The cost of a Professional Employer Organization (PEO) typically depends on the company’s size and the specific services selected. Most PEOs use a pricing structure based on a percentage of the business’s gross payroll, which generally ranges from 2% to 10%.
Key cost considerations include:
- Annual Payroll Volume: For a company with an annual payroll of $1 million, a rate of 4% to 6% would result in yearly costs of $40,000 to $60,000.
- Service Level: Administrative service-only options for basic needs are at the lower end of the pricing scale.
- Setup Fees: Initial implementation and contract customization usually involve setup fees averaging between $500 and $2,000.
- Influencing Factors: Total costs are affected by the total employee count, the industry risk profile, and the complexity of the benefits provided.
While these fees represent an investment, the model can offer savings by reducing internal HR overhead and providing access to lower group rates for benefits like health insurance and 401(k) administration.
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