The last decade, especially 2015 through 2018, has seen significant growth within the professional employer organization (PEO) industry
Each year, more small business leaders and brokers have turned to PEO solutions to address various HR-related issues including:
- Employment law compliance
- Risk management needs
- Improving employee benefit offerings
- Lowering HR administrative costs
- Reducing time spent on HR tasks
Over this same time period, the National Association of Professional Employer Organizations
(NAPEO) has conducted and released various reports that show just how quickly PEOs are growing in the United States.
Earlier in 2018, NAPEO released their 2017 Q3 Industry Pulse Survey which showed that 94% of PEOs expected worksite employee growth
over the next year.
Fast forward to earlier this month, and NAPEO released their latest industry statistics and findings, and the results are once again impressive.
The PEO Industry Footprint in 2018
At its annual conference on September 5th
, NAPEO released the results of their latest study An Economic Analysis: The PEO Industry Footprint in 2018
Conducted by economists Laurie Bassi and Dan McMurrer of McBassi and Associates, this report is the 6th
in a series released by NAPEO.
The first finding the survey revealed was a specific number of PEOs that are currently operating in the United States. Past NAPEO studies have said that between 780 and 980 PEOs existed, but this new report stated that there are 907 PEOs in total in the United States
However, the survey did note that their methodology used was intentionally conservative and that it is likely that some very small PEOs do exist that weren’t included in their industry size estimates.
The Size of the PEO Industry Today
Next, the report explored the current size of the PEO industry, breaking the numbers out into the total number of worksite employees (WSEs) as well as the total amount of money earned by them.
First, the NAPEO study revealed that there were 3.7 million worksite employees employed by PEOs
at the end of 2017. Additionally, these 3.7 million WSEs earned a total of $176 billion
Amongst employers that have 10 to 99 employees (which is the average size range for most PEO clients), the total WSE number represents 12.1% of all employment in this sector
Additionally, the report stated that the total employment in the PEO industry is around the same number of employees for Walmart (in the U.S. only), Amazon, IBM, FedEx, Starbucks, AT&T, Wells Fargo, Apple, and Google.
Lastly, the study also revealed that there are 175,000 different PEO clients, which represents 15% of all employers with 10 to 99 employees. This shows that there is still significant room for growth for PEOs in the coming years.
Industry Growth Over the Last Decade
The next part of the report explored how the industry has changed from 2008 to 2017.
It was shown that the number of WSEs employed by PEOs grew at a compounded annual rate of 8.3%
. This percentage growth in the PEO industry is 14 times higher than that of employment in the United States economy as a whole
This eye-opening number truly shows just how rapidly PEOs and the industry have grown and expanded in just the last decade.
Along with the remaining 75% of the 10 to 99 employee business market that aren’t PEO clients, you can see why many are expecting the growth of PEOs to continue at an even quicker pace over the next decade.
The PEO Industry Has Room to Continue to (Rapidly) Grow
This latest report from NAPEO follows a similar trend to their other studies over the last few years – PEOs are growing at an impressive rate.
And the President & CEO of NAPEO, Pat Cleary, doesn’t expect that trend to change anytime soon
, "The numbers in this study reinforce the growing footprint of the dynamic PEO industry. The outlook for continued growth and vibrancy is extremely bright for PEOs given the significant value proposition we offer to small and mid-size businesses: Faster growth, higher profitability, and happier employees."
and their small business clients who need HR assistance, a PEO solution is one option that appears poised to become even more popular moving forward.
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!