PEO vs employer of record: what each really costs
Compare attributable service fees, benefits and retained responsibilities without treating PEO and global EOR packages as equivalent.
Updated October 2026 · 9 minute read
A professional employer organisation, usually called a PEO, and an employer of record, usually called an EOR, can both help a business employ people. They are not interchangeable labels for outsourced payroll. The legal arrangement, locations supported and responsibilities retained by your company can differ substantially.
For a US small business, the useful question is which employment problem needs solving. If you already employ a domestic team and need payroll, benefits administration and HR support, a PEO may be relevant. If a provider will employ someone through its own entity, investigate the EOR contract and actual jurisdiction. Do not assume either arrangement removes every registration, tax or employment obligation.
| Published offering | Monthly per employee | Annual arithmetic |
|---|---|---|
| PEO Basic | $79 | $948 |
| PEO Plus | $124 | $1,488 |
| Global EOR | $599 | $7,188 |
| Wages, taxes and benefit premiums | Additional to service fee | Obtain itemised proposal |
What the headline service fee means
Justworks publishes PEO Basic at $79 and PEO Plus at $124 per employee per month. Its pricing page describes a separate global EOR offering at $599 per employee per month. These checked public figures provide an attributable comparison of service fees. They do not establish the cheapest price in the market or a typical price for all US businesses.
The offerings are not equivalent. The PEO Plus description includes medical, dental and vision administration, while medical premiums themselves still require separate budgeting. The global EOR label matters: do not treat that published price as confirmation that the same provider offers an identical domestic EOR arrangement in every US state.
Get an itemised proposal showing wages, employer taxes, insurance, benefits, administrative fees and any additional charges. Ask whether the advertised fee is the price for your employee type, headcount and billing arrangement. A lower service fee does not establish a lower total employment budget if the benefits and insurance costs differ.
Understand the employment and tax arrangement
A PEO commonly uses a shared employment arrangement while the client continues to direct the work and operate its business. An EOR commonly employs the worker through a provider entity under a service contract. The contract and applicable law determine the precise allocation of responsibilities. Marketing terms alone are not enough to establish who owes what.
The IRS has a specific certified PEO programme. Its customer guidance explains federal tax treatment for qualifying arrangements and worksite employees. Certification is not a general promise that all client liabilities disappear. Check the provider status, contract and the particular employees covered by the relevant rules.
For qualifying wages, CPEO rules can address federal employment tax liability and successor treatment. Those conditions matter when changing providers during a year. Do not assume every PEO is certified or every employee falls within the same protections. Ask the provider and your adviser to explain the actual treatment in writing.
A provider can help with administration without eliminating business tax exposure, licensing or other legal duties. An EOR contract also does not automatically answer sales tax or corporate tax nexus questions created by the activities of your business. Review the work location and duties, not just the name of the service.
What drives the cost up or down
Headcount and employee status affect the billed population. Ask whether owners, inactive staff, workers receiving a final payment or employees not using benefits still create an administration charge. Read the provider pricing rules instead of multiplying only the number of people currently at their desks.
Benefits choices can overwhelm a difference in service fees. Compare the employer share of medical premiums, eligibility, networks and any separate account contributions. A plan that offers access to benefits does not necessarily fund those benefits. Use the health insurance guide to keep full premiums and employer contributions distinct.
Location changes the underlying employment requirements. Different states or countries can require different insurance, payroll administration and mandatory benefits. The EOR must confirm it can support the actual arrangement. A published global starting price does not prove that every location or benefit package costs the same.
Contract length, deposits, currency conversion, termination support and optional services can change cash timing or total expense. No universal figure for those charges is assumed here. Ask for the terms, make them visible in the comparison and do not treat a refundable deposit as a permanent fee unless it becomes unrecoverable.
Compare a complete budget and an exit plan
Prepare a common employee roster for every proposal: work location, pay, expected hours, benefit elections and start dates. Require each provider to show what is included and excluded against that roster. Otherwise one quote may use single health coverage while another includes family coverage, creating a false cost advantage.
Compare the work you retain. Who approves time, handles employee complaints, records performance, manages safety and decides whether employment continues? A provider can offer expertise while the small business still supplies facts and day to day supervision. Include realistic internal administration time without pretending it is an external invoice.
Check how you leave the arrangement. You may need new payroll accounts, benefits transitions, records and updated employee notices. Ask who transfers historical wage information and whether any tax wage bases restart under the applicable rules. A cheap initial fee can be outweighed by an avoidable transition problem.
Use the employee cost calculator for salary and general employment cost categories. Use the contractor comparison only when the working arrangement is genuinely an appropriate contractor relationship. Calling a service EOR or PEO does not convert an employee into a contractor, and saving an administration fee does not justify worker misclassification.
Worked example: service fees for a 5 person team
Assume a business wants a service fee illustration for 5 employees over 12 months. Using the published Justworks PEO Basic and Plus prices produces 5 × $79 × 12 = $4,740 and 5 × $124 × 12 = $7,440. That is a specified PEO service fee range, not a quote for the complete payroll or benefit package.
For 5 eligible global EOR placements at the published $599 fee, the arithmetic is 5 × $599 × 12 = $35,940. It would be misleading to call the difference a saving for the same US employment problem without confirming service availability, legal arrangement and included responsibilities. The products answer different needs.
The assumed team size and full year are illustrative. Wages, employer taxes, insurance and medical premiums are excluded, as are any unverified additional contract charges. Obtain a dated proposal for the actual locations before comparing alternatives. This site has no referral fees or sponsorship arrangement with the provider; its public page is used only as a traceable price example.
Frequently asked questions
Is a PEO cheaper than an EOR?
The example PEO administration prices are lower, but the products are not equivalent. Compare actual locations, employment arrangements, benefits and duties. A service that does not solve your legal or operational problem is not a useful saving, regardless of its headline monthly fee.
Does the service fee include medical insurance premiums?
Do not assume so. A plan can include benefits administration or access while premiums remain additional. Ask for a complete itemised proposal and the employer contribution policy. The figures in this guide are service fees, not the total cost of employing someone.
Is every PEO certified by the IRS?
No. The IRS certified PEO programme has its own requirements and published information. Verify the provider status and the rules applying to your workers. Certification affects specific federal tax treatment; it does not remove every client duty or establish universal protection.
Can an EOR remove all state registration obligations?
Not as a blanket promise. The actual arrangement and business activities determine which obligations remain. Confirm who is the employer, which accounts are used and whether other business tax or registration duties apply. Seek location specific advice rather than relying on the label EOR.
Are the global EOR prices verified domestic US prices?
No. The cited provider describes that offering as global EOR. This guide does not claim it is an equivalent domestic service in every US state. Confirm jurisdiction and scope in a proposal, and do not use the price comparison as proof of universal availability.
Sources
- Justworks: Published Pricing. Public plans checked October 2026: PEO Basic $79, PEO Plus $124 and global EOR $599 per employee monthly. Service prices, not total employment costs or equivalent US products.
- Justworks Help Center: Pricing. Plan scope and how active employees and benefit eligibility affect administration billing.
- IRS: CPEO Customers. Federal tax treatment and customer responsibilities for certified PEO arrangements.
- IRS: Certified Professional Employer Organizations. Official programme information and verification resources.