Economic Analysis: The PEO Industry Footprint in 2019

The PEO Industry Footprint in 2019 Laurie Bassi and Dan McMurrer, McBassi & Company September 2019
Professional employer organizations (PEOs) provide comprehensive HR solutions for small and mid-sized businesses. Payroll, employee benefits, HR, workers’ compensation, and risk management are some of the many services PEOs provide to businesses across the country. As the research in our previous white papers has shown, those businesses enjoy a better chance of survival, higher growth rates, lower employee turnover, and higher employee satisfaction. PEOs produce these benefits for their clients by providing them with a broad array of cost-effective HR offerings. This enables their clients to concentrate on growing their businesses, while offering superior benefits and HR practices to their employees. As a result, PEO clients are able to provide their employees with a better value proposition, and employees respond in kind by helping their employers grow their businesses. Given the win-win proposition that PEOs create for employers and their employees, it is no surprise that as awareness increases, PEOs are becoming a large and growing force. This paper provides new, definitive measures of the current size, scope, and footprint of the PEO industry. At the end of 2017, the 907 PEOs in the United States employed a total of 3.7 million worksite employees (WSEs), who were paid a total of $176 billion. These employees worked for approximately 175,000 different PEO clients. The discussion that follows elaborates on these findings. The methodology used for this research is summarized in the second half of the paper. In a nutshell, first we used multiple sources to identify all PEOs operating in the United States. We then calculated the total size of the industry, using best available methods to estimate the size of individual PEOs when limited or no data was available. Finally, we used available data on year-over-year changes in size among individual PEOs to estimate changes in the size of the industry since 2008.