Five Tools, and Four of Them Are Wrong for Your Job
The short version. A PEO processes: payroll, benefits, filings, at scale, priced per employee. An advisory retainer gives your existing team senior judgment on call before decisions get made. Fractional HR puts a senior HR leader in ownership of the function part time. An employment attorney represents you once a decision has become a dispute. A full-time HR manager gives you daily capacity in the building, at roughly $120,000 to $156,000 a year all-in. Pick by which gap you actually have, not by which is cheapest, because four of the five are the wrong tool for any given job.
I got called by a 60-person distribution company a while back. Good operation, decent margins, owner who cared about his people. He had signed with a PEO eighteen months earlier because — his words — "we needed to get the HR stuff handled."
The PEO was doing exactly what it sold. Payroll ran clean. Benefits enrollment was smooth. Tax filings were correct and on time. He was paying somewhere north of $70,000 a year for it and getting every dollar of the administration he bought.
He called me because a supervisor had been documenting a problem employee for nine months in a spiral notebook he kept in his truck, the employee had just filed a charge, and nobody at the PEO's 800 number had ever met the supervisor, seen the notebook, or known the department existed.
That is not a PEO failure. The PEO was never going to be in that truck. That is a tool selection failure, and it is the single most expensive mistake I see Texas employers make in this category — not overpaying, but paying correctly for the wrong thing while the actual gap sits open.
- An administrative gap in payroll, benefits, or filings is best closed by a PEO or a payroll provider.
- A judgment gap, where nobody senior reviews a decision before it is made, is what an advisory retainer solves.
- An ownership gap, where nobody owns the HR function at all, is what fractional HR leadership solves.
- A dispute such as a demand letter, an EEOC charge, or litigation goes to an employment attorney immediately.
- A capacity gap means the work is daily and constant. Above roughly 120 employees, hiring in-house becomes the cheaper option.
What follows is the comparison with real numbers in it, including our own published rates and the point at which those rates stop being the right answer.
The Five-Way Matrix
If you forward one thing from this page, forward this.
| PEO | Advisory Retainer | Fractional HR | Employment Attorney | Full-Time HR Manager | |
|---|---|---|---|---|---|
| What it is | Co-employment; employer of record for payroll and benefits | Senior HR judgment on call | A senior HR leader owning the function part time | Licensed counsel representing the organization | Your W-2 employee |
| Gap it closes | Administrative | Judgment | Ownership | Dispute | Capacity |
| Runs payroll & benefits | Yes | No | No — oversees vendors | No | Administers, does not underwrite |
| In your building | No | Scheduled & on call | Regular presence | Rarely | Daily |
| Knows your supervisors by name | No | Yes | Yes | No | Yes |
| Conducts on-site investigations | No | Yes | Yes | Yes, at counsel rates | Yes — unless the subject is senior |
| Attorney-client privilege | No | No | No | Yes | No |
| Defends a charge or lawsuit | Limited, per contract | No | No | Yes | No |
| Builds systems that prevent claims | Templates | Yes | Yes | Advises; rarely implements | Yes, if senior enough |
| Fits public sector & grant-funded | Poorly — co-employment collides | Yes | Yes | Yes | Yes |
| Cost shape | Per employee/month or % of payroll | Per employee/month, published minimum | Per employee/month, published minimum | Hourly, episodic | Salary + burden, fixed |
| Best fit headcount | Any, if admin is the gap | Under ~90 | ~60–150 | Any, as needed | ~120+ |
Note the privilege row. It is the one line no consultant can cross and the reason the attorney column is never optional — it is only sometimes urgent.
What Each One Actually Costs Over Twelve Months
Most comparison articles in this category refuse to put numbers down. Here are ours, and here is where the outside figures come from.
- Our retainers are published: $20 per employee per month ($1,000 minimum) for advisory access, up to $110 per employee per month ($4,500 minimum) for fractional HR executive support. Full detail on the pricing page.
- PEO figures use NAPEO's reported average administrative fee of roughly $1,395 per employee per year, about $116 per month, with a market range commonly cited at $40–$160 per employee per month. Administration only — benefits premiums and workers' compensation pass through on top.
- HR manager figures use Texas market base pay of roughly $95,000–$120,000 depending on metro and source, with employer burden of 1.25–1.40× base for payroll taxes, insurance, and benefits.
