A 28-person nonprofit was paying $198,000/year for payroll. They had no idea.
A free Benefits Collective consultation uncovered hidden fee structures that had gone undetected for years. The organization renegotiated their entire benefits and payroll stack and saved over $110,000 annually.
Organization size
28
full-time employees
Annual PEO cost (actual)
$198k
payroll + HR + tech fees
Annual savings
$110k
after extraction
Background
A Southwest-based nonprofit organization with 28 full-time employees reached out to Benefits Collective for a second opinion on their benefits program. They believed they had a reasonable handle on their costs. They were wrong.
The organization had been on a Professional Employer Organization (PEO) for several years. Like most employers on a PEO, they could see their administrative fee line item — but what was buried underneath it was a different story entirely.
What we found
When a Benefits Collective advisor reviewed the organization’s PEO rate sheet and payroll records, three distinct hidden fee structures emerged:
| Fee type | How it appeared | Reality | Status |
|---|---|---|---|
| Administrative service fee | Listed as a percentage of total payroll | Grows automatically with every raise given — employees get a raise, the PEO gets one too | Disclosed |
| “Compliance tax” line item | Listed at 0.6% — formatted to look like a standard employer tax | No such tax exists. This was a fabricated fee disguised as a regulatory requirement | Hidden |
| Social Security wage base manipulation | Embedded in employer payroll tax line items | The PEO was not dropping Social Security tax after the federal wage base limit (~$176,100). Highly compensated employees were taxed on every dollar — generating pure profit for the PEO | Hidden |
When employers are shown a rate sheet from a PEO, they are typically shown what the PEO wants them to see. The administrative fee is transparent by design. Everything else often is not.
The math — what they were actually paying
To put the actual cost in context: the industry benchmark for best-in-class payroll technology for a 28-person organization is approximately $30–$60 per employee per month — roughly $10,000–$20,000 per year. This organization was paying nearly $200,000.
The outcome
Once the full picture was clear, the organization moved off the PEO entirely. They selected independent payroll technology, established their own carrier relationships for benefits, and no longer needed to pay for bundled HR services they were not using.
Annual payroll + HR + tech cost
$198,000
↓ after extraction
~$88,000
Annual savings
$110,000+
↓ returned to mission every year
ongoing
Payroll technology
White-labeled PEO platform
↓ upgraded to
Best-in-class HCM
Benefits structure
PEO master plan (pooled)
↓ moved to
Own carrier relationships
Key takeaway
PEOs are not inherently bad products — for the right companies at the right stage, they can provide real value. But for most organizations above 25–30 employees, the math often stops making sense. And it almost never gets better at renewal.
The problem is that most employers never see the full picture. A rate sheet is not a fee disclosure. If you have not had someone independently audit your PEO cost structure, there is a good chance you do not know what you are actually paying.
Company details have been anonymized to protect client confidentiality. All financial figures are based on actual client data reviewed during a Benefits Collective advisory consultation. Results vary by organization size, PEO provider, and fee structure.
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