HR GLOSSARY · Core HR

PEPM (per employee per month)

Also known as: PEPM, per employee per month, per-employee pricing, per head pricing

PEPM stands for per employee per month, the unit most HR and payroll software vendors use to quote a price. The monthly bill is the PEPM rate multiplied by the number of employees counted that month, plus any platform fee or add-ons.

PEPM looks simple and rarely is. The rate is only one input. What counts as an employee (everyone on the record, or only the people paid in that run), whether there is a monthly minimum, which modules the rate includes, and whether setup, implementation and support are billed separately all change what you pay. Two quotes with the same PEPM can differ by a wide margin once those terms are on the table. The same rate also scales differently as a company grows: a rate that is cheap for 20 people can carry a minimum that makes it expensive for 8.

How the bill is calculated

Monthly bill = (PEPM rate × billable employees) + platform fee + add-ons. Example with made-up numbers: a rate of 10 per employee per month, 35 billable employees and a platform fee of 50 a month gives 10 × 35 + 50 = 400 a month, or 4,800 a year.

Questions to ask before you compare quotes

  • Who counts as billable: every record, active employees only, or only people paid in that month?
  • Is there a monthly or annual minimum, and a minimum contract length?
  • Which modules does the rate cover, and which are priced separately, such as payroll, time tracking or recruiting?
  • Are there one-time fees for setup, data migration or training?
  • How are mid-month hires and leavers billed?
  • Does the rate change in bands as headcount grows, and does the new rate apply to everyone or only to the extra people?

PEPM compared with other pricing models

  • Per user per month: charges for each account with access, which differs from PEPM when not every employee has a login
  • Flat fee: one price for a headcount band or for the whole company
  • Per pay run: charges each time payroll is processed, used by some payroll vendors
  • Percentage of payroll: used by some employer-of-record and PEO providers

Frequently asked questions

What does PEPM mean?
PEPM means per employee per month. It is the price a software or service vendor charges for each employee in each month, before any platform fee, minimum or add-on.
Is PEPM the same as per user per month?
Not always. PEPM counts employees, and per user per month counts accounts that can log in. The two match only when every employee has a login.
How do I compare two PEPM quotes?
Turn each quote into a total annual cost at your current headcount and at the headcount you expect in 12 months. Include minimums, platform fees, setup fees and the modules you need, then compare the totals.
Does the PEPM rate include payroll?
That depends on the vendor. Some include payroll in the rate, others price it as a separate module or charge per pay run. Ask for a written list of what the rate covers.

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