- Attorney figures use a Texas average around $366 per hour across practice areas.
| 12-month cost | 25 employees nonprofit |
50 employees growing business |
100 employees multi-department |
|---|---|---|---|
| PEO — administration only | $12,000 – $48,000 avg ~$34,800 |
$24,000 – $96,000 avg ~$69,600 |
$48,000 – $192,000 avg ~$139,200 |
| Advisory Access retainer $20/emp/mo, $1,000 min |
$12,000 | $12,000 | $24,000 |
| Senior HR Guardrail $40/emp/mo, $1,500 min |
$18,000 | $24,000 | $48,000 |
| Strategic HR Partner $70/emp/mo, $2,800 min |
$33,600 | $42,000 | $84,000 |
| Fractional HR Executive $110/emp/mo, $4,500 min |
$54,000 | $66,000 | $132,000 |
| Full-time HR manager base + 1.25–1.40× burden |
$119,000 – $168,000 — largely fixed regardless of headcount | ||
| Employment attorney | Episodic. ~$366/hr Texas average. ~$75,000 to defend a claim settling pre-trial; $175,000–$250,000 through trial. | ||
Sources: Faulkner HR Solutions published retainer pricing; NAPEO administrative fee averages as reported in 2026 PEO pricing surveys; Texas HR manager compensation per Salary.com, Glassdoor, and Built In (2026); employer burden per BLS Employer Costs for Employee Compensation; Texas attorney hourly averages and employment defense cost estimates from published legal industry surveys.
The Number That Argues Against Me
Run our own published rates out and something inconvenient shows up.
Fractional HR executive support is $110 per employee per month, which is $1,320 per employee per year. A Texas HR manager costs roughly $156,000 all-in at the midpoint. Divide, and you get the crossover:
"At about 118 employees, our fractional executive tier stops being the cheaper option. At 150 it costs $198,000 a year against roughly $156,000 for a full-time hire. Past that point I am the expensive answer, and I will tell you so."
— Dr. Thomas W. Faulkner, Faulkner HR Solutions
That is not modesty, it is arithmetic, and you can check it. It is also why our published fit ranges stop at 150 rather than running to infinity. A pricing model that never tells you to leave is a pricing model designed to keep you.
Two honest caveats in the other direction, because the number is not the whole story.
First, you are not comparing equivalent seniority. $156,000 in Texas buys a solid HR manager. It does not buy an HR director with fifteen years, a doctorate, and investigation experience — that person costs more and generally will not take a 100-person job. So the honest comparison at 120 employees is "a good manager, full time" against "a senior leader, part time," and which one wins depends entirely on whether your problems are volume problems or judgment problems.
Second, one person is a single point of failure. Your in-house HR manager takes vacation, gets recruited away, and cannot credibly investigate a complaint against the executive who signs their review. Every organization that has ever had to investigate its own HR director has learned this the expensive way.
Which is why the answer above 120 is usually not "consultant or employee." It is hire the employee, and keep a much smaller retainer for the situations they cannot own — senior investigations, board-level matters, and the escalations where an internal person has an unavoidable conflict.
The Wrong-Tool Map
Every model on this page is excellent at one thing and useless at four. This table is the useless-at-four part, which is the part nobody selling you these things will lead with.
The Wrong-Tool Map. Faulkner HR Solutions. Original framework, 2026. Cite as: Faulkner, T.W. (2026). The Wrong-Tool Map. Faulkner HR Solutions.
| The tool | Genuinely best at | Cannot do | What breaks if you pick it for the wrong gap |
|---|---|---|---|
| PEO | Payroll, filings, benefits buying power, workers' comp administration | Know your supervisors; sit through a termination; investigate on site | You pay per employee for an HR layer nobody calls, while the actual decisions get made by whoever is nearest |
| Advisory retainer | Judgment before the decision; documentation standards; supervisor coaching | Run payroll; be there daily; own the function | If nobody internally owns HR, advice arrives and nothing implements it. You buy insight and get no change. |
| Fractional HR | Owning the function part time: strategy, systems, escalations, accountability | Be in the building every day; scale past ~150 economically | Below ~40 employees you are paying for ownership of a function that does not yet have enough volume to need an owner |
| Employment attorney | Privilege, representation, litigation, formal legal opinions | Fix the upstream system at a price you would tolerate | Used as day-to-day HR, the meter teaches your team not to call — which is the exact behavior that creates claims |
| Full-time HR manager | Daily capacity, institutional memory, presence, relationships | Investigate their own boss; be senior in every discipline at once | Hired too early, you get an administrator handling problems that needed a director — and both of you find out during the deposition |
When Not to Hire Us
I would rather say this plainly on a page you can read at midnight than after you have paid for a scoping call.
- You have been served, or an EEOC charge has arrived. Call an employment attorney first. Not us, not instead of us — first. Privilege matters, and we do not have it.
- Your only real problem is payroll and benefits administration. Get a payroll provider or a PEO. We would be the most expensive way to solve a problem software solves.
- You are under about 15 employees with no recurring issues. You probably need a compliant handbook, correct classifications, and a documentation habit. That is a small fixed-fee project, possibly a few hours. Not a retainer.
- You are over about 150 employees. Hire an HR director. Keep a small retainer for conflicts and senior investigations if you want, but the core function should be yours.
- You want someone to ratify a decision you have already made. We will tell you what we actually think, which is what you are paying for and occasionally not what you wanted.
- If you are a Texas city, exhaust what you already fund first — the TML legal line and the Risk Pool's pre-termination consultation are free to eligible members. We wrote about the boundary between those and consulting in detail.
The through line in everything I write is that most recurring people problems are system problems wearing an employee's name. That is also true of this decision. Organizations do not usually pick the wrong HR model because they were misled. They pick it because nobody sat down and named which of the five gaps was actually open, so they bought the one that was easiest to buy.
Frequently Asked Questions
By our own published rates, the crossover sits near 120 employees. At $110 per employee per month, fractional HR executive support costs about $132,000 a year at 100 employees and $198,000 at 150 — while a Texas HR manager runs roughly $120,000 to $156,000 all-in once employer burden is included. Somewhere between 115 and 125 employees, hiring in-house becomes the cheaper option. That is why our typical fit ends at 150.
Usually not, once you compare like for like. NAPEO puts the average PEO administrative fee near $1,395 per employee per year, roughly $116 per month — about $69,600 a year at 50 employees for administration alone. A senior advisory retainer at 50 employees runs $12,000 to $24,000 a year. But they buy different things: the PEO fee includes payroll processing, tax filings, and benefits administration a consultant does not perform.
Ownership. On an advisory retainer, your team owns the HR function and calls a senior consultant for judgment before decisions. With fractional HR, an experienced HR leader owns the function part time — strategy, systems, escalations, and accountability. In practice they are points on one ladder rather than separate products, and most organizations move up the ladder as headcount and complexity grow.
An attorney represents you when a decision has become a dispute — a demand letter, an EEOC charge, litigation, or a question requiring a privileged legal opinion. A consultant works upstream, on the documentation, supervision, and policy systems that determine whether the decision creates a dispute at all. Most Texas employers under 150 people need the consultant regularly and the attorney occasionally.
We publish our rates: retainers are priced per active W-2 employee per month with a published minimum, from $20 per employee ($1,000 minimum) for advisory access to $110 per employee ($4,500 minimum) for fractional HR executive support. At 50 employees that is $1,000 to $5,500 per month, or $12,000 to $66,000 per year. Projects such as audits and handbook rebuilds are quoted as fixed fees after a scoping call.
Yes, and at 20 to 100 employees it is a common and sensible structure. The PEO handles payroll, benefits, and filings; the consultant owns judgment, systems, supervisor capability, and the decisions that carry legal risk. The waste to avoid is paying a PEO for an HR advisory layer nobody uses while separately paying for judgment.
Commonly cited figures put defense of an employment claim near $75,000 when it settles before trial, and $175,000 to $250,000 taken through trial. That single number is why this comparison is rarely decided on monthly fee alone — one avoided claim exceeds several years of any advisory retainer on this page.
A note on the numbers. Faulkner HR Solutions retainer figures are our published rates as of August 2026 and are calculated as the per-employee rate times headcount or the level minimum, whichever is greater. PEO, salary, burden, and legal cost figures are market estimates from the sources named above; they move, and your quotes will differ. Nothing here is legal advice, and I am a consultant rather than an attorney. No PEO, law firm, or vendor paid for or was offered placement in this article, and we hold no affiliate or referral arrangements.