August 27, 2026
PEO vs. Insurance Broker: What Changes Once You Have 50 Employees
Are you about to renew your Professional Employer Organization (PEO) insurance plan? Many businesses don’t understand the differences between a PEO and utilizing an insurance broker. Once your company has more than 50 employees, PEO vs a broker can have significant costs.
For 20 years, Kelly and Calloway Insurance Group has been building employee benefits solutions. We’re agnostic insurance brokers. So, there’s no rate or carrier we’re incentivized to push you toward.
This article highlights the fees a PEO charges you. We share how having more than 50 employees changes their cost effectiveness. Lastly, you’ll know if moving away from your PEO’s EIN is the right move for your business.
What Are You Paying For with a PEO?
A PEO’s fee covers an HR/administration package and access to group health rates. These are rates you couldn’t get on your own. Most business owners never separate the expenses.
Payroll, HR Compliance, and Workers' Comp
Part of a PEO is the outsourced HR.
- Payroll processing and tax filing
- HR compliance including hiring, firing, employee classification
- Workers' comp. It's the only property and casualty coverage.
Fair value for a 10-person company with no HR person on staff.
Group Buying Power on Health Plans
For example, ADP TotalSource offers national contracts with carriers like Aetna and UnitedHealthcare. Your 10-employee group gets folded into a risk pool with a million other employees. Insurance companies price risk on pool size. Bigger pool, better rate.
- Access to national carrier contracts
- Risk spread across the PEO's entire client base
- Better rate than shopping the open market
“Once you get past 50, 60 employees, at some point the cost for this PEO model starts to really outweigh what you could just do by hiring somebody and doing these things on your own.” – Steven Kelly, Managing Partner
What Changes Once You Have 50 Employees?
Somewhere around 50 to 60 employees, the math changes if a PEO is worth it. Your claims history gets big enough that insurance carriers can underwrite you. Use level-funded or self-funded instead of pricing you as part of someone else’s risk pool. The PEO’s admin fee doesn’t shrink to match. It rides on top of a rate advantage you no longer need.
- Under 50 employees, your claims history is too thin to underwrite alone.
- Over 50, your own group is large enough to get its own rate.
- You're now paying for pooled buying power you've outgrown. This is on top of an HR bundle you may not need.
PEO or Broker: Which One Fits You Right Now?
A PEO Probably Still Fits You If:
- You're under 50 employees and you don't have a dedicated HR person on staff
- You've got employees spread across multiple states
- You'd rather not build your own HR department
A Broker Fits You Better If:
- You're past 50 employees and your claims history can now stand on its own
- You've already got payroll and basic HR handled internally
- You want the same person answering the phone every time