How Much Does a PEO Cost?

PEOs are a cost-effective solution for small businesses, explore the reasons why and how they stack up against building an in-house HR team.

Blog Author - Justworks
Aug 17, 20234 minutes
Blog Author - Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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1920x1080 How much does a PEO cost

Professional Employer Organizations (PEOs) offer a great option for small businesses and startups looking to streamline their HR operations. With the ability to handle a variety of back-office tasks such as payroll, benefits administration, and compliance, PEOs can be a cost-effective solution for businesses of all sizes. Not only can PEOs help businesses reduce overhead costs, but they can also provide employees with access to benefits that they might not otherwise have. 

In this article, we'll dive into the cost of PEO services — as well as the value they provide — for both business owners and their teams.


Why PEOs are Advantageous for Small Businesses

If your company is between two and 200 employees, you’ll likely benefit from a Professional Employer Organization (PEO). Learn more about the PEO model.

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What Is The Cost Of PEO Services?

PEO pricing is typically structured either on a per-employee, per-month basis or through charging a percentage of payroll. PEOs may also have different packages or plans to choose from depending on the needs of your business and team.

Beyond that, you will pay for other PEO services that you access or use, such as health insurance premiums. Some PEOs will include additional features and tools at no additional charge within their pricing model, while others may charge add-on fees. It's important to look for PEOs that are transparent about pricing and costs.

Related Article: The Bottom Line: What's the ROI of a PEO?

Why PEOs Are A Cost-Effective Solution For Businesses

For small business owners and HR managers, time is precious, and every minute spent on administrative tasks is a minute taken away from strategic business initiatives. This is where PEOs come to the rescue. PEOs can also help you navigate the complex landscape of employment laws and regulations, which can be a daunting challenge for small businesses. 

Here are a few areas where the cost of PEOs provides significant value:

Streamlined Operations

  • Reduce administrative tasks: PEOs specialize in simplifying your business operations by taking on various administrative responsibilities. From payroll processing and employee benefits management to tax filing and HR paperwork, PEOs shoulder many of these burdens, allowing you to focus on growing your business.

  • Save on costs: PEOs offer economies of scale that allows businesses to get quality HR services at a lower cost. Not only do you save valuable time, but you also cut down on costs associated with hiring and training staff for these functions.

  • Increase productivity: With a PEO in your corner, your team can redirect their energy towards driving innovation and improving overall productivity and efficiency. 

Reduced Liability

  • Compliance support: PEOs can help businesses stay compliant and avoid potential fines and penalties. By partnering with a PEO, you gain access to a wealth of knowledge and support in terms of compliance and risk management. 

  • Risk management: PEOs can also help manage risks by providing access to workers' compensation and employment practices liability insurance (EPLI) coverage and managing claims. In the dynamic landscape of modern business, a PEO's expertise provides a sense of security that is invaluable for both your business and your peace of mind.

The Benefits Of A PEO For Employees

When it comes to the success of your business, it's important not to overlook the well-being and satisfaction of your employees in considering the cost of PEOs.

PEOs open doors to a range of benefits that might otherwise be out of reach for smaller businesses. Imagine being able to provide your employees with access to robust health insurance plans and retirement options – perks that often make a significant difference in attracting and retaining top talent. With PEOs, you can offer these perks, enhancing employee satisfaction while supporting their financial security for the long haul. 

PEOs can also assist in supporting a healthy work-life balance for your team by managing paid time off (PTO). Whether it's vacation days, sick leave, or holidays, PEOs can help streamline PTO tracking and ensure that your employees receive the time they need to recharge. This kind of support contributes to a positive work environment, boosting morale and ultimately increasing productivity.

Cost Of PEO Services vs. In-House HR

When comparing the cost of a PEO to in-house HR, there are several factors to consider.

  1. Cost structure & scalability: When it comes to the cost structure, PEOs often offer a more predictable and manageable expense profile. With in-house HR, you have to factor in hiring and training costs, salaries, benefits, and ongoing professional development. These costs can quickly add up, particularly as your business expands. On the other hand, PEOs typically charge a flat fee based on the number of employees or a percentage of the payroll. This simplifies budgeting and makes cost projections more accurate, even as your workforce grows. Scaling up or down with PEOs is far more straightforward, allowing you to adapt to market changes.

  2. Expertise and support: Running an in-house HR department demands a wide range of skills and knowledge. From benefits administration to compliance with labor laws, the demands can be overwhelming for a small team. You may need to account for the costs of ongoing training and development to ensure HR staff have the necessary skills and knowledge. PEOs, however, bring a wealth of expertise to the table. They are well-versed in managing complex HR functions, staying current with ever-changing regulations, and supporting compliance. With PEOs, you get a team of specialists in your corner.

  3. Additional benefits: One of the standout features of PEOs is the access they provide to robust employee benefits, often at a more affordable rate than small businesses can secure on their own. Offering health insurance, retirement plans, and other perks to your team becomes feasible. This not only enhances their job satisfaction but can also play a pivotal role in attracting and retaining top talent. When compared to in-house HR's administrative burden and potential limitations in benefit offerings, the cost-effectiveness of PEOs becomes even more clear.

In the end, the choice between PEO services and in-house HR depends on your business's unique needs and priorities. However, considering the cost structure, scalability, expertise, and access to additional employee benefits that PEOs bring to the table, they emerge as a compelling and cost-effective solution for small businesses aiming to thrive in a competitive landscape.

Justworks Can Help

Justworks PEO is an all-in-one payroll and benefits solution for small businesses. By partnering with Justworks, you gain access to vital services including payroll management, benefits administration, compliance support, and HR tools. Justworks takes care of time-consuming administrative tasks, freeing up business owners to focus on growing your business. To learn about the cost of PEO services with Justworks, visit our Pricing page.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Justworks
Aug 17, 20234 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

Learn more with Justworks’ Resources

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