How Much Does a PEO in Canada Cost?
Canada is a great talent market for international companies looking to hire remote but getting started can be daunting. That’s why so many businesses choose to set up payroll through a PEO in Canada. Understanding PEO price structures, though, is key to choosing the right partner.
At Canadian Payroll Services, we believe that PEO services can be a great benefit for business owners in the US, UK, and other foreign countries. The cost of hiring a Canadian PEO is worth the satisfaction that exceptional HR and payroll services will give you.
How Much Does a PEO Cost?
PEO fees are are typically structured as a flat fee per employee per month, or percentage of monthly payroll, or a mix of the two.
In the flat fee model, the PEO charges a flat monthly fee for every new employee on the payroll. They may require employment retainers to handle end of engagement costs, offer volume discounts on large payrolls, or require a minimum number of employees.
In the percentage model, PEO cost fluctuates based on salaries and bonuses. Costs scale up with every dollar that flows through the PEO. Companies that charge on a percentage basis may require a minimum total payroll or a retainer.
Some PEOs use a mix of the two models, depending on the service. Where salaries and bonuses may be handled on a percentage basis, expenses and benefits may have a flat processing fee.
This makes the question, how much does a PEO cost, difficult to answer without learning more about an agency’s specific offering. No matter the model, however, PEO fees tend to be much less than the cost to set up your own local payroll department!
Independent contractors may seem expensive than working with a Canadian PEO, but it’s not always worth the risks that come with hiring an independent contractor long term.
Contractors are, by definition, more independent than employees; they B2B relationship with contractors, not an employee-employer relationship. This makes it harder to develop and retain contractors long term and puts companies that rely mostly on contract labour are at risk of losing valuable skill and knowledge to turnover.
Treating contractors more like employees puts both the company and contractor at risk of a misclassification investigation. If you are found to have misclassified your workers, you will need to pay all back employer taxes and a fee. In Canada, those fees can be steep and one misclassified worker can trigger a whole workplace audit.
Working with a PEO alleviates these risks hiring your remote workers compliantly and leasing them back to you. Their local expertise keeps you from making misclassification errors and makes payrolling your workers easier. That Canadian PEO expense is paid for in peace of mind.
Does a PEO Actually Save You Money?
Can working with a PEO save you money? Absolutely! I said above that answering the question, how much does a PEO cost, can be complex. Because PEO business models and cost structures vary, it’s not possible to do a simple one to one between average PEO costs and average remote Canadian payroll costs.
However, the cost savings that a PEO can deliver is clear. By working with a PEO you can avoid:
- Branch or subsidiary registration
- Hiring and training a Canadian payroll administrator and HR manager
- Hiring a labour lawyer to draft compliant Canadian contracts and advise on ongoing legal issues
- Purchasing Canadian compliant payroll software
- Costly labour law fines and lawsuits
PEOs can also provide you with services that would be costly for you to deliver with your smaller Canadian payroll, including:
- Supplementary benefits packages and Health Spending Accounts
- Employee assistance programs
- Retirement savings programs
- Expense management and pre-paid corporate cards
Work With Canadian Payroll Services Today
Choosing the right PEO isn’t easy. Costs and cost structures vary from one PEO to another, and when added services are taken into account, it gets even more complicated. However, Canadian PEOs deliver real cost savings to their clients, through the expertise they bring to managed services.
Canadian Payroll Services delivers reliable payroll, HR and compliance services to all our clients in the US, UK and around the world. Get in touch today and we’ll walk you through our PEO cost calculator to help you understand exactly why we’re worth paying for!