The modern business landscape, filled with many complexities, has driven companies toward finding innovative solutions for managing their internal operations. One of these solutions is using a Professional Employer Organization (PEO). But what exactly does a PEO cost per employee? What value does it add to an organization? Keep reading to learn more. 

What is a PEO? 

A PEO is a firm that provides a service under which an employer can outsource employee management tasks. For example, Canal HR can handle employee benefits, payroll processing, workers’ compensation, 401k, and risk/safety management. Our program allows business owners to devote more time and effort to running their business instead of dealing with endless paperwork. PEOs hire company employees and become their employer of record for tax purposes and insurance claims in an arrangement known as co-employment to take on the abovementioned responsibilities. 

Breaking Down the Costs

Understanding PEO costs requires looking into the services provided. Generally, the PEO cost per employee varies depending on the scale and needs of the organization. Below are the primary components. 

Administrative Fees

This fee is comprised of the tasks associated with managing the HR responsibilities. Typically, these fees can be fixed per employee or a percentage of the total payroll. 

Employee Benefits

These costs depend on the types of benefits offered, such as health, dental, vision, life, cancer, retirement, and more. Offering a comprehensive benefits package can increase the cost per employee and reduce the employee turnover rate.

 In fact, 78% of employees in a recent survey stated they are more likely to stay with an employer because of their benefits package, so it’s imperative to ensure you are offering a package that will attract and retain top talent. 

Workers’ Compensation

Premiums for workers’ compensation insurance are another cost that can vary widely based on the industry, the claims history of the company, and the state in which the company operates. For your guide to workers’ compensation in Louisiana, click here. 

Other Services

Some PEOs offer additional services, such as training and development, recruitment services,  safety compliance, and Christmas Savings Program, among others. The costs for these services depend on the specific PEO and the needs of the business. 

Factors Influencing Cost

PEO pricing is not one size fits all. Various factors influence the PEO cost per employee, including: 

• Industry: High-risk industries or those with a history of frequent workers’ compensation claims may face a higher PEO cost per employee. 
• Company Size: While economies of scale might mean a lower peo cost per employee, some PEOs, like Canal HR, cater to small businesses and offer competitive pricing for small employee numbers. 
• Location: Different states have different regulations, insurance rates, and taxes, impacting the PEO cost per employee and overall cost. 
• Services Required: The more services a company requires from a PEO, the higher the price they might expect to pay per employee. 
• Employee Turnover: Companies with higher employee turnover rates may see increased costs due to the administrative tasks associated with recruiting, hiring, onboarding, and offboarding. 

The Value Proposition

While there are costs associated with using a PEO, the benefits outweigh the expenses. 

Risk Management

By working with multiple companies, PEOs can better negotiate insurance rates for their clients and distribute risk. Risk management is a continuous process and should not be an afterthought. Luckily for business owners, PEOs like Canal HR can help you stay current on the process and best practices. 

Compliance Expertise

PEOs are well-versed in local, state, and federal regulations, ensuring the companies stay compliant and avoid potential fines or legal issues. Just be sure you are working with a PEO operating within your region. At Canal HR, we have served hundreds of businesses across the southeastern region of hte United States since 1992. 

Access to Better Benefits

Smaller companies may find it difficult to offer competitive benefits. PEOs, due to their scale, can negotiate better rates for health insurance and other benefits, making companies more attractive to potential employees. 

Canal HR has an in-house agency that can handle all your employee’s insurance needs. You just have to choose which type of plan you want to offer, and we’ll get you and your employees the best rates. 

Time and Resource Savings

Outsourcing HR tasks allows companies to focus on their core business operations, leading to increased productivity and growth. Leave the paperwork to your PEO and work on the aspects of business that matter to your bottom line. 

Are PEOs Worth the Cost?

The answer is yes for many businesses, especially small and medium-sized enterprises. The expertise,  efficiency, and economics of scale that PEOs can bring can be significant. Companies no longer have to invest heavily in in-house HR departments or spend countless hours navigating the intricacies of compliance and risk management. 

If you are still determining if a PEO is right for your business, conduct a cost-benefit analysis to determine if the PEO cost per employee is justifiable. 

Never Wonder Again About the PEO Cost Per Employee and Partner with Canal HR

The PE cost per employee is more than just a numerical value; it represents an investment in your business’s future success, efficiency, and growth. The right PEO can transform your organization’s HR landscape through expert guidance, comprehensive services, and a tailored approach. 

If you are considering taking this transformative step, Canal HR is here to partner with you. With a proven track record and dedication to personalized service, Canal HR stands out as a trusted PEO choice. Don’t just evaluate the cost; consider the value and the partnership you’re entering. Reach out to Canal HR today and discover how we can elevate your business to new heights.