Most PEO's create a factor and bundle all employee related costs (FICA, FUTA, SUTA, WORK COMP, and ADMIN) into a bundled factor for each work comp class code to make payroll and other services simple and predicable for the employer. These factors will either stay stagnate using mathematical estimates for SUTA and FUTA cut-off's, or they will reduce as wage base limits are met for SUTA and FUTA tax. This is known as an unbundled factor.
A third pricing model involves a "real time" factor for taxes and work comp, plus a per employee fee per pay cycle or month. Known as a fee-based factor.
Example of Employer related costs (per $100 of payroll): |
Work Comp Codes >> |
8810
Sales |
3632
Machine Shop |
5645
Construction |
Social Security/Medicare |
07.65% |
07.65% |
07.65% |
Federal Unemployment |
00.80% |
00.80% |
00.80% |
State Unemployment |
03.25% |
03.25% |
03.25% |
Workers' Compensation |
00.40% |
04.15% |
12.50% |
Administrative Overhead |
04.00% |
04.00% |
04.00% |
|
Total Cost per $100.00 |
16.10% |
19.85% |
28.20% |
|
*Notes
- State Unemployment Tax rates vary significantly by state and due to employer experience.
- The Small Business Administration estimates that administrative overhead for business with less than 100 employees ranges from 4% - 8%
Total cost is estimated and may very by employer.
Examples of Pricing Structures by PEO's:
1. Bundled Factor Example |
Work Comp Codes >> |
8810
Sales |
3632
Machine Shop |
5645
Construction |
|
|
PEO Cost |
14.21% |
17.63% |
24.95% |
|
*Note
- The factor stays constant throughout the year.
2. Unbundled Factor Example |
Work Comp Codes >> |
8810
Sales |
3632
Machine Shop |
5645
Construction |
|
|
PEO Cost- pre cut-off (w/SUTA/FUTA TAX) |
15.94% |
19.70% |
26.88% |
PEO Cost- post cut-off
(no SUTA/FUTA TAX) |
11.89% |
15.65% |
22.83% |
|
*Note
- The factor shifts with Federal and State Unemployment Tax.
3. Fee Based Factor Example |
Work Comp Codes >> |
8810
Sales |
3632
Machine Shop |
5645
Construction |
|
Client/PEO Cost-(w/SUTA/FUTA TAX) |
12.10% |
15.85% |
24.20% |
Client/PEO Cost-
(no SUTA/FUTA TAX) |
07.84% |
11.80% |
20.15% |
PEO fee per employee |
$35.00 |
$35.00 |
$35.00 |
|
*Note
- The factor shifts with Federal and State Unemployment Tax, and the fee is carved out.
PEOs may have additional fees for group benefits such as health or 401(k) implementation. They may also have fees for delivery or client set-up. Axis Group LLC helps our customers identify and compare PEO packages. |
PEO Cost Savings Opportunities:
PEO has lower cost for SUTA
PEO has lower cost for comp
PEO eliminates down payment
PEO removes premium audit
PEO has lower health rates
PEO has lower dental rates
PEO has lower 401(k) costs
PEO lowers administrative costs
PEO reduces turnover
PEO frees client's productive time
PEO creates operating leverage
PEO reduces liability
PEO increases efficiency
PEO provides legal advice
PEO performs HR services
PEO performs risk management
PEO makes your life easier! |
