Reference
How much does a PEO cost?
The short answer
There is no neutral, published price list for PEO fees, so the number you were quoted cannot be checked against a public benchmark. Fees are quoted either as a percentage of gross payroll or as a flat per-employee-per-month amount, and the two do not compare without modelling both against a full year of your real payroll. The larger variable is what sits inside the rate: some providers bundle workers’ compensation, state unemployment and benefit costs into a blended rate, others pass them through separately. For most mid-market employers the administrative fee is not the decisive number. Benefit plan cost, workers’ compensation treatment and unemployment handling move considerably more.
Two fee structures that do not compare cleanly
A percentage of gross payroll scales with your wage base, which means raises, overtime and bonus cycles all increase the fee without increasing the administrative work behind it. A per-employee-per-month figure scales with headcount, which tracks the actual load more honestly but can look worse for an employer with low average wages.
Neither is inherently better. What matters is that a proposal quoted one way and a proposal quoted the other are not comparable until both are modelled against your actual payroll across a full year, including seasonality, overtime patterns and any bonus cycle. That modelling is arithmetic, not judgment, and it is skipped surprisingly often. Also ask what the percentage is applied to (gross wages or taxable wages) and whether it is capped.
Bundled versus pass-through: the bigger variable
Some providers quote a blended rate with workers’ compensation, state unemployment insurance and benefit cost inside it. Others quote a thin administrative fee and pass those through at cost. A bundled rate looks expensive beside a thin one that is quietly excluding the largest line items on the page.
Normalize every proposal onto the same basis before looking at a single number. That means listing every cost component, marking which are included and which are not, and rebuilding all proposals to include everything. Proposals that survive that exercise unchanged are rare.
What one PEO reports earning per employee
The closest primary-source view of what sits behind a bundled rate is a filing. In its Form 10-K for fiscal 2025 (Insperity, Inc., audited SEC filing by a PEO, filed 2026), Insperity reports revenues of $1,831 per worksite employee per month in 2025, against $1,785 in 2024, and gross profit of $242 per worksite employee per month, down from $285 in 2024. It defines revenues as gross billings less the payroll costs of worksite employees.
Read this carefully. It is one large national provider, not an industry average. Gross profit is a margin measured after the provider’s own direct costs, and it is not the administrative fee that appears on a client’s invoice. We cite it because it is the only audited per-employee figure we found from a PEO, not as a fee benchmark.
Health coverage: usually the largest line inside the bundle
For employer-sponsored coverage in 2025, the KFF 2025 Employer Health Benefits Survey (KFF, an independent non-profit, 2025) puts average annual premiums at $9,325 for single coverage and $26,993 for family coverage, up 5% and 6% on 2024. Workers contributed an average of $1,440 for single coverage (16% of the premium) and $6,850 for family coverage (26%).
Firm size changes the picture. In the same KFF survey (2025), family premiums averaged $26,054 at firms with 10 to 199 workers against $27,280 at larger firms, but the worker’s family contribution averaged $8,889 at the smaller firms (36% of the premium) against $6,227 at larger ones (23%). Average single deductibles were $2,631 against $1,670.
A second measure sits alongside it. The Mercer National Survey of Employer-Sponsored Health Plans 2025 (Mercer, a benefits consultancy, press release of 18 November 2025; 2,010 employers, weighted to US employers with 50 or more employees) reports total health benefit cost averaging $17,496 per employee in 2025, up 6.0%, and projects a further 6.7% rise in 2026 to above $18,500. That figure includes the employee share and all plan costs, so it is a different measure from KFF’s premium and the two should not be set side by side as if they were the same thing.
For context on scale, the BLS Employer Costs for Employee Compensation release for June 2026 (Bureau of Labor Statistics, US government, released 9 September 2026) shows private-industry employer compensation of $46.89 per hour worked: $32.82 in wages (70.0%) and $14.07 in benefits (30.0%). That benefits share covers all benefits, not health coverage alone.
