PEO Authority
2026 Pricing Guide

How Much Does a PEO Cost?

PEO pricing can be confusing. This guide breaks down exactly how it works, what you should expect to pay, and how to evaluate whether it makes financial sense for your business.

The two main pricing models

PEOs use one of two pricing structures. Understanding which model a provider uses is essential before comparing quotes.

Per-employee per-month (PEPM)
$100 – $200 per employee/month

A flat fee charged for each employee on your payroll each month. Predictable, easy to budget. More common with smaller businesses and modern PEO platforms.

Best for: Businesses that want predictable costs
Percentage of payroll
2% – 12% of total gross payroll

A percentage of your total payroll each period. Costs scale with your payroll, meaning they rise as you give raises. More common with traditional and larger PEOs.

Best for: Businesses with lower average salaries

What affects your PEO cost?

Number of employees
More employees = lower per-employee cost. The per-employee rate often drops significantly at 25, 50, and 100 employee thresholds.
Industry and risk profile
High-risk industries like construction or manufacturing pay more due to higher workers compensation costs built into the PEO arrangement.
Location and states
Multi-state businesses often pay more due to compliance complexity. States with higher workers comp rates like California and New York increase overall cost.
Services included
A bare-bones payroll-only arrangement costs less than a full-service PEO with HR consulting, recruiting, and learning management systems.
Benefits choices
The health insurance plan tier you choose significantly impacts total cost. Some PEOs bundle benefits into their fee; others bill them separately.
Contract length
Annual contracts typically offer better rates than month-to-month arrangements. Some PEOs offer multi-year discounts.

Sample cost scenarios

These are illustrative examples based on typical market rates. Your actual costs will vary.

Company sizeAvg salaryPEPM model% payroll model
10 employees$50,000$1,200–$2,000/mo$833–$5,000/mo
25 employees$60,000$2,500–$4,000/mo$2,500–$15,000/mo
50 employees$65,000$4,500–$7,500/mo$5,417–$32,500/mo
100 employees$70,000$8,000–$14,000/mo$11,667–$70,000/mo

Note: These ranges reflect administrative fees only and exclude benefits premiums, workers compensation, and 401k costs.

Is a PEO worth the cost?

For most businesses with 10 or more employees, the answer is yes — but the math depends on your current setup. Consider what you currently spend on:

Payroll processing software or service
HR software and HRIS platforms
Benefits broker fees and administration
Employment law or HR consulting
Your own time spent on HR tasks (at your hourly value)
Costs of any HR compliance mistakes or fines

Most businesses find that the PEO administrative fee is largely offset by savings in benefits purchasing power alone — access to large-group health insurance rates can save $200-$500 per employee per year compared to small-group market rates.

Frequently asked questions

Is PEO pricing negotiable?

Yes, especially for companies with 25+ employees. PEOs will often negotiate on the administrative fee, particularly if you are switching from a competitor or have a clean workers compensation history.

Are there setup or onboarding fees?

Some PEOs charge a one-time setup fee ranging from $500 to $2,000. Others waive this entirely. Always ask upfront and factor it into your year-one cost comparison.

What is included in the PEO fee?

Most PEO fees cover payroll processing, tax filings, HR support access, compliance assistance, and the technology platform. Benefits, workers compensation premiums, and 401k plans are typically billed separately at cost.

How do I know if a PEO is worth the cost?

Compare what you currently spend on payroll processing, HR software, benefits administration, and any outside HR or legal counsel. Add the value of time you personally spend on HR tasks. Most businesses find PEO costs are offset by savings in benefits purchasing power alone.