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How Does Using A PEO Help Control Costs?

How Does Using A PEO Help Control Costs?


One of the biggest challenges for small and mid-sized businesses is managing employee-related expenses, such as payroll, taxes, and insurance. In fact, employee-related costs can combine to be a company’s biggest expense.

Partnering with a PEO (Professional Employee Organization) can save your company money, on your Human Resources costs, as well as save you and your office manager the time and headaches involved in providing employee services. The PEO effectively and efficiently manages all of your Human Resources services.

A lot of companies outsource payroll, and outsource their benefits management. But outsourcing various HR components to different vendors and insurance companies can actually be more expensive than outsourcing all of your HR services to a PEO like Einstein HR. 

And outsourcing your HR services to a PEO allows you and your administrative staff to focus on your business — providing better customer service, and making more service calls or sales calls instead of performing HR tasks. And if you’re one of those business owners who performs HR tasks after business hours, outsourcing to a PEO gives you your family time back.

What Services Does a PEO Offer?

A good PEO will offer a full range of HR services tailored to your specific business needs. Common Professional Employee Organization services include:

How Does a PEO Work?

PEOs use a legal arrangement called co-employment. In co-employment, the PEO becomes the employer of record – cutting paychecks, managing benefits, issuing W-2s, etc. You retain full control of your company’s management, customer service, projects, hiring and firing, and day to day operations.

There is no risk to you — you retain all executive powers. The PEO has no management power; we simply provide HR services.

Benefits of Co-employment

The main benefits of co-employment include:

Better, more affordable benefits

Insurance companies price benefits plans based on how many employees you have. So if you were to get a plan just for your company of 15 employees, the costs could be prohibitive. A PEO, on the other hand, often represents thousands of employees at various businesses. A PEO is therefore able to negotiate better group insurance rates, which are passed on to you and your employees.

Professional HR services

Professional HR services can reduce employee turnover and improve the workplace climate. When employees are confident they will get paid on time, that they have good health benefits, and that things are being run efficiently, they tend to be happier employees.

Costs savings

Even though you are paying the PEO, you should see cost savings in HR costs, benefits costs, and your time as a business owner will be more productive. Partnering with a PEO also helps control costs associated with risk management and government compliance.

How Much Does It Cost to Use a PEO?

There is no fixed answer to how much it costs to use a PEO. Most PEOs use one of two pricing models, depending on the size of your business.

  1. A percentage of payroll. The exact percentage will vary depending on your industry, the size of your business, and the type of workers you employ (full time, part time). Generally, the percentage falls in the range of 2% to 12% of payroll.
  2. A flat fee per employee per month. Many businesses prefer this model, because it does not tie the payment to how profitable a business is in a given month, and gives a more predictable cost. Again, the fee will range, based on the specifics of your organization, but should be between $40 and $160 per employee, per month.

If you’re spending too much on multiple HR service vendors, or if you’re spending too much time trying to do everything yourself, to the detriment of your customer service and company growth, it may be time for you to consider working with a PEO to help control costs. As with hiring any vendor, do your homework, and get estimates and proposals from at least three companies. In-person meetings are a good way to see how well you and the PEO will “click.”

Do you need better HR—at a lower cost? At Einstein HR, our mission is to make your business run better. We’ll give you a free quote and help you develop a customized human resources, payroll, or PEO service to fit your needs.

Fill out the form to your right or contact us and get a free quote today.

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