PEO cost, explained: what the fee covers and what it never will

Two fee structures, and why the difference matters

PEO pricing generally takes one of two forms. A per-employee-per-month (PEPM) fee is flat and predictable: every employee costs the same administrative fee regardless of salary. A percentage-of-payroll fee scales with compensation, so it rises as you give raises or hire more expensive roles.

The structure you choose should match your workforce. A commission-heavy or highly paid team usually prefers PEPM, because a percentage model gets expensive as payroll grows. A lower-wage workforce often prices better on a percentage basis, because a flat fee per employee is a larger share of total payroll cost.

Published pricing exists, but not everywhere

A minority of providers publish rates. As of this writing, Justworks lists its PEO plans publicly: PEO Basic at $79 per employee per month, PEO Plus at $124 per employee per month, and a payroll-only plan at $8 per employee per month plus a $50 monthly base fee. It also lists add-ons such as $30 per employee per month for dedicated HR consulting and $8 per employee per month for time tracking.

Those are administrative fees only. Most established national PEOs — including TriNet, Insperity, and ADP TotalSource — quote custom proposals instead, because their economics depend on your employee census, states, industry risk class, and plan selections. A provider that will not put a fee schedule in writing during evaluation is telling you something about the process.

The three costs the fee does not include

A PEO quote is an administrative fee. Three other cost lines exist whether you use a PEO or not, and two of them change when you do.

Health insurance premiums, workers’ compensation, and payroll taxes exist in both models. What changes is the group you are buying through and the rate you get. Workers’ compensation in particular is priced by industry class and claims experience, so a PEO does not automatically make it cheaper.

• Health, dental, and vision premiums — employer and employee contributions
• Workers’ compensation, priced by industry and experience
• Payroll taxes, including federal and state unemployment insurance

Build the comparison yourself

Do not rely on a provider’s savings claim. Build one spreadsheet with your actual census and model both options side by side. The line items below are the ones that decide the answer.

• Current payroll cost plus every HR and compliance tool you pay for
• Current broker fees, if any, and internal time spent on HR administration
• Estimated employer hours per month on payroll, benefits, compliance, and employee questions — value them honestly
• Proposed PEO administrative fee at your real headcount and payroll
• Proposed premiums and workers’ compensation under the new group
• Implementation cost, and any cost to exit or transfer data later

Read the exit before you sign

Ask what happens on termination: notice period, data export format and timing, benefit transition, benefit runout, and whether any renewal obligations survive. Cheap entry pricing with an expensive exit is not cheap. Ask for the answer in the contract, not in a sales call.