How Much Does a PEO Cost in 2026? Ranges by Headcount, Pricing Model, and What Drives the Number

"How much does a PEO cost?" is the first question most owners ask, and the honest answer has two layers. There is the admin fee, the number a PEO charges to run your payroll, benefits, and HR compliance, and there is everything billed on top of it. This guide gives you the current ranges, a modeled cost table by company size, the factors that move your number up or down, and how to read a quote so you know exactly what you are paying for. You can also estimate your own PEO cost with our calculator.

The short answer: what most businesses pay in 2026

A PEO (Professional Employer Organization) partners with your business to run HR, payroll, and benefits under a co-employment arrangement. It charges an administrative fee in one of two ways.

Per employee, per month (PEPM): a fixed dollar amount for each employee every month. The typical range is $40 to $160 per employee per month, with most small-to-mid employers landing between $100 and $150.

Percentage of payroll: a percentage of your total gross payroll each pay period, typically 2% to 12%. This model tends to favor lower-wage, higher-headcount teams and gets more expensive as salaries climb.

The one industry-sourced anchor to hold onto: NAPEO's analysis found the average PEO administrative cost was about $1,395 per employee per year, or roughly $116 per month (NAPEO/McBassi, 2019). That figure predates recent inflation, so treat it as a floor for the average rather than today's exact number. A one-time setup or onboarding fee of $500 to $2,000 is also common, though some PEOs waive it.

How PEOs actually price, from our own directory

Here is something you will not find on most pricing pages. We looked at how the 202 PEOs listed in the PEOIQ directory describe their own pricing, and the headline finding is about transparency, not dollars: more than four in five publish no specific pricing model at all. Only about 9% (18 of 202) state a model publicly. The rest list their pricing as "N/A," "customized," or "depends on services."

That pattern is the single most useful thing to understand about PEO cost. The published ranges tell you the neighborhood. Your real number comes from proposals matched to your headcount, industry, and states.

Flat fee vs. percentage of payroll

The model your PEO uses changes what you pay as your team and salaries grow. Here is how the two compare.

Key takeaway: flat-fee pricing rewards teams with higher salaries; percentage pricing costs less for lower-paid workforces. Before you compare quotes, ask each provider which model it uses. Some fold workers' comp and unemployment taxes into a percentage-of-payroll quote, which makes the admin fee look larger than it is, so always ask for a line-by-line breakdown.

What a PEO costs by company size

Because most PEOs will not publish a rate, the most useful thing we can give you is a transparent model. The table below applies our PEO cost calculator's own logic, a cautious planning figure of $147 per employee per month near the top of the $40 to $160 range, across five common headcounts. These are modeled admin fees, not quotes, and they cover the admin fee only. Health insurance, workers' comp, and payroll taxes are separate pass-through costs.

Two things to read into it. First, the per-employee rate usually falls as headcount rises, with breaks often around 25, 50, and 100 employees, so a real 250-person quote typically comes in under a flat $147 model. Second, the annual number is what to weigh against the cost of hiring HR in-house, which we compare below. To run your own headcount, use our PEO cost calculator.

What's included in the fee, and what costs extra

Your admin fee typically covers the core services that make a PEO different from a standalone payroll company:

• Payroll processing and tax filing
• HR support and compliance guidance
• Employee onboarding paperwork
• Access to an HR technology platform
• Basic reporting and analytics

Billed separately as pass-through costs:

• Health insurance premiums. The PEO pools your employees into a larger group to negotiate rates, but you still pay the premiums. The average employer pays $9,325 per year for single coverage and $26,993 for family coverage (KFF, 2025).
• Workers' compensation premiums. Based on your industry, state, and claims history. High-risk trades such as construction and manufacturing pay far more per dollar of payroll than office roles, and that gap is the biggest single swing for service and trade businesses.
• State unemployment taxes (SUTA). These vary by state and your company's experience rating.
• 401(k), dental, vision, life, and disability. If you offer these, the premiums are separate from the admin fee.

The bottom line: the admin fee is your PEO management cost. Insurance and taxes are employee-benefit costs you would pay with or without a PEO. The PEO's job is to get you better rates on those benefits through group purchasing power.

What affects your PEO cost: six factors

Not every business pays the same rate. Here is what moves the number.

