Blog Articles

New Study Shows Strong and Steady Growth For the PEO Industry

In 2016, the Small Business Efficiency Act (“SBEA”) goes into effect, providing the first-ever federal statutory recognition of Professional Employer Organizations (PEOs). When Congress passed the law late last year, it was recognized as a watershed event for the industry and a signal of more growth ahead in the already expanding PEO space. A new study proves through hard data that the industry continues to thrive as more businesses - drowning in a sea of employment-related laws and regulations - are outsourcing the management of their human resources and compliance, payroll, employee benefits, workers’ compensation and more, to PEOs.

The National Association of Professional Employer Organizations (NAPEO) released the study, “An Economic Analysis: The PEO Industry Footprint,” conducted by economists Laurie Bassi and Dan McMurrer of McBassi and Associates. Data sources used focused on NAPEO membership data; U.S. Bureau of Labor Statistics data; NAPEO’s 2014 Financial Ratio & Operating Statistics Survey; Hoovers/Dun & Bradstreet data on all companies classified as PEOs by Hoovers; and detailed administrative data from five selected states.

Key Findings:

  • The current size of the PEO industry is between $136 and $156 billion, as measured in gross revenues.

  • PEOs provide services to between 2.7 and 3.4 million worksite employees and work with 156,000 to 180,000 client companies.

  • There are between 780 and 980 PEOs currently operating in the U.S. States with the most PEOs in the following states:

    • Florida: 107

    • Texas: 100

    • California: 59 to 77

    • New York: 47

    • Michigan: 45 to 59

  • The PEO industry has grown significantly. In each of the last 30 years, the industry has added roughly 100,000 worksite employees and 6,000 net new clients. For perspective, that means that every five years, the PEO industry has added the employment equivalent of the entire utilities industry in the United States.

Download the full report here.