Per employee per month: a flat dollar fee for each worksite employee. It's the most common unit for PEO admin fees.

Are health insurance premiums included in a PEO's fee?

Usually not. Benefits are typically billed separately as a pass-through, because the cost depends on the plans your company offers and what employees elect.

Is a per-employee fee or a percent-of-payroll fee cheaper?

Neither is automatically cheaper. A percent-of-payroll fee rises with wages even when headcount is flat, and a low admin fee can hide separately billed items. Compare what each fee includes and the full invoice.

Putting PEO Pricing Models Under the Microscope: What You Need to Know

By Chris PetersonFirst published April 16, 2020Updated October 13, 2026

The short answer

PEOs usually charge either a flat fee per employee per month or a percentage of total payroll, and some offer both. ADP publishes a typical range of 2% to 12% of payroll, or about $40 to $160 per employee per month (2026), before health premiums; what you actually pay depends on your headcount, wages, job types, states and benefits.

You've done your research on professional employer organizations and you're seriously considering one: better benefits, help with HR and labor rules, payroll and taxes handled, and time back to grow the business. One question remains: what will a PEO cost you? Just as PEOs aren't all alike, neither are their prices or pricing models.

What are the two PEO pricing models?

A flat fee per employee per month (PEPM). Popular with small businesses because it's predictable. The rate depends on the PEO and the services you choose.
A percentage of total payroll, charged each pay period. The percentage depends on your size and whether your employees are hourly or salaried.

Neither model is automatically cheaper. A percent-of-payroll fee rises when wages rise, even if headcount stays flat. What matters is what the fee includes. Under either model, extras such as recruiting, onboarding, premium benefits, employee training and safety training can carry added fees.

What does a PEO cost?

ADP publishes a typical range of 2% to 12% of total payroll, or about $40 to $160 per employee per month (ADP, citing People Managing People, July 2026). Those ranges leave out health premiums, which are usually the biggest line on the invoice. Only a quote built from your own employee census is real.

What's the difference between bundled and unbundled pricing?

A bundled price is one service fee that may include workers' comp, employment practices liability insurance (EPLI) and compliance services. An unbundled price shows a lower-looking admin fee and bills those items separately; some PEOs add a separate risk fee. Benefits are usually billed separately either way, as a pass-through, because they depend on the plans and elections (ADP, 2026). A low admin fee can end up costing more once everything is added, so compare the full invoice.

What drives your price?

Hourly or salaried workers. Expect to pay more for hourly workforces, because PEOs expect more turnover, unemployment claims and workers' comp claims there.
Company size. PEOs spread fixed costs across the employees they serve, so more workers usually means a lower per-employee cost. Small companies still have options; many PEOs package services for them.
Benefits participation. If some employees are on a spouse's plan, your benefits cost goes down.
Industry risk and workers' comp class codes, your payroll and wage structure, and the states you operate in (ADP, 2026).

How do you get the right PEO the first time?

Finding a PEO that provides what you need at a price you can afford takes time, and price isn't everything: the PEO has to be reliable and trustworthy. A PEO broker like PEO Consultants compares PEOs for you and stays with you from the contract through implementation and beyond. The comparison is free to you; the PEO you select pays PEO Consultants.

Common questions

What does PEPM mean?: Per employee per month: a flat dollar fee for each worksite employee. It's the most common unit for PEO admin fees.
Are health insurance premiums included in a PEO's fee?: Usually not. Benefits are typically billed separately as a pass-through, because the cost depends on the plans your company offers and what employees elect.
Is a per-employee fee or a percent-of-payroll fee cheaper?: Neither is automatically cheaper. A percent-of-payroll fee rises with wages even when headcount is flat, and a low admin fee can hide separately billed items. Compare what each fee includes and the full invoice.