North America Professional Employer Organization (PEO) Market

Market Overview

The North American professional employer organization (PEO) market size was valued at USD 14,805 million in 2021 and is projected to reach USD 41,300 million by 2030, registering a CAGR of 12.07% 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 North America, adopting Professional Employer Organizations (PEOs) by small and medium-sized businesses is one of the primary growth drivers. PEOs enable business proprietors to maximize their professional benefits, by streamlining HR services for healthcare businesses or managing numerous aspects of human resources for other companies. Large and minor healthcare providers select PEO services as a cost-effective alternative to business-to-business services. The escalating demand for PEOs in the healthcare industry is anticipated to generate enormous opportunities in the North American market.

Highlights

• Full-Service PEO dominates the market by type. 
• The large businesses segment dominates the market by end-use.

Market Dynamics

North America Professional Employer Organization (PEO) Market Drivers

Increasing Problems Concerning Employee Turnover

The need for businesses to comply with labor laws, which has increased over the past few years, is the primary factor influencing the expansion of the PEO market. Numerous significant organizations have a high employee turnover rate, resulting in additional expenses—for instance, training new employees.

A professional employer organization (PEO) is a business that offers a variety of services to its clients, including payroll and employee benefits. Employers who purchase these services from a PEO can reduce the cost of administering their employees' benefits while granting employees greater control over their benefits, resulting in increased employee retention and lower turnover rates.

North America Professional Employer Organization (PEO) Market Restraints

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.

North America Professional Employer Organization (PEO) Market Opportunities

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.

Segmental Analysis

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 11.8% 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 11.2% over the forecast period.

Regional Analysis

North America Dominates the Global Market

North America is the most significant revenue contributor globally and is expected to grow at a CAGR of 12.07% during the forecast period. The North American market is segmented into the U.S and Canada with the U.S. being the dominant region. Paychex, Inc. specializes in human resource management, payroll, benefits, and insurance. The business strategy of Paychex, Inc. is concentrated on providing industry-leading, integrated technology, increasing client satisfaction, expanding the HR leadership, expanding their client base, and engaging in strategic acquisitions.

Insperity provides human resources and business solutions to small and medium-sized enterprises. The company's objective is to provide its specialized human resources service offering to the leading small and medium-sized businesses in the United States while leveraging our purchasing power and experience to provide additional valued services to clients—their marketing and sales strategy for new products and services within standard PEO HR Outsourcing solutions and beyond. Following this plan, they routinely make long-term strategic decisions to invest in or acquire new companies, business divisions, or assets.

Recent Developments

• January 2022- A US-based human resource service provider, Paychex Inc., announced that it partnered with HireRight to provide COVID-19 rapid test kits, allowing instant testing for employees of several businesses.
• February 2021- A US-based administrative services provider to small and medium-sized businesses, Insperity Inc. announced a strategic collaboration with a cloud-based software giant, Salesforce. The strategy aimed to enhance their services for better customer retention, robust marketing campaigns, and maximizing businesses' productivity.