PEO cost calculator

Price a PEO arrangement the way a broker quotes it: administration fee first, then the payroll taxes, workers' compensation and benefit contributions you pay whether or not a PEO is involved.

Result

$2,005,813 per year, $80,233 per employee

Gross payroll25 employees at $65,000$1,625,000
PEO administrative fee4% of payroll$65,000
Social Security6.2% up to the annual wage base$100,750
Medicare1.45% of all wages$23,563
FUTA0.6% on the first $7,000 of wages$1,050
State unemployment insurance3.4% to $7,000$5,950
Workers' compensation1.2 per $100 of payroll$19,500
Employer health contribution$550 per employee per month$165,000
Total$2,005,813

Shareable result: https://peosignal.com/calculators/peo-cost?employees=25&salary=65000&model=percent&fee=4&feePer=125&health=550&wc=1.2&sui=3.4&suiBase=7000

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What this assumes

  • Assumes every employee is enrolled in the employer health plan.
  • Assumes one workers'-comp class code applied across the whole payroll.
  • The PEO fee covers administration only; benefit premiums are shown separately so the two are not conflated.
  • Federal rates verified 2026-07-28 against IRS Publication 15.

How the maths works

Administration is charged either as a percentage of gross payroll or as a flat amount per employee per month. The percentage model scales with salary, so a team of well-paid engineers pays far more for the same service than a team of hourly staff — at $65,000 average salary the two models diverge quickly, which is the single biggest lever in a PEO negotiation.

Payroll taxes are computed per employee rather than on the payroll total, because Social Security, FUTA and state unemployment all stop at a wage base. Averaging first would understate the tax for a small team of high earners and overstate it for a large team of low earners.

Workers' compensation is priced per $100 of payroll at a single blended rate. Health contribution is the employer share only.

Check the estimate against a real quote

Send the inputs above to a broker and get priced numbers back for your headcount.

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Questions

How much does a PEO cost per employee?
Administrative fees usually land between 3% and 10% of gross payroll, or roughly $100 to $200 per employee per month. The fee is the small part: taxes, workers' compensation and benefits typically account for the majority of the total this calculator shows.
Is the percentage or per-employee model cheaper?
Per-employee pricing is cheaper above roughly $50,000 average salary, because a percentage fee keeps rising with pay while the service delivered does not. Switch the fee model above to compare the two on your own numbers.
Does a PEO reduce payroll taxes?
No. Federal taxes are fixed by statute. A PEO can lower your effective state unemployment rate in some states by reporting under its own account, and can lower workers'-comp and health premiums through pooled purchasing.

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