How Much Does a PEO Cost? Real Price Bands and What Drives Them

The two pricing models

Almost every PEO prices its service in one of two ways. Once you know which one a vendor uses, the rest of the quote gets much easier to read.

The first model is a flat fee per employee per month, usually shortened to PEPM. You pay a set dollar amount for each person on payroll, every month. Twenty employees at a given rate cost twice what 10 employees cost. Salaries do not affect the fee.

The second model is a percentage of total payroll. The PEO takes a set percent of the gross wages you pay each pay period. If your payroll goes up, the fee goes up with it, even if nothing about the service changed.

That second point is the one to sit with. Under percent-of-payroll pricing, every raise you give also raises what you pay the PEO. Hire a senior engineer at twice the salary of your last hire, and the PEO’s fee for that person doubles too, though onboarding a highly paid employee takes no more work than onboarding anyone else.

For a company with mostly hourly or modestly paid staff, percent-of-payroll can look cheap. For a company with a high average salary, or one that expects wages to climb, it usually gets expensive over time. That is why many companies with professional staff push for a PEPM quote, or ask a percent-of-payroll vendor to convert its quote to a per-employee figure so they can compare.

Neither model is wrong. You just need to know which one you are looking at and how it will behave in year 3, not only in month 1.

What is inside the fee and what is billed separately

The number a PEO quotes you is the administrative fee. It is the price of the PEO’s own services. It is not the total amount that will leave your bank account.

ADP, one of the largest providers, is direct about this. Its published cost guidance calls the administrative fee only one part of the total cost. Benefits and payroll taxes sit outside the fee. Workers’ comp may be bundled into the fee or billed on top, depending on the provider. All three are real costs, and under a PEO they run through the PEO.

Here is how to think about each.

Benefits premiums. If your employees enroll in the PEO’s health plan, the premiums for that coverage are billed to you. A PEO may get better group rates than you could on your own, but the premiums are still yours to pay. The administrative fee does not include them.

Workers’ compensation. Workers’ comp is the insurance that pays for workplace injuries. Under a PEO, your employees are typically covered under the PEO’s policy, and the premium for your share is passed through to you. Rates depend on the kind of work your people do.

Payroll taxes. Federal, state, and local employment taxes are what they are. The PEO calculates, withholds, and files them under its own tax ID. You still fund them. The fee pays for the work of handling them, not for the taxes themselves.

Inside the administrative fee, you should expect the core of the service: payroll processing, tax filing, benefits administration, HR support, compliance help, and access to the PEO’s software. What exactly is in that bundle varies by vendor, and that variation is a big reason the published price bands are so wide.

Before you compare two quotes, make a simple list. Write down every line item each vendor will bill. Put a check next to the ones inside the fee and a dollar sign next to the ones billed on top. Two fees that look far apart often come much closer together once you do this.

Published price bands, with sources

Two widely read sources publish PEO price ranges. They agree on the shape and mostly agree on the numbers.

The U.S. Chamber of Commerce’s CO- publication reports that PEOs charge either 2 to 15 percent of payroll or a flat per-employee fee. As an example of the flat model, Justworks’ own pricing page lists its 2 PEO plans at $79 and $124 per employee per month, as of October 19, 2026.

ADP’s cost guidance puts the PEO administrative fee at 2 to 12 percent of payroll, or about $40 to $160 per employee per month, before benefits and taxes. ADP notes that workers’ comp may be inside that fee or billed separately, depending on the provider.

CO-‘s 2 to 15 percent band runs wider than ADP’s, and it may cover more than the administrative fee. CO- says a PEO’s price usually includes workers’ comp, state unemployment insurance, and health benefits fees, so its band may include some insurance costs.

Put side by side:

• Percent of payroll: 2 to 12 percent (ADP), or 2 to 15 percent (CO-, which may include some insurance costs)
• Flat PEPM: about $40 to $160 per employee per month (ADP)
• One named vendor: $79 to $124 per employee per month (Justworks pricing page)

CO- also publishes a range for ASOs, which handle similar administrative work without co-employment. An ASO is an administrative services organization: it runs payroll and HR administration under your own tax ID, and you remain the sole employer. CO- puts ASO pricing at $50 to $250 per employee per month.

It may look odd that the ASO band tops out higher than the PEO band. Remember what each fee covers. An ASO fee can include more customized service for a company that already has some HR in place. Even so, CO- says businesses generally pay less for an ASO than for a PEO. The bands describe different products. If you are still deciding between the two, our guide to PEO vs ASO vs HRO walks through the fit.

One more caution. These ranges are national. They come from articles, not from quotes to a specific company. Your quote will depend on your headcount, your industry, your average wage, your claims history, and how hard you negotiate. Use the bands to tell whether a quote is inside the normal range, not to predict your own number.

A worked example for a 20-person Philadelphia company

The fastest way to see how the two models behave is to run the arithmetic on a plausible company. Everything below uses only the published ranges above and one assumed input.

Two lessons come out of that arithmetic.

First, the model matters more than the vendor. The gap between the cheapest and most expensive flat PEPM figure in this example is under $30,000 a year. The gap between the cheapest flat figure and the top of ADP’s percent-of-payroll band is $134,400 a year. Before you compare vendors, decide which pricing model you can accept.

Second, percent-of-payroll pricing punishes a professional payroll. If this same company paid an average of half as much, every percent-of-payroll figure above would be cut in half, while the flat PEPM figures would not change at all. Run the numbers on your own average wage before you assume either model is cheaper.

Questions to ask before you sign

A PEO quote can look simple and hide a lot. These questions pull the important parts into the open. Ask them of every vendor, and ask for the answers in writing.

Once you have written answers to all 8, build a one-page comparison: total first-year cost, total third-year cost at your expected headcount and wages, and what is included in each. That single page will do more to protect you than any sales presentation.

The right PEO for a 20-person Philadelphia company is not the one with the lowest headline fee. It is the one whose total cost you can predict, whose bundle matches what you actually need, and whose contract you could leave without pain if the fit changes.