Workers’ compensation: the line a bundled rate makes hardest to check
Workers’ compensation is where a blended rate is hardest to verify, because the price depends on how your payroll is classified and whose claims record is applied. Our page on how workers’ compensation premium is rated covers the mechanics. The practical questions for any quote are which class codes your payroll is assigned to, whose experience modifier is used, and whether you keep the benefit of a good record if you leave.
Rate levels also differ sharply by state. In the Oregon Department of Consumer and Business Services 2024 premium rate ranking (Oregon DCBS, a state agency study, 2024), Hawaii had the highest index rate at 2.52 (231% of the study median) and North Dakota the lowest at 0.50 (45%), roughly a five-to-one spread across 51 jurisdictions. The index prices a fixed mix of classes at each state’s rates in effect during 2023 and 2024. It measures state rate levels, not what any individual employer pays. For an employer in Florida, our page on how PEOs are regulated in Florida sets out what the state licensing regulator publishes and how to confirm a provider’s license and workers’ compensation certificate.
Who PEOs are built for
The trade association’s own research shows a market built around small employers. NAPEO’s PEO Industry Footprint 2023 (NAPEO, the PEO trade association, research by McBassi & Company, 2023) counts 523 PEOs and 4.5 million worksite employees at the end of 2022, with the five largest PEOs holding 39% of worksite employees. Its PEO Clients white paper (NAPEO, October 2025) reports more than 230,000 clients, about half with 10 to 49 employees, 35% with fewer than 10, and about 6% with 100 to 499.
Both sources are produced for the industry and should be read that way. The practical point is narrower: a company in the low hundreds of employees is at the edge of the typical client profile, which is a reason to read the contract and the rate build-up more closely, not less.
Where the money actually moves
The administrative fee attracts most of the attention and moves the least money. Benefit plan cost is usually the largest line by a wide margin. Workers’ compensation modifier treatment matters enormously in shift-based and physical industries. State unemployment rate handling, meaning whether your experience rating follows you or is absorbed into a pooled rate, can move more than the entire admin fee in either direction.
A provider who saves you two points on administration and moves you into a health plan costing six percent more has left you materially worse off, and no proposal will state that anywhere on it.
In BRG’s anonymised engagements, the case record for a manufacturer describes an open-market health renewal of 26.55%, set against the 5% to 6% premium growth KFF reports nationally. The real estate management firm case record reports state unemployment tax down 53% and the administrative fee down 31% on remarketing the same PEO relationship. These are single engagements, with baselines and periods as each case page states them, not market averages.
What we looked for and could not find
We did not find an independent, free-to-cite benchmark for PEO administrative fees, whether as a percentage of payroll or per employee per month. The detailed industry financial survey is sold by the trade association rather than published, and we found no government source that publishes PEO pricing. The ranges that circulate come from PEO vendors and consultancies, with no stated sample, so we do not reproduce them.
We also found no independent study of whether a PEO saves money net of everything compared with buying direct. Savings figures come from the association and from providers, and we could not verify their methodology. We found no independent data on how a PEO’s master workers’ compensation policy prices against an employer’s own modified rate, and no primary benchmark for ASO, administrator or HRIS per-employee fees. Where this page gives no number, that is why. Whether a PEO is worth it at all is a separate, earlier question; see is a PEO worth it for your company.
Why this page does not publish a range
A credible figure depends on your industry, your state mix, your claims history, your wage distribution and your headcount. A number that ignores those is worse than no number, because it anchors the conversation somewhere arbitrary and every subsequent quote gets read against it.
What is worth doing instead is modelling your own situation against real market quotes, normalized onto one basis, and understanding what drives the spread. That is a few weeks of work and it produces a number that means something.
The cost nobody quotes
Exit. Leaving means re-establishing payroll under your own FEIN, standing up benefit plans mid-year, re-underwriting workers’ compensation, and potentially restarting Social Security and FUTA wage bases for every employee depending on the provider’s certification status and how the transition is structured. Ask for that figure during the entry analysis. Providers can answer it, and the willingness to answer is itself informative.
