Many business owners use the services of a Professional Employer Organization (PEO) as a way to outsource their HR needs and run more efficiently. Of course, in any discussion regarding business transactions, a common question is how much the services of PEOs cost. When using PEOs, most companies actually save money in the long run because they do not have to hire an in-house HR team for the work.
Why Consider a PEO?
Running a business comes with countless challenges, especially in managing human resources. Small and medium-sized businesses often lack the resources to build a robust HR team, which can lead to inefficiencies, compliance risks, and employee dissatisfaction. A PEO offers an effective solution by taking over these responsibilities, allowing business owners to focus on growth and strategic planning.
Partnering with a PEO is more than just a cost-saving measure; it’s a strategic move to enhance operational efficiency. PEOs provide access to specialized expertise, advanced HR technologies, and employee benefits that are otherwise unattainable for smaller companies. By pooling resources, PEOs can negotiate better benefits and streamline payroll, recruiting, and compliance processes.
This combination of cost savings and improved operational efficiency makes PEOs an attractive choice for businesses of all sizes.
How Do PEOs Charge?
There are two common ways that PEOs may elect to charge business owners for their services:
-
A flat fee calculated per employee, per year.
-
A fee calculated as a percentage of the company’s overall payroll per year.
Flat Fee Structure
The flat fee is normally between $900 and $1,500 per employee each year, depending on the PEO in question. This structure provides predictability, making it easier for business owners to budget for HR costs. For instance, if you have 20 employees and the PEO charges $1,000 per employee annually, your total cost would be $20,000.
This model is particularly beneficial for businesses with steady or predictable employee counts and payrolls. It ensures transparency and eliminates surprises, which is crucial for effective financial planning.
Percentage of Payroll Structure
If the business owner elects to be charged as a percentage of the company’s overall payroll, PEOs charge about 3-10% on average. For example, if your annual payroll is $500,000 and the PEO charges 5%, your cost would be $25,000. This model ties HR costs directly to your payroll expenses, which can be advantageous for businesses with fluctuating employee counts or seasonal operations.
It is not uncommon for PEOs to offer either option to customers based on the specifics of each business owner’s individual service needs and budgeting requirements. With access to NetPEO’s nationwide network of PEOs, you can choose between PEOs according to your exact specifications. Negotiation is always a possibility, and NetPEO works with clients to match them with PEOs that meet their budgets.
What Are You Paying For?
PEOs offer a variety of services to business owners. At NetPEO, our partner PEOs are available for any of the following needs:
-
Handling of Employee Benefits: PEOs manage employee benefits such as health insurance, retirement plans, and wellness programs. By leveraging the collective buying power of multiple businesses, PEOs can secure competitive rates and more comprehensive benefits than most small businesses could obtain independently.
-
Recruitment of New Hires: From job postings to interviews, PEOs streamline the hiring process, ensuring that you attract and retain top talent without the administrative burden.
-
Employee Administration: This includes drafting employee handbooks, managing workplace policies, and maintaining employee records—tasks that are essential but time-consuming.
-
Federal Regulation Compliance: Staying compliant with federal, state, and local regulations can be daunting. PEOs ensure that your business adheres to all legal requirements, reducing the risk of costly penalties.
-
Handling of Workers’ Compensation Claims: PEOs manage workers’ compensation insurance and claims, providing support in case of workplace injuries and helping to minimize associated costs.
-
Payroll Administration: PEOs handle payroll processing, tax withholdings, and direct deposits, ensuring accuracy and timeliness.
This is by no means an exhaustive list, but it goes a long way toward showing the variety of services provided by PEOs. Many business owners find that using a PEO frees up their time to focus on the meatier matters of business management.
Flexibility with NetPEO
Through NetPEO, you can find PEOs to do the work of an entire HR division or hire PEOs for individual tasks à la carte. While the full service is recommended to receive the full benefit of a PEO, we also provide that added flexibility to ensure that we meet all of our clients’ business needs.
Tailored Solutions
One of the greatest advantages of using NetPEO is the ability to customize services. Whether you need full-scale HR support or assistance with specific tasks, NetPEO connects you with providers that align with your goals and budget. This ensures that you’re not paying for services you don’t need, maximizing the value of your investment.
Co-Employment and PEOs
An additional benefit of using a PEO is co-employment. This is a unique relationship that means that the PEO will take on some of the responsibilities and risks of being an employer, which lets the PEO handle important tasks like payroll and employee benefit packages.
Enhanced Employee Benefits
Since the employee benefit packages go through the PEO rather than you, the sole business owner, the benefits are in a larger pool and are often much better than individual owners are able to provide on their own. In other words, using a PEO gives your employees the benefits of larger companies.
When employees are given better benefits, they tend to be much happier. And when they are happy, they tend not to leave their position. This is especially important for small businesses, which can suffer greatly from high rates of employee turnover. By using a PEO, companies can reduce their turnover rate by providing employees a welcoming environment with better pay and benefits.
Risk Mitigation
Co-employment also shifts some liabilities to the PEO, such as compliance with employment laws and tax regulations. This partnership reduces risks for the business owner while ensuring that all processes adhere to legal standards.
What if You Are Unhappy With a PEO?
Often, business owners prefer to go with a PEO service provider from the same state to ensure that the experts are well versed in local and state regulations. As such, Montgomery businesses often prefer to connect with PEO companies in Alabama. NetPEO is determined to find each entrepreneur the perfect provider based on their preferences.
Unlike some other companies, NetPEO is a broker that stays with its clients throughout the relationship between them and our partner PEOs. NetPEO first matches a business owner with several PEOs that fit their needs. The business owner can choose which PEO to hire, signing a Client Service Agreement stipulating the details of their relationship. After this, NetPEO stays in contact via regular check-ups to gauge the customer’s satisfaction.
Superior Client Support
This ongoing support has led to two astonishing facts in NetPEO’s favor:
-
NetPEO has the highest client retention rate in the industry, at 95%.
-
100% of NetPEO clients rated our services either satisfactory or extremely satisfactory in recent surveys.
If you are ever unhappy with a PEO, NetPEO’s dedicated support team is available to address your concerns and facilitate changes. This commitment to client satisfaction ensures a seamless and productive partnership.
Find Your PEO Today
Using a PEO to outsource your HR needs is one clear way to lower your business operation costs. It is often cheaper than hiring an in-house staff to handle the work. Additionally, the enhanced services, compliance support, and employee benefits offered by PEOs make them an invaluable resource for businesses aiming to thrive in today’s competitive landscape.
To receive a quote today for the services your business needs, fill out the form on our contact page or contact us today at (678) 376-1212. Let NetPEO help you find the perfect partner to take your business to new heights.
