The cost of employee management leasing is not a one-size-fits-all value. The price point of this PEO service depends on the number of employees who work for you, the industry you work in, and the nature of your business.
Also known as co-employment, employee management leasing can provide businesses like yours with a comprehensive solution for handling HR operations. With PEO companies in the USA, responsibilities like payroll, benefits administration, and regulatory compliance can be handled for you.
This type of arrangement can relieve you of many administrative burdens, resulting in higher cost savings and greater operational efficiency. But before you hire a PEO for employee management leasing, let’s take a more detailed look at what influences the total cost.
What Comprises the Cost of Employee Management Leasing?
Not all PEO companies operate in the same way, so the exact breakdown of your PEO costs may differ. That said, in many cases, the expenses associated with paying for employee management leasing often include the following:
- Administrative fees for handling payroll and complying with taxes
- Costs associated with negotiating better rates for employee benefits
- Fees for handling workers’ compensation and unemployment insurance
Ultimately, your exact cost structure will depend on your company’s specific needs, the number of people you employ, and the services you want your PEO to provide.
How Is the Pricing Structure of Employee Management Leasing Determined?
PEOs generally use two primary pricing structures:
- Percentage of payroll fee
- Flat per-employee rate
Percentage of Payroll
Many PEOs charge a percentage of the company’s total payroll for their services. This usually ranges between 2% and 10%, depending on the size of the business. This pricing model aligns with the number of people in the company’s workforce, meaning it’s scalable.
Flat Per-Employee Fee
Some PEOs charge a monthly flat rate per employee. Depending on the services offered by the PEO, this fee typically ranges from $50 to $200 per employee.
This option is predictable because the cost is not affected by payroll fluctuations, which occur from month to month.
What Factors Influence the Cost of Employee Management Leasing?
Many variables may affect your total employee leasing costs. For starters, the size of your company will play a part in the amount of money you will spend on employee management leasing services.
Due to the number of people larger companies employ, they often pay lower per-employee rates. Meanwhile, smaller businesses might face higher costs to account for fewer employees. Additionally, the risks or regulatory requirements associated with your industry may play a part.
Businesses in riskier or highly regulated industries—including construction or healthcare—may have to spend more on PEO services. This is due to the additional resources and insurance costs required for these businesses to remain compliant.
What Are the Long-Term Financial Benefits of Employee Management Leasing?
We mentioned how employee management leasing can yield immediate cost savings. However, this is only the beginning. Employee management leasing can also create lasting financial benefits for your business in the following ways:
- Increase in employee retention rates
- Less turnover, meaning lower hiring and training costs
- Increased productivity and focus on strategic priorities
- Ability to scale without having to overhaul internal HR systems
- Steady growth without experiencing increased administrative costs
The long-term financial impact of employee management leasing can reduce overhead and contribute to a healthier bottom line, resulting in a more stable and productive workforce.
How Can Companies Determine if Employee Management Leasing Is Right for Their Budget?
There are many questions you should ask yourself if you’re thinking about onboarding a PEO to help you run your business. Newly established companies might find themselves wondering, “Can a new business afford the cost of a PEO?”
Meanwhile, larger businesses might consider whether employee management leasing aligns with their budget based on current HR expenses, potential cost savings, and overall business goals.
This step-by-step process can help you figure out if this PEO service is affordable for your business:
- Calculate your estimated savings
- Request quotes from PEO providers
- Evaluate a PEO’s long-term value
- Consult with a PEO broker directly
- Explore the options in your area
Are There Any Cost Savings With Employee Management Leasing?
Many companies experience significant cost savings with the help of employee management leasing. Since PEOs use their larger employee pools to negotiate more favorable rates, your company can save money while having access to competitive benefits.
PEOs often secure lower workers’ compensation insurance rates because they can spread risk across multiple client companies. Furthermore, by outsourcing HR tasks to a PEO, companies can reduce the need for an in-house HR team, which lowers your overall payroll expenses.
With a PEO, you can benefit from fewer non-compliance penalties because your PEO can make sure your company meets local, state, and federal employment regulations. Avoiding potential fines and lawsuits can translate to significant cost savings over time.
Call NetPEO to Understand How Much Employee Management Leasing Costs
The cost of employee management leasing varies depending on the size of your business, your company’s needs, the industry you are part of, and your desired PEO service level. In general, PEOs are a scalable solution for businesses that need help handling HR-related tasks.
While there are costs associated with paying for employee management leasing services, the savings that PEOs grant you—as well as the long-term advantages of a PEO—often outweigh the money you spend to hire them. That’s why they are a viable option for many organizations.
If you’re interested in learning more about employee management leasing costs or exploring how a PEO can tailor services to your business, contact NetPEO today. We can tell you more about our company and help you determine if this service is right for your business.
