Data Highlights Strength and Growth in the Professional Employer Organization (PEO) Industry
Employment growth in the professional employer organization (PEO) industry is 16 times higher than the growth rate in the U.S. economy overall since 2013, and the total employment represented by the PEO industry is the same as the combined number of employees for Walmart (U.S. only), Amazon, Kroger, and Home Depot, according to a new study released last week by the National Association of Professional Employer Organizations (NAPEO).
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The study, by noted economists Laurie Bassi and Dan McMurrer of McBassi and Company, is the ninth in a series. Previous studies conducted by Bassi and McMurrer have shown that businesses in PEO arrangements grow 7-9 percent faster, have employee turnover that is 10-14 percent lower, and have a significantly higher rate of business survival than businesses that don’t use PEOs. Their other research has shown higher revenue growth, increased profitability, and higher employee satisfaction for companies that use a PEO.
The new report also provides new definitive measures of the current size, scope, and footprint of the PEO industry, using an updated methodology. Data through the end of 2020 shows:
- There are 487 PEOs in the United States.
- PEOs employ 4 million worksite employees (WSEs).
- Annual wages in the PEO industry are $216 billion.
- 173,000 businesses partner with a PEO.
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“The numbers in this study reinforce the dynamism and growth in PEO industry. More and more business 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 NAPEO President & CEO Pat Cleary.
PEOs provide HR, payroll, benefits, workers’ comp, and regulatory compliance assistance to small and mid-sized companies. By providing these services, PEOs help businesses improve productivity, increase profitability, and focus on their core mission. Through PEOs, the employees of small businesses 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.
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