What a PEO actually costs — and what the quote leaves out
PEOs price one of two ways: a flat fee per employee per month, or a percentage of gross payroll. Neither number tells you your real cost until you know what's bundled and what's billed on top.
Here are the ranges, the pass-through costs that surprise people, and the five things to line up before you compare two proposals.
The two pricing models
Which one is cheaper depends entirely on your wage levels and how much your headcount moves.
Per-employee-per-month (PEPM)
Fixed dollar amount per head, per month.
- Predictable regardless of what you pay people
- Budgets cleanly with stable headcount
- Usually the better deal at higher average salaries
Percentage of gross payroll
Fee scales with what you run through payroll.
- Rises and falls with payroll — useful when work is seasonal
- Often cheaper for lower-wage or variable-pay workforces
- Watch it: raises and overtime quietly raise your fee
Included vs. billed separately
This is where two quotes stop being comparable. Pass-through costs exist whether or not you use a PEO — what changes is how they're priced and managed.
Why two quotes differ by thousands
- Industry risk and your claims history
- Workforce mix and turnover
- Benefits plan design and how much you contribute
- Number of operating states and compliance complexity
- What's bundled versus charged on top
If a quote looks unusually low, the assumptions underneath it are usually the reason.
Line these five up before you compare
- The pricing model each one is using
- What services sit inside the base fee
- The workers' comp assumptions — class codes and mod
- Benefits structure and renewal history
- Contract terms, minimums, and exit provisions
Real comparison happens below the headline number. We'll do this part for you.
What it costs — and what employers your size actually saved
Most brokers make you book a call to hear a number. Put your headcount and average wage in and get both halves of the equation — the fee, and what employers we placed actually kept. No email required.
This is an estimate of the administrative fee — the PEO's charge for payroll, HR, compliance and benefits administration. It is not benefits premiums or workers' comp, which depend on your plan design and claims history.
Higher-risk workforces carry more compliance and claims administration, so the admin fee sits higher in the range.
NAPEO puts the all-in cost of a PEO at roughly $1,395 per employee per year across administration, benefits and risk. Your administrative fee is only one line of that.
Across four placements — a vineyard, a non-profit ambulance service, an urgent care clinic and a tribal government entity — savings ran from $1,187 to $1,821 per employee per year. That is money kept on benefits premiums, workers' compensation and unemployment.
Those savings are already net of the PEO's fee — don't subtract the number above from them. On one real comparison the winning PEO charged $4,203 more in administration and still saved the employer $21,467.
Your result depends on what you pay today, your claims history and your renewal. Some employers save nothing. When that's the answer, we say so — it's the same fee to us either way.
A range is the honest answer. Any broker who gives you one number before seeing your census, your workers' comp class codes and your current renewal is guessing. What moves your number: claims history, benefit plan design, how much of the premium you cover, how many states you run payroll in, and whether the PEO wants your industry this year.
Get the real numbers from 3–5 PEOsWhat a real comparison looks like
A Texas employer, 15 employees, $1.97M of payroll. Three PEOs quoted on identical assumptions. Names removed, numbers untouched.
Read the administrative line first, then the total. The PEO that won cost $4,203 MORE to administer than doing nothing — and still saved them $21,467.
Swipe the table to compare all three →
One of the three would have cost them $22,244 a year. That is the quote you never see when a single PEO is the one doing the quoting.
Get your PEO quotes compared
Free to your business. The PEO you choose pays the broker fee — and it's the same fee whichever one you pick.
Questions employers ask us first
Is a PEO more expensive than payroll software?+
On the admin line, yes. Payroll software covers payroll. A PEO adds benefits administration, workers' comp support, and HR compliance resources you would otherwise buy, staff, or absorb as risk — so the honest comparison is all-in, not fee-to-fee.
Do PEO costs change if my headcount changes?+
Yes. Pricing adjusts as employees are added or removed. How sharply depends on which model you're on — PEPM moves in steps, percentage-of-payroll moves continuously.
Are there hidden fees with PEOs?+
Unexpected costs almost always come from misreading what's included versus passed through, not from the pricing model itself. That's exactly what the comparison table above is for.
Can I leave a PEO if the pricing stops working?+
Most agreements allow it, but terms vary and renewal timing matters more than anything else in the contract. Know your exit provisions before you sign, not at renewal.
Will a broker's fee raise my cost?+
No. Broker compensation is already built into PEO pricing and does not increase what you pay.
Not sure a PEO is even the right model?
Read the straight comparison against a payroll company and an ASO before you price anything.