PEO: 5 Surprising Facts About Professional Employer Organizations

Nov 08, 2017
| Michael Altiero
5 surprising PEO facts

How well do you know professional employer organizations (PEO)? This is a question we have been asking a lot lately, especially as new reports come out which show the benefits PEOs can provide their clients. The level of awareness about the industry ranges all over the map – from those who never heard of a PEO to individuals/companies who choose to partner with and market the benefits a professional employer organization can provide.

We have written in the past about industry stats which show just how valuable a PEO partnership can be to small and medium-sized businesses (SMBs). These statistics are eye-opening for anyone, regardless of how well you know PEOs. And while these stats are important to know, there are even more interesting facts you may not know about professional employer organizations and the industry as a whole.

Let’s take a look at some surprising PEO facts that you may not be aware of, courtesy of the National Association of Professional Employer Organizations (NAPEO). But before we do, should you want to brush up on your PEO knowledge, check out our first eBook How Well Do You Know PEO? We take a much closer look at professional employer organizations, how they operate, and the benefits they can provide to small and medium-sized businesses, as well as their benefits brokers.

Now let’s go into these five surprising PEO facts!

1) There are between 780 and 980 PEOs in the United States

The PEO industry has been growing steadily over the last 30 years. That growth has meant that new professional employer organizations have been entering the market as more and more small businesses seek PEO services. According to NAPEO, the number of PEOs operating today ranges between 780 and 980 in the United States alone. It’s an eye-opening number, and one that will likely continue to increase as the market continues to grow and expand.

2) Current Size of the PEO Industry is Between $136 and $156 Billion

With all the PEOs in the market today (and the success the industry is having), you would expect impressive financial results. However, just how well the PEO industry is doing might be really surprising to some. The current size of the PEO industry is between $136 and $156 billion, as measured in gross revenues. This is another statistic that is expected to grow over the next few years.

3) The Industry Adds 100,000 Worksite Employees Each Year

To better understand this fact, let’s first briefly explain the relationship between PEOs and their clients. When an SMB and a PEO partner, they enter into a co-employment agreement. This means that the client and the PEO share employer responsibilities of the client’s employees. For a PEO, the employees of clients are referred to as worksite employees.

The growth in the number of PEO worksite employees is really exciting. NAPEO has found that in each of the last 30 years, the PEO industry has added around 100,000 worksite employees on average each year. In total, it is estimated that professional employer organizations employ between 2.7 and 3.4 million people.

4) PEOs Provide Services to 156,000 to 180,000 Small and Medium-Sized Businesses

Small and medium-sized businesses are facing new challenges with human resources. The ever-changing compliance and regulation landscape has made employment harder than ever, especially for SMBs. This is where PEOs provide tremendous value to smaller businesses.

According to NAPEO, between 156,000 and 180,000 SMBs currently work and partner with professional employer organizations. Additionally, 14% to 16% of small businesses with 10-99 employees partner with a PEO. This means that there is a lot of room for further growth for PEOs and the industry as a whole.

5) There are More Than 300 NAPEO Members

We have mentioned NAPEO a lot so far. Founded in 1984, NAPEO is one of the leaders and advocates of the PEO industry. It also promotes a Code of Ethics and best practices to its member companies. Leading PEO companies and startup firms alike are members of NAPEO. In total, there are more than 300 PEOs who are members, including Extensis.

NAPEO is a great resource for anyone looking to learn more about PEOs. They have a lot of content – including eBooks, whitepapers, and infographics – that can answer most questions around professional employer organizations. Be sure to check out the NAPEO website if you are considering a PEO!

The PEO Industry is Continuing to Grow Each Year

A common theme with the facts in this article is that they all are due to the growth of the PEO industry. With more and more companies looking to outsource their HR needs (especially with uncertainty around things like the Affordable Care Act), it’s expected that the industry will see continued growth over the next few years and beyond. It’s a really exciting time for all involved in the PEO industry!

Want to learn more about PEOs? Check out our eBook, How Well Do You Know PEO? This eBook provides an overview of the PEO industry as well as helpful information for brokers and employers!

How well do you know PEO?