Where this sits
Manufacturers weigh these cost components differently, because workers’ compensation, multi-site payroll and any union agreement carry more of the decision; see PEO for manufacturers: what to weigh.
| Component | Typically quoted | Moves the total |
|---|---|---|
| Administrative fee (% or PEPM) | Always | Least of these |
| Health and ancillary benefit cost | Sometimes bundled | Most |
| Workers’ compensation premium | Sometimes bundled | High in physical industries |
| State unemployment insurance | Often unclear | High, and easy to miss |
| Implementation / setup | Sometimes waived | One-off |
| Exit and wage-base restart | Almost never | High, and discovered late |
An invoice-reading checklist
Take your last PEO invoice and your client service agreement and work down this list, one line at a time. For each line, the middle column is what it should be traceable to, and the right-hand column is the question to put to the provider in writing.
| Line on your invoice | What it should be tied to | Question to ask the PEO |
|---|---|---|
| Administrative fee | The base set out in the agreement: gross wages, taxable wages or headcount, with any cap or minimum | What exactly is the fee applied to, is it capped, and can you recalculate it on our last twelve months of actual payroll? |
| Health and ancillary premiums | Carrier rates for each plan and coverage tier, multiplied by enrolled employees | Is each premium passed through at the carrier rate or marked up, and what assumptions sit behind the renewal figure? |
| Workers’ compensation | The class code assigned to each part of your payroll, the rate for each, and the modifier applied | Which class codes are we in, whose experience modifier is used, and what happens to our record if we leave? |
| State unemployment tax | The rate applied to your wages in each state | Is our own rate used, the provider’s rate, or a pooled rate, and what was it in each of the last two years? |
| Employer payroll taxes | Statutory rates and wage bases applied to actual wages, by state | Are taxes billed exactly as incurred, and is any administration charge applied on top of them? |
| Setup and implementation | A one-off amount in the agreement, or a waiver | Is this waived outright, or recovered inside the ongoing rate? |
| Technology and add-on modules | A module list in the agreement, with what is included in the base fee | Which modules are included, which are metered, and what changes if we use less? |
| Retirement plan fees | The plan’s fee schedule, and who pays each item | Which fees are charged to the plan, which to us, and how do they compare with the plan’s own fee disclosure? |
| Anything labelled other, adjustment or surcharge | A named clause in the agreement | Which clause authorises this line, and when was it last changed? |
| Exit terms (not on the invoice) | Notice period, data handover and any termination fee in the agreement | What does leaving cost, and what will you hand over, in writing and by when? |
Sources and methodology
Every figure on this page is taken from the source named beside it. Each source is labelled by type, because a government statistic, a trade-association study and a provider’s own filing carry different incentives.
- KFF, 2025 Employer Health Benefits Survey2025 · Independent (non-profit research) · used for: Average premiums, worker contributions and firm-size breakdown
- Mercer, National Survey of Employer-Sponsored Health Plans 2025 (press release)2025 · Benefits consultant, published sample · used for: Total health benefit cost per employee and the 2026 projection
- US Bureau of Labor Statistics, Employer Costs for Employee Compensation, June 20262026 · Independent (government) · used for: Wages and benefits share of private-industry compensation
- Insperity, Inc., Form 10-K for fiscal 20252025 · Filing by a PEO (audited, vendor) · used for: Revenues and gross profit per worksite employee per month
- Oregon DCBS, Workers’ compensation premium rate ranking by state (2024)2024 · Independent (state agency) · used for: Highest and lowest state index rates
- NAPEO, PEO Industry Footprint 2023 (McBassi & Company)2023 · Trade association research · used for: Number of PEOs, worksite employees and market concentration
- NAPEO, PEO Clients: Who They Are, Where They Are, and What They Do2025 · Trade association research · used for: Client size distribution
General information, not legal or tax advice. Figures are quoted from the sources linked above as published, and apply to the populations those sources describe, not to any individual employer.
