Key Takeaways
- A full-time HR manager costs $80,000 to $120,000 per year in salary alone, plus benefits and taxes. A PEO for 20 employees costs $24,000 to $40,000 per year.
- A PEO provides a team of specialists, including benefits, compliance, payroll, and risk management. An HR manager is one generalist.
- For companies under 50 employees, a PEO is almost always more cost effective. For companies over 150, a dedicated HR person may start to make sense.
- Many companies use both, a PEO for benefits and compliance, and an HR coordinator for day to day employee relations.
The Cost Comparison
A full-time HR manager in Florida typically earns $80,000 to $120,000 per year in salary. Add 30 percent for benefits, payroll taxes, and workers' comp, and the total cost is $104,000 to $156,000 per year. That does not include the cost of payroll software, benefits administration platforms, or compliance tools, which add another $5,000 to $15,000 per year.
A PEO for a 20-employee company costs $24,000 to $40,000 per year, and that includes payroll, benefits administration, compliance tools, and the HRIS platform. For a 50-employee company, the PEO costs $60,000 to $100,000 per year. In both cases, the PEO is significantly cheaper than a single HR manager, and it provides a broader range of services.
Capabilities: Team vs Generalist
An HR manager is one person. They may be strong in some areas, like employee relations and recruiting, but weaker in others, like benefits plan design, compliance law, or workers' comp claims management. No single person can be an expert in everything HR requires.
A PEO provides a team of specialists. You get a benefits expert who designs and manages your health insurance plans. A compliance specialist who tracks labor law changes and handles audits. A payroll team that processes taxes and year end forms. A risk management professional who handles workers' comp claims and safety programs. And an HR generalist who helps with hiring, onboarding, and employee relations. You get the depth of a full HR department for less than the cost of one hire.
When an HR Manager Makes Sense
An in-house HR manager starts to make sense when your company reaches 150 or more employees, or when HR is a strategic priority that requires a dedicated leader. At that size, the complexity of employee relations, performance management, and culture building benefits from someone who is in the office every day and knows the team personally.
An HR manager also makes sense if your company has unique HR needs that a PEO cannot address, like a highly specialized workforce, complex compensation structures, or a strong internal culture initiative. In these cases, the HR manager focuses on strategy and culture while the PEO handles the administrative and compliance work in the background.
When a PEO Is the Better Choice
For companies with 5 to 150 employees, a PEO is almost always the better choice. You get a full HR department for a fraction of the cost of one hire. The PEO handles the administrative burden, compliance risk, and benefits management that would otherwise fall on the owner or office manager. And the PEO provides access to large-group health insurance and pooled workers' comp, which an HR manager cannot do.
A PEO is also the better choice if your primary HR pain points are compliance, benefits cost, and payroll accuracy. These are the areas where a PEO excels and where a single HR manager would struggle to keep up. The PEO's scale and specialized team solve these problems more effectively than one generalist hire.
The Best of Both Worlds
Many growing companies use both. The PEO handles payroll, benefits, compliance, and workers' comp. An HR coordinator, who costs $45,000 to $60,000 per year, handles day to day employee relations, onboarding, and culture. This combination gives you the administrative power of a PEO plus the personal touch of an in-house person, for less than the cost of a full HR manager.
This is a common setup for companies between 50 and 150 employees. As you grow past 150, you can upgrade the coordinator to a manager and eventually build an internal HR team, while keeping the PEO for benefits and compliance. The PEO scales with you, so you are never paying for more HR capacity than you need.
Frequently Asked Questions
Can a PEO replace an HR manager?
For companies under 150 employees, a PEO can handle most of what an HR manager would do, at a lower cost. For larger companies, a PEO plus an in-house HR person is often the best combination, with the PEO handling administration and compliance and the HR person focusing on culture and strategy.
How much does an in-house HR manager cost vs a PEO?
An HR manager costs $80,000 to $120,000 per year in salary, plus 30 percent for benefits and taxes. A PEO for 20 employees costs $24,000 to $40,000 per year and includes payroll, benefits, compliance, and HR support. The PEO is significantly cheaper and provides a broader range of services.
Does a PEO provide a dedicated HR contact?
Good PEOs assign a dedicated HR contact who knows your business. This person handles employee relations questions, onboarding guidance, and compliance support. When comparing PEOs, ask about the service model and whether you get a dedicated contact or a call center.