The attractive promises that PEOs make small businesses in terms of cost savings for employee benefits cause many small business owners jump at the chance to sign up. Others are skeptical and want to know what the PEO cost per employee will be to see if there really is any significant savings to be had.
Since the coining of the popular phrase, â€śThere is no such thing as a free lunch,â€ť many shy away from a good thing, convinced they will be taken in by a shyster who is only interested in making a buck. Signing on with a PEO also involves taking your employees along for the ride of being taken for a ride, when one fully grasps that idea the interest can end with merely entertaining the idea of a PEO instead of asking for a contract.
If you want to know how to figure out what the PEO cost per employee is, it may not be as easy as it sounds, but we can give you a pretty good idea as to what you can expect. Better to know if you really will be saving now rather than signing on to feel like you wasted your time and money trying to save on employee benefits.
The PEO Cost Per Employee Varies With Some PEOs
The short answer is that there isnâ€™t one short answer but a few of them. Not all PEOs work the same in terms of fees so weâ€™ll give you a few of examples of how they typically work so you know how to understand fee structures with PEOs.
They Will Charge A Flat Rate Per Employee- Some PEOs charge one rate per employee. This is an easy way to figure out how much extra you will be paying outside of what the rate of benefits per employee is for each of them.
Others Will Take A Percentage Of Payroll- There are other large PEOs who will charge a percentage of payroll in place of a flat monthly fee. This isnâ€™t so bad unless there is a lot of overtime or you have a company that fluctuates on payroll quite a bit. Trying to nail down your monthly fees may be a hard thing to do if this payroll scenario sounds like your company.
Some Bundle Their Fees Into Other Things Then Send You One Bill- If you need your payroll, payroll taxes, employee benefits costs and fees broken down on your statements, then this is the worst case scenario for you. In situations like this, you have no way of knowing. This is definitely not an ideal situation for most small businesses and/or their accountants.
What Costs You Do Save On When You Work With A PEO
There are obvious savings on employee benefits when it comes to almost every PEO. That is the main reason why most small businesses work with a PEO. Small business group health plans are egregiously expensive if you want decent coverage. Most PEOs will offer health plans that are sizably less what you can get on your own.
The other savings may not be as obviously but they need to be included in the cost savings. For one, you wonâ€™t be paying to process your payroll any more. A PEO handles all of your payroll functions for you. The nice thing about a PEO is they also handle paying all of your payroll taxes.
EPLI insurance and Workersâ€™ Compensation insurance are also included in your PEO costs and very likely at a much lower rate than you are paying now.
No Matter What, The PEO Cost Per Employee Is Lower
Whichever plan you go with, whatever PEO you choose, the chances are you will save over what you are paying now on employee overhead costs. The choice becomes which of the over 700 choices you have is the right one for your companyâ€™s individual needs. Some PEO fees are based on a service tier. Which tier you should go with should just be which one is cheaper. It depends on what you will need. That is when the decision gets harder.
There are plenty of PEOs, some big, some small, some regional, some international. It takes more than figuring out how you want to be billed to decide which one is the right one. That is where a PEO broker comes in. A PEO broker knows the business and understands which PEOs work best with your companyâ€™s needs.
The savings are there. The choices are many. The reality of a lower rate on employee overhead is yours to be had with a simple phone call to a PEO broker like PEO Spectrum.