It will be fairly easy to identify the SUTA tax assessment and the workers' compensation insurance cost. It may be more difficult to identify administrative costs.

Even so, an employer should not assume that because those costs are hard to identify, they are insignificant. National studies indicate that employers spend as much as 5-8% of payroll on administration. (Administrative costs are the estimated amount of costs associated with payroll processing, all employee tax filings, check printing, and liability assumed with these functions. It also includes the lost revenue of employee time associated with these tasks. The US Department of Labor estimates that these expenses cost most businesses 8.45%.)

Considering these advantages it's easy to see why employers are opting to outsource their payroll processing to a PEO.

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