Cost vs. Benefit: Are PEOs Worth It in 2025?

peo-costs-in-2025

PEOs (Professional Employer Organizations) have become an essential resource for over 200,000 businesses, streamlining HR functions and delivering substantial value. It’s no wonder, considering nearly half of business owners spend over a quarter of their time managing HR tasks, with many clocking at least 18 hours a week on administrative burdens. This time cost significantly impacts efficiency, turning potential growth into countless hours handling HR roadblocks.

This time cost significantly impacts efficiency, turning potential growth into countless hours spent handling HR roadblocks.

PEOs eliminate these inefficiencies by shouldering HR responsibilities. They help businesses achieve an average ROI of 27%, reduce turnover rates by 12%, and increase profitability by 16%.

But with so many benefits, you might wonder if you can even afford a PEO, especially in 2025?

Here’s the truth: almost every business can afford a PEO when they choose the right one. Their pricing structures offer flexibility to fit into a variety of budgets.

How Are PEOs Priced?

PEO pricing structures have continued to evolve, offering businesses even more tailored options. Here's a breakdown of primary pricing models:

Percentage of Payroll: Links your PEO costs to payroll, ideal for growing businesses or those with part-time and seasonal employees. Leading PEOs often offer discounts for bonuses, high-salaried executives, and business owners.

Flat Fee Per-Employee Per-Month: A fixed monthly charge per employee, detached from payroll or compensation. This model suits businesses that prefer predictability.

Flat Fee Per-Employee Per-Check: A fixed fee per paycheck issued, ideal for streamlining costs in businesses with consistent payroll schedules.

Flat Fee Per Month: The simplest option for businesses with static payroll, minimal turnover, and steady headcount.

Each model has advantages and challenges. For instance, percentage-based fees are scalable and well-suited for dynamic businesses, while flat fees may better align with predictable payrolls. It’s crucial to assess which structure best suits your company’s unique needs.

What Influences PEO Pricing in 2025?

Several factors can shape what you pay for a PEO:

SUTA Rates: High turnover or unemployment claims may increase costs based on your state unemployment tax account (SUTA) rates. Fortunately, many PEOs take over SUTA filing responsibilities, often reducing rates over time.

Payroll Distribution: Businesses with higher-salaried employees may incur lower percentage-based costs. Many PEOs offer discounts for bonuses and executive pay structures.

Gross Payroll: Depending on the pricing model, the total payroll amount influences costs. Luckily, discounts for high earners often offset this expense.

How Do PEOs Save You Money?

Working with a best-in-class PEO does more than streamline HR processes. It unlocks significant cost savings across multiple areas:

1. Affordable Benefits Packages

PEOs allow small and mid-sized businesses to access benefits typically reserved for larger enterprises. By pooling employees across multiple organizations, PEOs negotiate enterprise-level benefits at lower costs. These savings can significantly reduce your benefits expenses while boosting employee satisfaction.

Additionally, PEOs manage new hire onboarding and benefits enrollment, ensuring compliance with dynamic HR regulations. This reduces administrative strain while providing seamless experiences for both employees and employers.

2. Reduced Employee Turnover

Firms partnering with PEOs experience lower turnover rates, largely thanks to the enhanced benefits, seamless employee self-service tools, and accurate payroll systems that companies can offer to encourage higher retention. Lower turnover means substantial savings, considering it can cost $7,500 to $28,000 to find and onboard a new employee. Reduced turnover lowers overall costs, increases productivity by keeping institutional knowledge in-house, and strengthens workplace culture so employees will work better with each other.

3. Streamlined Workers’ Compensation

Navigating workers’ comp can be a costly, time-consuming ordeal. PEOs simplify this by finding tailored coverage across dozens of carriers, often at reduced rates. Many PEOs handle workers’ comp audits and deposit requirements, saving businesses significant amounts of money and hassle.

Can You Afford NOT To Work with a PEO?

The benefits of partnering with a PEO in 2025 far outweigh the costs, especially when working with a well-chosen provider. From accessing Fortune 500-level benefits to significantly reducing HR workloads, PEOs deliver unmatched value in modern business operations. The question isn’t whether you can afford a PEO; it’s whether you can afford not to hire one.

The key lies in selecting the right partner. Best-in-class PEOs offer scalable, flexible solutions that perfectly align with your business model, helping you grow without administrative bottlenecks.

Since 1999, PRemployer has been a trusted partner in delivering exceptional HR solutions tailored to meet the evolving needs of businesses. With over two decades of experience, we have built a legacy of excellence by empowering organizations to streamline their HR processes, enhance employee engagement, and achieve sustainable growth.