How Much Does a PEO Cost? Pricing, Fees, and Examples

To compare your options properly, separate what you’re paying the PEO from what you’re paying for your team.

This guide breaks down common pricing models and invoices, then uses three example businesses to show what those costs can look like over a year.

How Much Does a PEO Cost?

There’s no one PEO price that works for every business.

For example, Justworks’ published PEO pricing lists its Basic plan at $79 per employee per month, and Plus at $124 per employee per month, with no base fee. (These prices were checked on September 27, 2026).

Those are Justworks’ plan prices, not an industry average or a range that predicts your quote. The Plus plan includes admin support for medical, dental, and vision plans. For its PEO-sponsored large-group coverage, insurance premiums cost extra and appear on its combined bill. That’s why your budget should separate the PEO fee from wages, employer taxes, insurance, and optional services.

Your quote needs to reflect your headcount, payroll, employee locations, industry, insurance needs, and service scope. Start with two questions: What does the administrative fee cover, and what will we pay outside it?

Comparing the Main PEO Pricing Models

The two main PEO pricing models are per employee per month (PEPM) and a percentage of payroll. Justworks uses monthly employee pricing, while the IRS explains that PEO fees are typically based on payroll costs.

The table below compares administrative fees only, assuming the rate and service scope stay unchanged.

PEPM: budget around billable headcount

For a stable team, the annual formula is:

PEPM rate × billable employees × 12 = annual administrative fee

If staffing changes, calculate each month’s charge and add the results. Don’t assume “employee” means full-time equivalent: two part-time workers might generate two charges.

For example, Justworks’ billing rules cover active employees, employees paid during the month, and unpaid owners. Its rules aren’t universal, but they show why you need a written definition rather than a casual headcount estimate.

Percentage pricing: budget around covered payroll

For percentage pricing, the annual formula is:

Agreed percentage × annual payroll covered by that fee = annual administrative fee

Ask whether the base includes overtime, bonuses, commissions, and other pay. At an unchanged percentage, more covered payroll means a larger fee, even without new hires.

Find out if the quoted rate covers just the admin fee, or if it bundles in other costs. A bundled rate can’t be compared directly with an admin-only PEPM price. If a quote combines a fixed charge with a variable charge, calculate both parts.

Know What the Administrative Fee Covers

A PEO shares some employer duties with you under a contract. This is called co-employment. You still run your business and manage your team’s day-to-day work. NAPEO’s service overview lists these types of support:

• Payroll processing: Handling pay and related records.
• Tax support: Preparing filings and managing tax payments.
• HR support: Guidance on employee issues, policies, and processes.
• Benefits admin: Helping staff enroll and managing plan details.
• Workers’ compensation support: Helping manage coverage and claims.
• Compliance tools and advice: HR systems and help with employment rules.

The contract (not the category name) tells you what’s included. Ask whether support is advisory or hands-on, which tasks stay with your team, and whether specialist help costs extra.

Break Down the Rest of the Invoice

Once you’ve identified the PEO’s fee, separate it from the employment costs on the rest of the invoice. Processing payroll isn’t the same as funding wages, and managing benefits isn’t the same as paying insurance premiums.

NAPEO describes PEOs remitting wages and taxes as part of their role. Those funds shouldn’t be counted as the provider’s service fee simply because they flow through its invoice.

Use this invoice overview table to request a breakdown. “Pass-through” means an underlying employment cost here, but it doesn’t guarantee the provider charges it at cost without a markup. The possible extra-fee rows are questions to check, not charges every PEO sets.

Packaging varies. For instance, Justworks explicitly advertises no implementation fee. Get the same level of clarity from every provider rather than assuming a setup charge always applies or never does.

For employer-cost comparisons, separate employee-paid deductions from employer spending. A health premium partly funded through payroll deductions isn’t entirely an employer expense. Likewise, amounts withheld from gross wages aren’t extra wages to add again.

Identify What Could Change Your PEO Price

Not every factor changes the administrative fee. Some change insurance, taxes, or your total budget instead. Ask the provider to show you where each factor appears.

Headcount and pay: test your growth plans

Under PEPM, hiring changes the billable population. Under percentage pricing, pay increases can change the fee even when staffing stays flat. Ask whether headcount tiers or minimum charges apply, and model seasonal staff month by month.

States, industry, and claims: check the insurance assumptions

Request a quote using each employee’s actual work state and duties, not just your headquarters address or a broad industry label.

