PEOs Are Great Until You Actually Understand What You’re Paying For
Professional Employer Organizations (PEOs) promise simple HR: one vendor for payroll, benefits, compliance, and risk management. For companies with 5-30 employees, they can be a great solution. But most business owners sign PEO contracts without understanding:
- What you’re actually paying (fees buried in PEPM quotes)
- What you’re getting vs. what you could buy cheaper separately
- That you’re locked into THEIR health insurance at THEIR rates
- How hard it is to leave if it’s not working
- Whether PEO or separate vendors is better for YOUR situation
Common PEO problems:
- “We’re paying $400/employee/month—is that reasonable?” (probably not)
- “Their health insurance increased 40% and we’re stuck”
- “We’re growing and don’t need full-service anymore but can’t leave”
- “Benefits are mediocre but we can’t shop other carriers”
- “PEO won’t tell us actual costs—everything is bundled”
Our PEO/EOR Selection & Transition service helps you for $999:
- Determine if PEO is right for you (or if separate vendors are better)
- Compare PEO costs apples-to-apples (break down the hidden fees)
- Select the right PEO or plan your exit from current PEO
- Transition smoothly to new solution
WHAT YOU’LL RECEIVE
1. PEO vs. Separate Vendors Analysis
- Build vs. buy decision framework (PEO vs. separate payroll + benefits + HR)
- Cost comparison model (PEO all-in cost vs. separate vendor costs)
- Pros/cons analysis for your specific situation
- Breakeven analysis (at what size does PEO make sense?)
- Future growth considerations (will PEO scale with you?)
2. PEO Market Education
- How PEOs actually make money (what they won’t tell you in sales pitch)
- Fee structures decoded (PEPM, percentage of payroll, administrative fees, workers comp markup)
- What’s included vs. what costs extra (most PEOs don’t include everything they imply)
- Co-employment explained (legal and tax implications)
- PEO types comparison (bundled vs. unbundled, ASO vs. PEO)
3. Vendor Selection Support If you decide PEO is right:
- PEO shortlist (3-5 recommended PEOs for your size/industry)
- RFP template (request for proposal to send to PEOs)
- Pricing comparison worksheet (apples-to-apples cost breakdown)
- Contract terms to negotiate (exit clauses, rate guarantees, what to avoid)
- Reference questions to ask (what to ask current PEO clients)
If you decide separate vendors are better:
- Recommended vendor stack (payroll + HRIS + benefits broker)
- Estimated all-in costs (comparable to PEO quote)
- Implementation complexity assessment
4. PEO Contract Review
- Contract review checklist (key terms to understand before signing)
- Red flags guide (terms to negotiate or walk away from)
- Exit clause analysis (how hard is it to leave?)
- Rate lock provisions (what’s guaranteed, what can increase)
- Service level agreement review (what are they actually promising?)
5. PEO Transition Planning (if leaving current PEO)
- Transition timeline (typically 30-60 days)
- Data extraction requirements (what data to get from current PEO)
- Employee communication plan (how to explain change)
- Benefits continuation strategy (avoiding coverage gaps)
- Payroll cutover plan (timing to avoid missed paychecks)
- Compliance handoff (workers comp, unemployment, tax accounts)
6. Implementation Support
- New vendor implementation checklist
- Employee data migration template
- Benefit enrollment coordination
- Payroll parallel testing plan (verify accuracy before going live)
- Go-live readiness checklist
7. Cost Negotiation Strategies
- What’s negotiable with PEOs (most don’t tell you this)
- Volume discount considerations (current size vs. projected size)
- Multi-year pricing options (pros/cons of rate locks)
- How to play vendors against each other (ethical tactics)
All analysis customized to your company size, growth plans, and current situation
WHAT’S NOT INCLUDED
This is selection guidance and transition planning, not ongoing PEO management:
- ❌ Legal review of PEO contracts (we provide checklist, attorney does legal review)
- ❌ Negotiation on your behalf (we provide strategy, you negotiate)
- ❌ Hands-on implementation or data migration (we provide plan, you or vendor executes)
- ❌ Benefits broker services (separate from PEO selection)
- ❌ Ongoing HR or payroll administration (that’s what PEO provides)
- ❌ Workers comp insurance shopping (PEO includes this, or you get separate if not using PEO)
- ❌ Tax compliance or filings (PEO handles if you choose PEO route)
Important: We have zero financial relationships with any PEO or vendor. Our recommendations are 100% independent.
WHAT WE NEED FROM YOU
Complete our intake (30-40 minutes):
Required Information:
- Company basics:
- Current number of employees
- Growth plans (will you be 50 employees in 2 years?)
- State locations
- Industry/business type
- Current situation:
- Are you using a PEO now? Which one?
- What are you paying? (PEPM or total monthly cost)
- What’s working? What’s frustrating?
- Or are you considering PEO for first time?
- Payroll and benefits:
- Current payroll frequency
- Benefits you offer (or want to offer)
- Rough payroll volume (monthly or annual)
- Decision drivers:
- Why are you considering change?
- What’s most important? (cost, service, benefits quality, compliance support?)
