As we move through 2018, the growth of professional employer organizations (PEO)
doesn’t appear to be slowing down.
Earlier this year, NAPEO released the results from there 2017 Q3 Industry Pulse Survey. The findings showed that PEOs are continuing to grow, and at an impressive pace. In the report, 72% of PEOs reported revenue growth
in Q3 of 2017, compared to Q3 of 2016.
With all that is happening with employment laws, healthcare and health insurance, and other areas of HR that impact small and medium-sized businesses (SMBs), it is easy to see why PEOs and other HR outsourcing options are seeing, in many cases, rapid industry growth.
Now, NAPEOs latest Quarterly Pulse Survey
, which compared the 4th
quarter of 2017 to the 4th
quarter of 2016, shows that PEO growth is still occurring, and will almost certainly continue in 2018 and beyond.
Data From the 2017 Q4 NAPEO Pulse Survey
The NAPEO Quarterly Pulse Survey – Q4 2017
was conducted in early 2018, and was taken by 32 PEO executives.
The first result from the survey looked at PEO revenue. 71.9% of PEO executives
said their organization’s revenue increased in Q4 of 2017, compared to Q4 of 2016.
Broken down further, 50% said that revenue increased somewhat, and 21.9% said revenue increased significantly.
Next, the survey showed that PEOs experienced an increase in the average annual wage per worksite employee (WSE), with 65.5% of executives responding.
NAPEO’s findings also revealed that 66% of PEOs saw an increase in gross profit. Of this 66%, 43.3% said gross profit increased somewhat, while 23.3% said it increased significantly.
Operating Income, Number of Clients, and WSE Projection Data
The next group of results from the survey uncovered data around operating income, the number of clients, and worksite employee projection information.
First, the report showed that 65.7% of PEO executives
reported an increase in operating income in the 4th
quarter of 2017, compared to the 4th
quarter of 2016. The 65.7% can be broken down further, with 43.8% saying that operating income increased somewhat, and 21.9% increasing significantly.
Next, 59.4% of PEOs said that the number of clients increased, while 31.3% said that the number of clients stayed about the same. Of the 59.4%, 50% said that clients increased somewhat, and 9.4% said clients increased significantly.
Lastly, the survey asked PEO executives about worksite employee (WSE) projections over the next 12 months.
Perhaps the most promising and impressive statistic found in the quarterly survey, almost 94% expect WSEs to increase
. Here is the full breakdown:
- 71% expect WSEs to increase somewhat
- 22.6% expect WSEs to increase significantly
- 3.2% expect WSEs to stay about the same
- 3.2% expect WSEs to decrease somewhat
With PEOs seeing an increase in revenue throughout 2017, and executives overwhelmingly expecting WSEs to increase over the next 12 months, revenue outlooks for the rest of 2018 and into 2019 look extremely promising throughout the PEO industry.
Professional Employer Organizations Continue to Thrive
Much like the last few Quarterly Pulse Surveys from NAPEO, the 2017 Q4 survey
shows that despite all of the uncertainty and complexity with various areas of HR, PEOs continue to grow.
Regarding the survey, Pat Cleary, President & CEO of NAPEO, said, “This is just the latest example that more and more business owners are realizing the true value of using a PEO. Surveys and studies consistently show that using a PEO is good for a business and its employees. PEOs provide a real benefit to businesses by providing HR services and solutions that they would otherwise be unable to afford."
Some additional findings from the survey include:
- Average annual wage per WSE increased somewhat
- Average number of WSEs per client company stayed about the same
- Number of internal employees (including salespeople) stayed about the same
- Number of Worker’s Compensation claims reported to carrier stayed about the same
The survey also revealed that the average PEO has 19 worksite employees per client
With a recent survey from PrismHR showing growth within the broader HR outsourcing industry
(which includes PEOs), there is a lot of optimism that this growth will continue in 2018 and beyond!
What’s the difference between co-employment and employee leasing? Check out our eBook, Co-Employment vs. Employee Leasing: The Differences Brokers (and Clients) Should Know, to learn more about how different they really are!