How PEO pricing works
A professional employer organization, or PEO, helps with payroll, benefits and HR. Providers commonly charge a set fee per employee or a percentage of payroll. Check whether that fee is billed monthly or each pay run.
There is no single price that fits every company. Team size, work states, job types, benefits and the services you need can all affect a quote. The admin fee is only one part of the bill. ADP’s pricing guide explains these fee structures and cost factors. Your written proposal sets the actual terms.
Put both quotes on the same basis
Give each provider the same employee count, payroll, work locations and benefit needs. Then ask both to fill in these rows for the same year. Keep employer costs separate from employee deductions.
| Cost to check | Question to ask |
|---|---|
| Admin fee | What is the rate, billing period and minimum charge? |
| Benefits | Which plans are priced, and what will the company pay? |
| Workers’ compensation | Is this included or separate? What assumptions set the price? |
| Payroll taxes | Which amounts are shown, and which need a separate review? |
| Extra services | Are setup, extra pay runs and the tools we need included? |
| Renewal and exit | What can change next year? What costs apply if we leave? |
Ask for an itemized quote, not just one total. Paychex’s PEO selection guide also recommends checking the services and fees behind a proposal.
Two quotes. One fair comparison.
A monthly fee and a percentage of payroll cannot be compared at a glance. First, put both on a yearly basis. Then add the same services your team needs.
One team, the same needs
25 employees. $1.5 million in yearly payroll. The team needs time tracking and six extra pay runs. Assume headcount and payroll stay the same all year.
| Cost to compare | Sample quote A | Sample quote B |
|---|---|---|
| Fee basis | $85 per employee each month | 1.8% of yearly payroll |
| Yearly admin fee | $25,50025 × $85 × 12 | $27,000$1,500,000 × 1.8% |
| Time tracking | $2,400$200 per month × 12 | Included |
| Six extra pay runs | $1,8006 × $300 | Included |
| Comparable subtotal | $29,700 | $27,000 |
A starts with the lower admin fee. B is $2,700 lower once these services are included. That does not make B the better PEO. It tells us which cost questions to ask next.
These subtotals exclude benefit premiums, payroll taxes, workers’ compensation, setup and other charges. Confirm those amounts before comparing the full bill. Also check what counts as payroll, minimum fees and how either quote changes as you hire or raise pay.
What we would check next
Do both time-tracking tools do what the team needs? Are the six extra pay runs covered in writing? Do the benefit plans and support fit? A lower subtotal is useful only when we know what it buys.
What to bring to a cost review
- Your latest PEO invoice or current payroll and benefits costs.
- Any new proposal, including the fee schedule and plan details.
- Your team size, work states and renewal date, if you have one.
- The two or three things you most want to improve.
No current PEO? Start with the separate services you use today. Already in a PEO? Compare the renewal offer as well as a new quote. Our switching PEOs checklist covers the next set of questions.
Make sense of the whole proposal.
Review the costs, gaps and tradeoffs with a broker before you choose.