Payroll & HR Outsourcing Guide for SMBs

Jan de Vries · 2026-05-22

For a U.S. company with 10 to 200 employees, choosing the right HR and payroll partner can feel overwhelming. You've got PEOs, payroll software, ASOs, and EORs all claiming to be the best fit. Here's the truth: the right choice depends on who employs your workers, who files payroll taxes, and where your team is located. This guide breaks down each model, names real providers, shares actual pricing, and gives you a simple framework to use in your next RFP. ### Four Outsourcing Models Explained Simply Let's clear up the confusion. Terms like PEO and EOR get thrown around, but they mean very different things. Here's how they stack up: - **PEO (Professional Employer Organization):** A co-employment setup where the PEO becomes the employer of record for tax purposes. They file payroll under their own EIN, pool benefits to get you better rates, and handle compliance. Over 230,000 U.S. businesses use a PEO, covering about 15% of employers with 10 to 499 employees. Look for IRS Certified PEO (CPEO) status and ESAC accreditation for peace of mind. - **Payroll/HR Software (HCM):** You stay the sole employer. The software files taxes under your EIN and offers modules for payroll, time tracking, benefits, and compliance. It's a tool, not a partnership. - **ASO (Administrative Services Organization):** Think of this as advisory support without co-employment. You keep full control, but they help with payroll admin, handbooks, or compliance advice on an a la carte basis. - **EOR (Employer of Record):** The provider becomes the legal employer in another country, so you can hire internationally without setting up a local entity. Unlike a PEO, you don't need a U.S. entity to use an EOR.  ### When Each Model Makes Sense Start with your legal footprint. Where are your employees? How much control do you want to keep? Match the model to your current situation, not your dream scenario. | Factor | PEO | Payroll/HR Suite | ASO | EOR | |--------|-----|-----------------|-----|-----| | Employer of record | Co-employment | You | You | EOR provider | | Payroll tax filing | PEO's EIN | Your EIN | Your EIN | EOR's entity | | Benefits approach | Pooled master plan | Your own plans | Your own plans | Statutory + provider plans | | Typical fee basis | Per employee per month or % of payroll | Base + per person | Per service | Flat per employee per month | | Best when | U.S.-only, want one bundle | Have HR staff, want control | Need advisory only | Hiring abroad, no entity | A quick test: If everyone is in the U.S. and you want a bundled admin layer, compare PEOs. If you want software and full control, go with a payroll suite. If you only need expert guidance, ask ASO firms for their menu. If you're hiring one person abroad and have no entity there, start with an EOR. ### Real Pricing You Can Expect Always separate admin fees from pass-through costs like benefits and workers' comp. The lowest admin fee can still lead to the highest total cost. - **PEO pricing:** Flat per employee per month or a percentage of gross payroll. Justworks publishes two tiers: around $59 and $99 per employee per month for smaller teams. Oyster's U.S. PEO page lists an $89 PEO fee plus a $25 platform fee per employee per month, plus a one-time $500 implementation fee. ADP TotalSource and Paychex PEO are quote-based. - **Payroll/HR suites:** Transparent base plus per-person fees are common. Gusto's Simple plan runs $49 per month plus $6 per person, with higher tiers for more features. - **EOR pricing:** Higher because the provider becomes the legal employer abroad. Deel starts at $599 per employee per month. > "The right model depends on where you hire and how much employer control you want. Match the option to your current risk, not your future wish list." ### How to Use This in an RFP When you send out an RFP, ask these three questions: Who is the employer of record? Who files payroll taxes? What happens if we need to terminate a contract? The answers will quickly separate providers that fit from those that don't. And remember, the cheapest option upfront might cost you more in hidden fees or lost control. Take your time, compare apples to apples, and choose the model that matches where your business is today.