The European professional employer organization (PEO) market was valued at USD 12,669 million in 2021 and is projected to reach USD 28,700 million by 2030, registering a CAGR of 9.5% during the forecast period (2022-2030).
Professional employer organization (PEO), also known as human resource outsourcing, is an outsourcing organization that provides small and medium-sized enterprises with a cost-effective management and high-performance solutions for human resource (HR) services. It leases personnel to an employer, permitting the PEO to share and control many of the employer's employee-related responsibilities and liabilities. PEO provides businesses with essential administrative and management services, such as payroll, finance & taxation, employee recruitment, talent search management, and risk mitigation.
In Europe, the primary factor influencing the development of the PEO market is the increase in outsourcing activities, which can be attributed to the professional employer organization's ability to help businesses focus on their core competencies and reduce operational overhead expenses. Companies choose a PEO provider due to the simplicity of creation and the need to comply with new regulations. The increasing prevalence of employee benefits has also contributed to the growth of the European Professional Employer Organization Market.
Rapid Growth in Small and Medium-Sized Businesses
The market for professional employer organizations (PEO) is anticipated to grow swiftly due to the constant development and expansion of small and medium-sized businesses (SMEs). According to the Organization for Economic Co-operation and Development, "Small and medium-sized enterprises (SMEs) account for more than 95% of firms and 60%–70% of employment in OECD economies, and generate a significant proportion of new jobs."
In addition, according to the globe Bank, "600 million jobs will be required by 2030 to absorb the growing global workforce," making the development of SMEs a top priority for many governments around the globe. Small and medium-sized enterprises (SMEs) are seeking to enter the market for PEOs with a rapid growth rate. However, they frequently need more resources to address issues that could contribute to their success, such as streamlining operations and completing administrative duties.
Lost Command of Important Processes
As organizations transition to a more flexible staffing model, they lose control of relevant processes, such as payroll administration, tax processing, and human resource management. In addition, they become more reliant on vendors for these essential business functions, which causes significant delays in time-sensitive operations (like payroll). Control is one of the critical aspects of decision-making, and this is particularly true in the relationship between an employer and an employee. When a business utilizes a professional employer organization, it relinquishes total control over its workforce in exchange for a service it values.
Increasing Demand for Automated Human Resource Management Technology
Companies must monitor, measure, and evaluate data to ensure the efficient operation of the organization in the current business environment. Technology advancements, the incorporation of automation and robotics, and the emergence of a sophisticated and highly competitive environment have increased the demand for highly sophisticated and automated human resource management technology solutions.
One of the most significant trends in the PEO industry is the rising demand for technological systems that automate payroll administration. When attaining a competitive advantage is of the utmost importance, many businesses seek out Professional Employer Organizations (PEOs) that offer sophisticated, automated, and integrated platforms to assist companies in managing their human capital, thereby maximizing business value. Increasing demand for highly sophisticated automation solutions to manage employee benefits, payroll processing, and hiring drives this market's continued expansion.
The professional employer organization market is segmented based on type and end-use.
Based on type, the Professional Employer Organization (PEO) market is segmented into Full-Service PEO and ASO.
The Full-Service PEO segment dominates the market and is expected to register a CAGR of 10.2% over the forecast period.
Based on end-user, the Professional Employer Organization (PEO) market is segmented into Small, Medium, and Large Businesses.
The large businesses segment dominates the market and is anticipated to grow at a CAGR of 9.5% over the forecast period.
Europe is a significant revenue contributor globally and is expected to grow at a CAGR of 9.5% during the forecast period. The rising popularity of outsourcing in Europe is a major driver of the PEO industry's expansion there, as PEOs enable businesses to concentrate on their main competencies while cutting costs in other areas. Because of the ease of setup and the necessity of meeting emerging laws, businesses increasingly turn to PEO providers. Global PEO Services enables companies to rapidly hire employees without establishing legal entities in foreign jurisdictions or incurring the costs of doing so. The business offers professional employer organization (PEO) and employer of record (EOR) solutions, including security entities or managing talent acquisition, human resources, payroll, benefits, tax, and compliance issues. The company's primary objective is to provide business proprietors with the most effective business solutions for streamlining their operations at every stage and locating effective and efficient financing services.
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