Workers’ compensation needs care. Jobs fall into risk classes with base rates. California’s insurance regulator explains that those rates can change based on the business, its safety record, and past claims. This guidance applies to California, but it isn’t a national pricing formula.

For field businesses, ask which risk classes cover office staff and on-site workers. Is the insurance price final? Could a risk review, payroll change, or later adjustment change it? You may hear the term underwriting. This means the provider or insurer reviews the risk before accepting it or setting terms.

Benefits: hold the coverage and employer contribution steady

Use the same number of enrolled staff and dependents, similar coverage, and the same employer share of costs. A smaller bill isn’t a like-for-like saving if staff simply pay more of the premium.

Ask what changes at renewal and whether quoted rates depend on participation or other conditions. Keep health-plan selection separate from choosing the cheapest administrative fee.

Service scope and contract: price the work you’ll actually need

Give providers your payroll frequency, implementation needs, and required support level. Ask whether extra payroll runs, data migration, integrations, or specialist HR help change the price.

Check the contract length, promotional discounts, renewal rules, and notice period. A first-year discount only belongs in the first-year budget, not automatically in every future year.

Calculate PEO Cost Per Employee Without Inflating the Fee

To calculate PEO cost per employee, use two separate measures:

Annual administrative and related service charges ÷ total employee-months = effective administrative cost per employee per month

Employee-months means adding the covered employee count for each month. For a stable team, that’s headcount × 12. Use the same group of staff and counting method across quotes. But use each provider’s own billing rules to work out its charges.

Add required service extras and setup fees to the first-year total before dividing. Then work out an ongoing figure. Leave out one-time charges and use the stated ongoing terms.

(Administrative/service charges + employer-funded benefits + employer taxes + workers’ compensation + other included employer costs) ÷ total employee-months = broader PEO-related employer cost per employee per month

Define the included categories alongside this measure. Here, it excludes wages and employee-funded deductions. It’s a budgeting measure, not the provider’s fee or the extra cost caused by choosing a PEO.

Many of those employment costs belong in your current setup, too. If you compare a PEO’s full invoice with only your payroll software fee, the PEO will look much more expensive than it really is.

Estimate your PEO service costs

Use this PEO Cost Calculator to estimate your first-year and ongoing service fees. This calculator excludes wages, employer taxes, benefit premiums, and workers’ compensation, which should be reviewed separately.

See How PEO Costs Compare for 3 Businesses

PEO pricing can look very different depending on your team size, payroll, and pricing model. The examples below show how those differences can affect annual costs for three types of businesses.

The numbers are just examples to show how the math works. They aren’t market averages, provider quotes, or recommended tax or insurance rates. Each example assumes the same number of employees for a full year, and all amounts are in U.S. dollars.

• A 12-person professional-services business: separate fees from employment costs

Let’s say a professional-services business has 12 billable employees and $900,000 annual payroll. The proposal charges $100 PEPM plus $1,500 setup.

• Recurring administration: 12 × $100 × 12 = $14,400/year.
• First-year administration and setup: $14,400 + $1,500 = $15,900.
• First-year effective administrative PEPM: $15,900 ÷ 144 employee-months = $110.42.

Now assume eight employees enroll in benefits, with an employer contribution of $400 each per month. Also assume $70,000 in employer payroll taxes and $6,000 in workers’ compensation for the year. (Remember: these are sample budget inputs, not calculated tax or insurance quotes).

• Employer benefits: 8 × $400 × 12 = $38,400.
• Broader first-year employer cost, excluding wages: $15,900 + $38,400 + $70,000 + $6,000 = $130,300.
• Broader monthly cost per employee: $130,300 ÷ 144 = $904.86.

The business isn’t paying a $904.86 admin fee. Its recurring PEO fee is $100 PEPM, while the larger amount also includes setup and employer-paid employment costs. Employee-paid premiums are excluded, and no other employer costs are assumed.

• A 40-person hourly, multi-state business: compare the complete service package

A multi-state business has 40 employees and $2 million in covered annual payroll. These two example quotes cover the same states and required services.

