Cost of PEO Services
When considering a potential PEO partner, one of the most important considerations is cost. For many companies they are looking into this option for HR needs or because they want to reduce their liability or avoid bringing on addiontal staff to manage risk or benefits. It takes a little time & effort from both parties involved before you can truly understand if the PEO is a cost effective model for your company as it is for so many.
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The cost of PEO services varies depending on what you are getting, but it usually starts at about $100-$200 per employee per month. Some companies offer discounts to their clients or those who sign up during certain times of the year; this can bring down your price further if you know when and how to negotiate it! You’ll also want to take into account any promotional deals that are available when calculating how much money will be saved by going with one provider over another - just remember these numbers may change so check carefully before committing yourself completely.
How a PEO Might Price Their Fees
The cost for a PEO can be based on either model, with some offering discounts depending who you want to account from. The two most common pricing schemes in the industry are:
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Percentage if Gross Payroll: When it comes to this method, you'll want to pay close attention the your gross numbers and net figures for the fees and taxes. Most PEO companies offer this approach as their standard option and depending on how big or small an organization is they can vary from 2% all the way up into 12%. Paying attention in these important numbers will help ensure that every dollar spent is accounted for.
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Per-Employee-Per-Month: This method is gaining in popularity and is often the preferred method for customers because it's easier to understand and has less varience. The per-employee cost of a PEO is typically fixed at $100-$200 dollars, depending on your organization's size and requirements. This makes it easy to scale as you grow with less risk in terms costs increasing exponentially while profits stay stable because they're tied directly into paychecks instead of gross payroll.
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Some, like the percentage method can be calculated easily and grow fluidly as your organization grows with you; while others might offer more flexibility such as flat fees - just keep in mind that they may not make sense when dealing smaller or larger number. Typically, one model will stand out if you have multiple offers on the table.
To find the best deal, you should consider both your current organization structure and how it will likely change as new roles and locations are added.
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Why Does the Cost of a PEO Vary?
You can see that a PEO will cost you differently depending on what benefits and services they offer. Most of the difference comes down to a few factors:
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The cost of your PEO services will depend on the size and needs for your company. Services are cheaper when they’re offered in larger groups, but smaller organizations may still find some deals that work well with their budget by looking at PEOs who provide packages tailored towards small businesses' - and all organizations have the potential for significant insurance savings.
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Salaried employees generally carry a higher price from the PEO than those who are paid hourly. This is largely because the full time salaried employees utilize more of the PEOs time and resources.
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The cost to administer benefits is a large part of the PEO’s expense, and it shows up in their pricing—if you have them included. If your workers don't receive any sort or group insurance coverage, then they will often be cheaper for an organization with higher wages because that offsetting factor balances out.
How Much Can a PEO Save Me?
When it comes to your ROI, there are several factors that determine your savings. These include:
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HR is a cost center that often gets overlooked when companies are looking to cut their expenses. The real savings on HR services should be considered in addition with the potential decrease of benefits administration and health insurance prices, not just wage expenses for administrative staff.
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One of the greatest benefits a PEO offers is risk management. This can be hard to quantify, but if you have an established target for reduction in workers compensation costs or employee disputes and want better outcomes when hiring employees, then a PEO will help you reduce liability and turnover significantly!
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PEOs offer a variety of services, including recruiting, onboarding, training, employee perks, discounts, and ancillary benefits. These can all be beneficial to your company if they will bring value in other areas like job training or employee performance improvement; however not every PEO has the same offerings so make sure you carefully consider what is important for you before signing up with the wrong one.
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Mission is here to save you money and deliver immediate access to our PEO knowledge and network. Contact us for a free consultation on your PEO needs today!
We’re dedicated not just in saving you money, but also providing top notch service that will have an impact long after the your services has startedand will have an impact on more than our bottom line. Find out more about OUR MISSION.
PEO and Healthcare Reform 101
Navigating the Affordable Care Act (ACA) is a very complex and labor-intensive process. Not to mention the penalties that exist if it is not handled properly. A PEO, as the administrative employer, can assist with many of these regulations and provide expert guidance, and administrative relief, while you focus on running your company.
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Specifically, The Mission can partner with your company with the following:
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A payroll solution that complies with W-2 and mandated benefits provisions
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Compliance with providing ACA compliant healthcare plan designs
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Required enrollment/re-enrollment disclosures for clients in PEO sponsored medical plans;
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Support in calculating large employer status under the ACA, including measurement of the 12 month look-back period.
Is PEO Right for My Company?
The PEO model is an extremely popular choice for owners of small and medium-sized businesses who want to focus more time on their key business initiatives and less on administrative and compliance-related tasks. If you think a PEO partnership might be right for your business, you can review: