PEO Employment Growth Outpaces the Rest of the U.S. Economy

Posted by Employer Flexible on June 3, 2021
Employer Flexible

New economic analysis shows that the professional employer organization (PEO) industry has outpaced the U.S. economy since 2013 with employment growth 16 times above average.

"The numbers in this study reinforce the dynamism and growth in the PEO industry. More and more businesses are realizing the true value proposition of using a PEO, particularly during the pandemic, when PEOs proved to be invaluable in helping their clients navigate through the challenges of the PPP loan process, COVID legislation, remote work, and return-to-office protocols," said National Association of Professional Employer Organizations (NAPEO) President & CEO Pat Cleary.

The Role of PEOs for Small and Midsized Companies

PEOs provide benefits, HR, payroll, regulatory compliance, andBenefits Concept. Word on Folder Register of Card Index. Selective Focus. workers' comp assistance to small and midsized companies.

By providing these services, PEOs help small and midsize businesses (SMB) improve productivity, increase profitability, and allow them to focus on their core mission.

Through PEOs, the employees of SMB gain access to employee benefits such as 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits typically provided by large companies.

NAPEO Study Highlights the PEO Industry Strength

The NAPEO study released in May 2021 highlights the strength of the PEO industry which now has as many employees as Walmart, Amazon, Kroger, Home Depot combined in the U.S.

Noted economists Laurie Bassi and Dan McMurrer of McBassi and Company conducted the study, which is the ninth in a series which has shown businesses in PEO arrangements:

  • Grow 7 to 9 percent faster.
  • Show employee turnover that is 10 to 14 percent lower.
  • Have a significantly higher rate of survival than businesses that do not use PEOs.

Highlights of the new report, which encompasses data through the end of 2020, includes:

  • There are 487 PEOs in the U.S.
  • PEOs employ 4 million worksite employees.
  • Annual wages in the PEO industry are $216 billon.
  • 173,000 businesses partner with a PEO.

COVID-19 Pandemic Effect on PEO Industry

The analysis from the study showed that the PEO Industry held steady during 2020 while the rest of the U.S. economy shrank during the COVID-19 pandemic.

Prior to 2020, the PEO industry had experienced an average of 8 percent annual growth during the study years, but growth at the end of 2020 remained level from 2019.

“It is still a positive result in the context of the overall economy shrinking, with unemployment rising significantly and many businesses (especially small businesses) closing temporarily or permanently,” wrote the report authors.

About the NAPEO

The NAPEO is “the voice of the PEO Industry” with 250 members that account for more than 90 percent of the industry’s $254 billion in revenue.

An additional 250 companies that provide services to PEOs are associate members of NAPEO.

According to the new report, Texas is one of the states with a high PEO presence along with Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, New Jersey, and New York.

Employer Flexible is a proud member of NAPEO with founding partner Chris Dollins serving his second term on the NAPEO elected national board directors, as well as vice-chair for Texas Leadership Council for NAPEO.

Contact Employer Flexible today to find out how we can develop a comprehensive HR plan that is tailored to your unique needs.

Topics: PEO