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Professional Employer Organizations (PEOs) can present their pricing using one of a few standard methods. At PEOrates.com we want to help you understand the fees you are getting charged and how PEOs compare with one another and with your own internal costs. To determine if a PEO’s rates reflect a savings or cost it’s important to have an understanding of what your current employer costs are. As an employer your costs fall broadly into two areas; your employer related taxes and you internal administrative costs. PEO pricing combines employer paid taxes (SUTA, FUTA and FICA) and employer administrative costs (Workers' Comp premium and payroll services represented by the Admin Fee). While the components for each PEO are essentially the same how the rates themselves, how they are presented and what they buy (the scope of PEO service) can very. Below are a few of the basic PEO pricing models. Keep in mind that the numbers used in these examples are not real. Pricing varies not just from one PEO to another but also by state, industry and company size (gross annual payroll). 1. Un-Bundled Pricing | Workers' Comp Codes |
8810
Administration |
8742
Sales | 5645
Carpentry |
| Social Security/ Medicare | 7.65% | 7.65% | 7.65% | | Federal Unemployment | .80% | .80% | .80% | | State Unemployment* | .95% | .95% | .95% | | Workers' Compensation | .50% | .85% | 29.85% | | Administrative Rate** | 3% | 3% | 3% | | PEO Botton Line Rate | 12.90% | 13.25% | 42.25% | | Rate After Cut Offs*** | 11.15% | 11.50% | 40.50% | Each component of the PEO price is revealed in the un-bundled model. It's important to remember, however, that it's the bottom-line rate that matters. * State Unemployment Tax, Workers' Comp rates and Admin fees can very from state to state and PEO to PEO. It's important to shop before you buy - and keep you eye on the bottom line.
** The Small Business Administration estimates that administrative overhead for businesses with less than 100 employees ranges from 4% - 8%.
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***Most PEO's recognize cut-offs for FUTA (paid only on the first $7,000 of gross wage per employee each year) and SUTA (limits vary by state. In Florida SUTA is paid on only the first $7,000 like FUTA). In this example, the rates for each Comp Code would drop by 1.75% (.80% + .95%) after each employee earns $7,00 for the year. 2. Bundled Pricing | Workers' Comp Codes |
8810
Administration |
8742
Sales |
5645
Carpentry |
| PEO Bottom Line Rate | 12.90% | 13.25% | 42.25% | | Rate After Cut Offs | 11.15% | 11.50% | 40.50% | In a bundled pricing model the individual rates are not shown. This focuses attention on the bottom line rate per code.
As in the first example, the PEO may or may not provide cutoffs. Again, the rates for each workers' Comp class code would drop by 1.75% (.80% + .95%) after each employee earns $7,00 for the year (based on FL SUTA limits). 3. Bundled Factored Pricing | Workers' Comp Codes |
8810
Administration |
8742
Sales |
5645
Carpentry |
| Simplified PEO Rate | 11.62% | 11.97% | 40.97% | In this method of pricing the PEO proposes a single rate that will be changed throughout the year. Notice that the overall rate is lower but the PEO would not provide SUTA & FUTA cut-offs. 4. Fee-Based Pricing | Workers' Comp Codes |
8810
Administration |
8742
Sales |
5645
Carpentry |
| PEO Rate | 9.90% | 10.25% | 39.25% | | Rate After Cut Offs | 8.15% | 8.50% | 37.5% | | Admin Fee per Employee | $15 | $15 | $15 | In this example the PEO would charge a flat fee per employee each pay period.
Keep in mind that PEOs may have additional fees for group benefits such as health or 401(k) implementation and may charge for services such as background checks or employee testing. Many PEOs also have fees for delivery and client set-up.
After EmployHR.com prepares your PEO price comparison we'll take the time to review all the PEO costs for you. You're also encouraged to contact your EmployHR.com Advisor or the PEO directly with any questions.
To get you free PEO quote take a moment to complete our simple online proposal request form or contact us today.
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