Hypothetical service cost	Proposal A: PEPM	Proposal B: payroll percentage
Base administration	40 × $80 × 12 = $38,400	$2,000,000 × 2% = $40,000
Required service add-on	$3,600/year	Included
Setup	$2,000	$1,000
First-year service total	$44,000	$41,000
First-year effective PEPM	$91.67	$85.42
Ongoing service total (excluding setup)	$42,000	$40,000
Ongoing effective PEPM (excluding setup)	$87.50	$83.33

The ongoing figures assume the same rates, payroll, and add-on costs. Renewal terms could change them.

Proposal A has the lower base fee, but Proposal B has the lower first-year service total. Neither total includes wages, employer taxes, benefits, or workers’ compensation. Compare those costs separately using the same assumptions.

Now suppose covered payroll rises 10% to $2.2 million with no change in headcount. Proposal B’s base admin fee becomes $2,200,000 × 2% = $44,000. Proposal A’s base remains $38,400 if its rate stays unchanged. Recalculate the full package before deciding which model fits next year’s budget.

• A 75-person field business: isolate the insurance exposure

In this example, a field business has 75 employees, $4.5 million in covered annual payroll, and an admin-only fee of 1.8%.

• Annual administration: $4,500,000 × 1.8% = $81,000.
• Administrative PEPM: $81,000 ÷ 900 employee-months = $90.

Now take a simple insurance example. Assume all payroll uses one hypothetical workers’ compensation rate, with no other adjustment: $3.50 per $100.

• Workers’ compensation: ($4,500,000 ÷ 100) × $3.50 = $157,500/year.
• Administration plus workers’ compensation: $81,000 + $157,500 = $238,500/year.

That’s only a two-category subtotal. It excludes wages, benefits, employer taxes, setup, and other charges.

A $1 change in the assumed insurance rate per $100 of payroll changes this simplified premium by $45,000/year. That’s why a field business should check classifications and policy terms, not just focus on the $90 admin PEPM.

Note that real insurance calculations may use multiple classifications and adjustments (this isn’t an industry rate estimate).

Compare PEO Quotes Fairly

Use this checklist before choosing a provider to make sure you’re comparing each PEO quote using the same assumptions.

• Isolate administration. Request the service fee separately from wages, taxes, and insurance, even if the invoice bundles them.
• Align the workforce forecast. Use the same monthly employee counts, work states, payroll, and expected pay increases.
• Match the services. Add any required services that aren’t included in the lower-priced package.
• Separate employment costs. Compare benefits, employer contributions, workers’ compensation coverage, and tax assumptions line by line.
• Calculate annual totals. Build a first-year view with setup and an ongoing view using recurring charges. Identify promotional discounts.
• Check renewal assumptions. Record what can change, when it can change, and whether any increase limits apply.
• Review contract and exit terms. Pay attention to notice deadlines, possible termination charges, data-export costs, and final reconciliations.

Ask These Pricing Questions Before Signing

Before signing with a PEO, get these answers in writing and keep them with the proposal:

• What exactly does the PEPM rate or payroll percentage cover?
• Which employees and owners are billable? How do you handle part-time staff, leave, new hires, and departures?
• Are there minimum fees, headcount commitments, or partial-month rules?
• Will raises, bonuses, commissions, or overtime increase the administrative charge?
• Can you provide the complete fee schedule, including year-end and off-cycle processing?
• Which insurance costs, employer contributions, employee deductions, or markups are separate?
• Is pricing final, or does it depend on underwriting, enrollment, or other conditions?
• What does implementation include, and which add-ons will we need?
• When do administrative and insurance rates renew, and how much notice will we receive?
• What happens financially if we terminate, including final payroll, reporting, and reconciliations?

Consider Costs for Workforce Software

A PEO may not cover every workforce tool your business needs. Check whether the package includes scheduling, time tracking, PTO, and team messaging. If you’ll need to keep or add another platform, include its subscription and setup costs in your overall budget, separate from the PEO’s admin fee.

For example, Connecteam’s employee scheduler helps you create and share shifts, and its employee time clock tracks work hours and prepares timesheets with breaks, overtime, and time off. These tools support workforce management, but they don’t replace a PEO’s co-employment services.

Before adding a separate tool, check how it works with your PEO, how payroll data is transferred, and whether either provider charges integration fees. You also don’t want to pay twice for the same features unless the separate software fills a clear gap.

The Full Cost of a PEO

PEO pricing gets much easier to compare once you separate the provider’s fee from the costs of employing your team.

Focus on the full yearly cost, compare each quote using the same assumptions, and get the breakdown in writing before you sign. That way, you can choose a PEO based on what your business will actually pay.