PEOs offer two main pricing structures for small and midsize businesses: They charge a per-employee fee (roughly $40-$160 per month) or a percentage of your total monthly payroll (roughly 3%-12%). There are advantages and disadvantages to both types of pricing. The best pricing model for your business depends on factors like your business type, the number of employees you have and the PEO services you want.
Professional employer organizations typically do not offer free trials of their HR services, and contract lengths and structures vary by company. Some PEOs only offer long-term contracts, while others don't require a contract at all. Cancellation policies vary, but business owners typically need to provide at least 30 to 60 days' notice before canceling a PEO service. Some companies allow you to leave at any time for any reason; others charge you a fee for leaving.
Within each of our reviews, we've listed the PEO's cancellation policy. It's critical, though, that you ask about the PEO's cancellation policy before you reach an agreement – you want the freedom and flexibility to cancel the service if you need to.
Below are other crucial items to address with the PEO service you're considering. You should go over this information – even though it may be available on the company's website – with a member of the PEO's sales team to gain a complete understanding of the PEO's services.
One thing to pay attention to is how a PEO packages its services, like employee onboarding and development, insurance policies, workers' compensation claims, payroll processing, risk and compliance management, and HR tasks. Some PEOs offer a one-size-fits-all solution, whereas others offer customizable services that you can add or remove to fit your small business's needs. There are advantages and disadvantages to both. A bundled solution means you can grow into all the features without changing the pay structure, while an a la carte option is more tailored to your business and can save you money if you only need a few features, such as payroll and health insurance.
Inquire upfront about additional fees. For example, some companies charge a fee if you cancel service. Thoroughly review the materials the sales team gives you to spot any fees associated with service. If you're not sure, ask the sales representative. Also keep in mind that the pricing model, whether it charges per employee or as a percentage of income, does not include additional costs for healthcare and other employee benefits.
Many of the PEOs we evaluated have an employee minimum – that is, they require small businesses to have over a certain number of employees, usually five, to qualify for their service. (Another type of minimum you may see is a minimum monthly salary if your business is below a certain employee threshold.)
If you don't qualify, many companies offer administrative services organization (ASO) or HR outsourcing services. While these services may be similar to the PEO model, they do not have co-employment agreements.
Make sure you understand what your PEO expects from you. You don't want to have to cancel your services or pay an additional fee for falling below the PEO's employee minimum.