Does your PEO charge a Percentage of Payroll for your Administration Fee?

HR OutsourcingPEOs

Oct 12

Being in a Professional Employer Organization (PEO) is a smart choice for small-medium size companies. You gain access to streamlined operations for payroll, health insurance, workers’ compensation, and expert HR service and support. The items listed above are great for your business, your employees and make the lives easier for everyone involved.

Every PEO charges an Administration Fee per employee for their services. It includes all of the services that the PEO does for you and your employees. PEOs either charge a Flat Fee or a Percentage of Payroll. While you should always work to get the best price for your administration fee, you should ALWAYS pay a Flat Fee per Employee.

PEOs that charge a Percentage of Payroll make a significant amount of money because as you grow and hire employees, your payroll rises and so does your Administration Fee. It’s a variable percentage and in our experience is always expensive. Insperity and ADP TotalSource typically charge a Percentage of Payroll and combine the administration fees with State and Federal taxes and Workers’ Compensation costs.

This makes it extremely difficult to know exactly what you are paying and in my experience, it’s much, much more than you should be paying. The other day I reviewed a PEO quote for a Referral Partner of ours and when we broke out the numbers, the PEO in question was charging $22,000 in Administration Fees for 15 employees and only saving the group $860 a year assuming a 20% renewal for the group’s health benefits.

PEO makes a lot of sense and we’ve helped numerous companies find the right one, but paying a Percentage of Payroll as your Administration Fee is always a bad idea. So if you are in a PEO that charges a Percentage of Payroll, it’s in your best interest to find out what you’re paying exactly and to have it fixed.

To learn more about PEOs - request your copy of our Intro to PEO.

PEO FeesPEO Administration FeesPEOProfessional Employer Organization

Rodney Steele

As Dinsmore Steele’s CEO and Founder, Rodney is responsible for the leadership and vision of Dinsmore Steele, as well as leading the company’s solution development and strategy. He founded Dinsmore Steele because he witnessed first hand the inefficiencies and difficulty companies had when pricing, shopping and purchasing their human capital solutions, and so he created single source platform that comparatively shops the entire marketplace. Prior to Dinsmore Steele, Rodney had an illustrious career in Capital Markets and Banking for some of the largest financial institutions in the world. Committed to changing the way companies shop for their human capital needs, Rodney and the entire Dinsmore Steele team is at the forefront of human capital. Rodney holds a bachelor’s degree in finance from the University of North Carolina, Chapel Hill. He is an active member of his community and resides on the North Shore of Long Island with his Siberian Husky Jefe.

Does your PEO charge a Percentage of Payroll for your Administration Fee?

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