn’t just how much your PEO costs — it’s what value does it bring to your business?

How can Remote help?

As a mid-size PEO provider in the US, Remote is well-placed to take care of your payroll, benefits, compliance, and onboarding needs — saving you time, money, and resources.

To learn more — and to get a detailed breakdown of our pricing plan — speak to one of our friendly experts today.