The Hourly Rate PEO Model for Small and Medium Businesses

When you run a company, you know how complex and time-consuming human resources administration can be. From managing payroll and benefits to overseeing compliance and workplace policies, HR tasks demand extensive effort. Yet they’re vital for operating a successful, legally sound business. Can a PEO help?

Rather than tackle this alone, many small and medium-sized businesses (SMBs) partner with a Professional Employer Organization (PEO). PEOs provide comprehensive HR services and support so you can focus on your core priorities.

One of the most common questions is about how PEOs charge for taking over these critical HR functions. There are several ways that a PEO can bill a client, and in this article we’re covering the hourly rate option. This model offers transparency while allowing you to scale services up or down as needed.

Read on to explore how PEO hourly fees work, what influences the rates, and whether this pricing structure makes sense for your organization.

How PEO Hourly Rates Are Determined

PEOs charge an hourly or per-person hourly rate based on the specific services provided and level of expertise required. Fees range widely and can be customized to your organizational needs, but often fall around $100-$200 per hour. Rates depend on several key factors:

Service Complexity

Highly complex services like compensation analysis or workplace investigation demand higher hourly fees than basic HR administration.

Level of Expertise

Hours billed by a senior HR expert with 20+ years of experience cost more than those from a generalist with 5 years experience.

Location

PEOs adjust rates based on the local labor market. Fees tend to run higher in large metro areas with elevated pay scales.

Supplemental Costs

Some services incur added costs like software licenses, background checks, job board postings, etc., which may be factored into hourly fees.

Volume Discounts

PEOs may offer discounted hourly rates for high-volume clients with 500+ hours per month.

Service Bundles

Bundling certain core services like payroll and benefits administration can warrant more attractive overall hourly pricing.

Key PEO Services Billed at Hourly Rates

Some of the most common PEO services charged by the hour include:

HR Consultation

Strategic guidance on HR policies, employee relations, organizational change, workforce compliance, and so on.

Training and Development

Needs assessment, instructional design, training delivery, leadership coaching, and program analysis/reporting.

Recruiting and Staffing

Sourcing, screening, interviewing, assessments, onboarding, and background checks for any hiring/staffing needs.

Payroll Processing

Payroll preparation, direct deposit or check processing, tax payments and quarterly/annual filings, earnings statements, and more.

HR Administration

Maintaining employee records, HRIS data entry, managing PTO accruals, administering performance reviews, tracking attendance, etc.

Workplace Investigations

Planning investigation approach, conducting interviews, analyzing findings, documenting conclusions, and issuing recommendations.

Compensation Analysis

Job description review, compensation benchmarking, pay equity analysis, bonus/incentive design, and updating pay structures.

Custom Training

Developing specialized training programs based on organizational needs like customer service, sales, leadership, compliance, or diversity and inclusion. 

Weighing the Benefits of PEO Hourly Billing

Beyond sheer time savings, partnering with a PEO that bills hourly offers compelling benefits:

Cost Flexibility

You only pay for the specific services utilized each month, allowing for greater budgeting control.

Scalability

It’s easy to add or reduce services to match changing business needs.

Customization

You can tailor PEO support to address unique organizational priorities and challenges.

Specialized Expertise

Access senior-level specialists for complex projects without having to hire them full-time.

No Long-Term Commitments

Hourly billing allows you to test out the partnership before making a major investment.

Finding the Right PEO Partner

Identifying the right PEO comes down to asking the right questions upfront:

  • What is your hourly rate range by service type and level of expertise?
  • How are your hourly rates determined?
  • What factors might cause your hourly rates to fluctuate?
  • Do you offer discounted flat fees or rates for high-volume clients?
  • Can we start with a pilot group of hourly services before scaling up?
  • What are typical hourly volumes for clients of our size?

Armed with answers to questions like these, you can determine if a PEO’s hourly pricing structure aligns to your budget and needs.

Bring Strategic HR Support Within Reach

While HR demands significant resources, PEO hourly rates allow you to cost-effectively outsource select functions so you can get back to focusing on core priorities. It’s worth investing the time and effort to explore the value of a customized PEO partnership tailored to your specific business goals and ever-changing requirements.


You can continue your research by learning about the other models PEOs use to charge for their services:

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