- Budget for HR administration
- Internal capacity for HR/payroll management
You’ll also need to share:
- Current PEO contract (if applicable)
- Recent invoices showing costs
- Benefits summaries
PROCESS & TIMELINE
Days 1-2: Intake call + you provide contract/invoices for analysis
Days 3-5: We analyze your costs, research alternatives, model different scenarios
Day 6: Deliver recommendations report (PEO vs. separate vendors + specific vendor shortlist)
Day 7: Review call (60 min) to discuss findings and answer questions
Days 8-9: You request quotes from recommended vendors
Day 10: Quote comparison call (45 min) to evaluate proposals and make decision
Post-delivery: 30-day email support while you finalize selection and begin transition
If transitioning from current PEO: Additional 60-day support during transition period
Total timeline: 10 business days for selection + ongoing transition support
WHO THIS SERVICE IS FOR
This service is perfect for:
✅ Companies with 5-50 employees evaluating PEO for first time
✅ Businesses currently in PEO wondering if they’re overpaying
✅ Startups outgrowing their PEO and ready for separate vendors
✅ Anyone frustrated with current PEO service or costs
✅ Companies comparing multiple PEO proposals and can’t decipher pricing
✅ Leadership teams who don’t understand PEO contracts they’re being asked to sign
You definitely need this if:
- Your PEO renewal came in with 30%+ increase
- You’re signing a PEO contract and don’t understand what you’re agreeing to
- You’re comparing PEO quotes that all look different (how do you compare?!)
- You suspect you’re overpaying but don’t know how to comparison shop
- You want to leave your PEO but don’t know how
Not right for you if:
- You have <5 employees (PEO probably too expensive, consider payroll software instead)
- You have 100+ employees (likely outgrown PEO, need full HRIS + separate benefits)
- You’re happy with current PEO and prices are reasonable (if it ain’t broke…)
- You have dedicated HR team that can manage separate vendors
WHY INDEPENDENT PEO GUIDANCE MATTERS
PEO Sales Reps Work For PEOs, Not You:
They’re incentivized to sell you the most expensive package, downplay negatives, and make it sound simpler than it is.
PEO Pricing Is Intentionally Confusing:
PEPM quotes bundle everything together so you can’t see:
- How much is payroll admin ($40-$60/employee/month typically)
- How much is their benefits markup (often 10-20% on insurance premiums)
- How much is workers comp markup (can be 20-40% above direct rates)
- Hidden fees (implementation, technology, per-payroll charges)
You’re Probably Overpaying:
Most companies pay $350-$500 PEPM. At 25 employees, that’s $105,000-$150,000/year. You could often get same services for $75,000-$90,000 with separate vendors.
PEOs Are Hard to Leave:
They control your:
- Workers comp policy (transferring is complex)
- Unemployment account (SUTA rate goes with them)
- 401k (transfer can be expensive)
- Health insurance (you’re on their master policy)
Bad PEO decisions cost thousands monthly. This $999 investment saves you from multi-year commitments costing tens of thousands more than necessary.
FREQUENTLY ASKED QUESTIONS
What’s the difference between PEO and EOR?
PEO = Professional Employer Organization. Co-employment model, they become employer of record for taxes/benefits. EOR = Employer of Record. They’re the legal employer (common for international hiring). Most domestic use cases = PEO.
Are PEOs worth it?
For 5-30 employees with no HR staff: often yes (all-in-one simplicity). For 30-50 employees: depends (compare costs). For 50+ employees: usually no (you can save money with separate vendors).
How much should PEO cost?
Typical PEPM: $350-$600 depending on services. Calculate total cost: (PEPM × number of employees × 12 months). Compare that to separate payroll ($40-$60 PEPM) + benefits admin ($30-$50 PEPM) + HR software ($8-$15 PEPM).
What’s negotiable with PEOs?
Implementation fees (often waived), admin fees (can reduce), rate locks (ask for multi-year), early termination terms (try to improve). Health insurance rates and workers comp rates are less negotiable.
How hard is it to leave a PEO?
Challenging but doable. Typically requires 30-60 days notice, coordination with new vendors, benefits transition planning. We provide detailed transition roadmap.
Can we shop health insurance if we’re in a PEO?
No. PEOs use master health insurance policy. You can’t choose carriers. This is a major downside—their rates might be worse than you could get directly.
What if we have workers comp claims history?
PEO’s master workers comp policy can be advantage (they absorb your experience rating) or disadvantage (you pay their averaged rate). Depends on your specific claims.
Should we switch PEOs or leave PEO entirely?
Depends. If PEO model works but current one is expensive/bad service, switch PEOs. If you’ve outgrown need for full-service, exit to separate vendors. We’ll model both.
What about payroll companies with HR services (like ADP TotalSource)?
That’s essentially a PEO (co-employment model). Same evaluation applies. Compare to other PEOs and separate vendor options.
Do you recommend specific PEOs?
We provide shortlist of 3-5 PEOs that are good fit for your size/situation. We have zero financial relationships with them. Recommendations based purely on fit for your needs.
LEGAL DISCLAIMER
This service provides PEO and vendor selection guidance, not legal, tax, or financial advice. PEO arrangements involve complex legal relationships, tax implications, and regulatory compliance.
We provide operational analysis and vendor comparison, but you are responsible for:
- Legal review of contracts by qualified attorney
- Understanding co-employment implications with your counsel
- Tax implications of PEO relationship
- Compliance with all applicable employment laws under PEO arrangement
We have no financial relationships with PEOs, EROs, or related vendors. Recommendations are based on publicly available information, vendor comparisons, and industry best practices, not compensation or referral fees.
Each PEO arrangement is unique. What works for one business may not work for another. Consult legal and tax advisors before making PEO decisions.
ADD-ONS AVAILABLE
PEO Contract Legal Review Coordination (+$299): We’ll work with your attorney to streamline contract review
Hands-On Transition Management (+$799): We’ll project-manage your transition from current PEO to new solution
Annual PEO Cost Review (+$399): We’ll review your PEO renewal annually and advise on whether to shop
Workers Comp Analysis (+$299): Detailed analysis of workers comp costs in PEO vs. direct market
