The Monthly Retainer PEO Model for Small and Medium Businesses

Human resources can be a real chore for the owner of a small to medium-sized business (SMB). From payroll and benefits administration to compliance and recruiting, HR eats up time and effort that you’d rather be using to grow your business.

That’s where a Professional Employer Organization (PEO) can help. As an HR outsourcing firm, a PEO takes over your human resources responsibilities and provides ongoing support that allows you to get back to growing your company. For these services, PEOs utilize a variety of billing options that can be tailored to suit your business needs — in this article, we’re examining the monthly retainer method.

The PEO Monthly Retainer

Rather than charging per service, PEOs can offer a monthly fee option. This predictable, fixed monthly cost allows you to budget accurately and provides complete HR support. The retainer covers all administration of payroll, benefits, compliance, recruiting, training, and more.

Some key things to know about the PEO monthly retainer model:

All-Inclusive Services

The PEO retainer provides full HR services, including:

  • Payroll administration
  • Health and other insurance benefits
  • Compliance with labor regulations
  • New employee onboarding
  • Employee training and development
  • Performance management
  • HR technology and online portals

With the retainer, you avoid piecemeal pricing for individual HR functions.

Cost Savings

By leveraging the economies of scale, PEOs can provide HR services at a lower cost than hiring in-house. The PEO passes those savings on to your business through the monthly rate.

PEOs can secure affordable group benefits plans and reduced payroll provider fees not available to individual small businesses. The monthly retainer saves you money over traditional HR expenses.

Fixed, Predictable Costs

The PEO retainer provides budget certainty. You pay the same set monthly rate for full HR support. This consistency allows for better financial planning and cost control. No surprises, no add-on fees — the single retainer covers everything.

Scalability

As your business grows, your HR needs expand. The PEO monthly retainer is scalable to match your changing requirements, so you pay more or less based on the number of employees. There’s no need to constantly evaluate and source new HR solutions.

How Much Does the PEO Retainer Cost?

PEO retainer fees vary based on:

  • Number of employees
  • Employee demographics
  • Industry risk
  • Services included
  • Geography

Typically, costs range from $100 to over $200 per employee per month. This covers the full scope of HR administration and compliance.

Some PEOs offer tiered pricing models based on company size and services. Here’s a hypothetical example:

  • 1-10 employees = $125 per employee per month
  • 11-25 employees = $110 per employee per month
  • 26-50 employees = $100 per employee per month

Others use straightforward per-employee pricing. The rate decreases as your headcount increases. The PEO will evaluate your specific HR needs and employee population to provide a customized quote. Be sure to ask about any minimum monthly fees as well.

Services Included in the PEO Retainer

To understand the full value of the PEO retainer model, let’s look at the comprehensive services you receive for your monthly fee:

Payroll Administration

The PEO handles all payroll tasks, including:

  • Payroll processing
  • Direct deposits
  • Tax filings and payments
  • W-2 forms
  • Garnishments

You simply review employee hours and approve payroll. The PEO does the rest!

Benefits Management

The PEO provides access to group health insurance, retirement plans, life insurance, and other essential benefits. They act as the employer of record to enroll your employees and handle tasks such as:

  • Open enrollment
  • Changes in status
  • Plan compliance
  • COBRA

The PEO can also help you assess benefits needs and design cost-effective offerings.

HR Compliance

PEOs stay current on the myriad HR regulations from federal, state, and local agencies. They ensure your policies and practices adhere to laws related to:

  • Wages and payroll
  • Health and safety
  • Discrimination
  • Leave and accommodation
  • Hiring and termination

The PEO retainer frees you from constantly tracking regulatory changes.

Recruiting and Onboarding

Through the PEO, you gain access to:

  • Applicant tracking software
  • Job advertising
  • Background screening
  • Offer letter and agreement generation
  • Online onboarding

The PEO can fully manage the hiring process, from sourcing candidates to new employee orientation.

Performance Management

Managing employee productivity and development is made easier with PEO services like:

  • Performance reviews
  • Goal tracking
  • Corrective action
  • Training programs
  • Assessments
  • Succession planning

You retain control over personnel decisions while the PEO provides supportive infrastructure.

Access to HR Technology

PEOs provide online platforms and self-service apps that connect you and your employees to important HR data and tools. Features often include:

  • Payroll information
  • Benefits enrollment
  • Time-off requests
  • Company policies
  • Performance reviews
  • Training

The technology improves communication, productivity, and engagement.

Hands-on Administration

In addition to the above services, the PEO handles all administrative aspects of HR, from filing paperwork to answering employee questions. This comprehensive, hands-on support is included in the monthly retainer.

Partner with a PEO for Complete HR Support

Hopefully this breakdown gives you a better understanding of the PEO monthly retainer model. For a predictable, scalable fee, you can finally take HR off your to-do list and focus on the future of your business.


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

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