1. Company size. More employees usually means a lower per-person rate, with breaks often around 25, 50, and 100 employees. A 50-person company typically pays less per head than a 10-person one.
2. Industry. Your workers' compensation class code is the single biggest variable for trade and service businesses. High-risk class codes (construction, manufacturing, healthcare) carry far higher workers' comp premiums than office work, which raises your total cost even when the admin fee is the same.
3. State. Employment rules, workers' comp rates, and unemployment insurance costs vary widely by state, so an identical team costs meaningfully more in a high-cost state than in a low-cost one. For one state worked through in detail, see our guide to PEO companies in North Carolina.
4. Claims history. Your experience modification rate (EMR) reflects past workers' comp claims. A higher EMR means higher premiums; many PEOs fold your team into their master policy, which can help if your EMR is above average.
5. Services bundled. Basic payroll plus compliance sits at the low end of the range; full-service HR with benefits administration, risk management, and training tools costs more.
6. Average salary. This matters most under percentage-of-payroll pricing, where a team averaging $100,000 pays twice what a team averaging $50,000 pays at the same rate.

PEO cost vs. hiring in‑house HR

For most companies under about 75 employees, a PEO costs less than building an in-house HR function. Here is the math for a 30-employee company.

PEO route:

• Admin fee: about $100 to $150 per employee per month
• Monthly: roughly $3,000 to $4,500
• Annual: roughly $36,000 to $54,000
• Includes payroll, HR support, compliance, benefits administration, and risk management

In-house route:

• HR generalist salary: $65,000 to $75,000
• Benefits and taxes (add ~30%): $19,500 to $22,500
• HR software: $5,000 to $15,000/year
• Benefits broker: $3,000 to $5,000/year
• Legal and compliance consulting: $5,000 to $10,000/year
• Total: roughly $97,500 to $127,500/year, and you still miss the PEO's group buying power on health and workers' comp.

For context, the median HR manager salary is $140,030 per year and the median HR specialist salary is $72,910 (BLS, May 2024). For a small business, those salaries alone often exceed what a PEO would cost. You can also see how many HR hours a PEO could save you.

Do PEOs actually save money?

For most businesses, the data says yes. NAPEO's ROI analysis found PEO clients save an average of $1,775 per employee per year across five categories: HR staff, health benefits, workers' comp, unemployment insurance, and outside HR services. Against an average admin cost of about $1,395 per employee per year, that is a net ROI of 27.2% (NAPEO/McBassi, 2019). Businesses that use a PEO also grow revenue at more than twice the rate of comparable firms, have 12% lower turnover, and are about a third less likely to go out of business (NAPEO/McBassi, 2024).

The savings are not guaranteed. Businesses with already-low workers' comp rates, strong existing benefits, or efficient in-house HR typically see less. The way to know is to get real quotes and compare them to your current costs. For the full picture, read whether a PEO is worth it and use our savings calculator.

Fees to ask about before you sign

Before you commit, get clear answers on these:

• Early termination fees. Many PEOs charge 25% to 50% of the remaining contract value, or a flat fee, if you leave early.
• Contract length. Most require 12 to 36 months. Ask about a month-to-month option and its cost.
• Auto-renewal clauses. Some renew automatically unless you give 30 to 90 days' notice.
• Post-termination fees. Some charge admin fees for 30 to 90 days after the contract ends to process final payroll, COBRA, and tax filings.
• Benefits-admin fees. A few charge separately for benefits enrollment on top of the admin fee.
• Year-end processing. Ask whether W-2 and year-end tax processing is included.

The most reliable way to compare is to request a line-item breakdown from at least three providers and focus on total cost, not just the admin fee.

Where to go deeper

This page is the overview. For a narrower question, these go further:

• PEO cost per employee, if you want the per-head number in detail.
• PEO costs for small business, if you are under 50 employees.
• PEO pricing comparison, for how to line up competing quotes.
• How PEO benefits work and PEO health insurance, for the pass-through side of the bill.

Or browse the PEO directory to see providers by state and industry.

The bottom line

Most businesses pay about $40 to $160 per employee per month in PEO admin fees, or 2% to 12% of payroll, with the industry average near $116 per employee per month (NAPEO). Health insurance, workers' comp, and taxes are billed on top. Your total depends on company size, industry, state, and the services you need. For companies under about 75 employees, a PEO typically costs less than in-house HR while giving better benefits access and compliance support, and NAPEO data shows a 27.2% net ROI for the average client. The only way to know your actual cost is to get quotes.

If you want to see what a PEO would cost for your business, request a consultation and we will connect you with our independent broker, who compares proposals matched to your size, industry, and states. The consultation is free to you. If you sign through the broker, he shares part of his fee with us. Expect the review to take several business days, not minutes.

Sources

• NAPEO/McBassi & Company, "The ROI of Using a PEO," White Paper #7 (2019)
• NAPEO/McBassi & Company, "PEO Clients: Faster Growing, More Resilient Businesses," White Paper #13 (2024)
• KFF, 2025 Employer Health Benefits Survey
• BLS, Occupational Outlook Handbook: Human Resources Managers (May 2024)
• PEOIQ directory (202 PEO provider listings), pricing-model disclosure, retrieved 2026-09-27
• PEOIQ PEO cost calculator methodology ($147-per-employee-per-month planning figure)