United Kingdom Professional Employer Organization (PEO) Market Size, Share & Trends Analysis Report By Type (Full Service PEO, Administrative Services Organization), By Service Type (Human Capital Management, Payroll Services, Regulatory Compliance, Risk Management, Withholding & Taxation, Insurance Services, Others), By Business Size (Small Businesses (SMBs), Mid-sized Enterprises, Large Corporations) and Forecasts, 2024-2032

Market Overview

The United Kingdom professional employer organization (PEO) market share witnessed significant growth in the past and is expected to grow at a CAGR of 10.5% during the forecast period (2022-2030).

A professional employer organization (PEO), or human resource outsourcing, is a service provider specializing in providing small and medium-sized businesses (SMEs) with cost-effective HR management solutions. By leasing employees, PEOs share responsibility and control over various employee-related tasks and liabilities with the employer. These organizations provide businesses with vital administrative and management services, including payroll processing, finance, and tax support, employee recruitment, personnel management, and risk mitigation.

The need for sophisticated, automated technological HR solutions is propelling market demand. Compliance with employment laws and regulations established by global governments is increasing the demand for PEO services. The manufacturing, IT services, and BFSI sectors have a high demand for these services. It contributes to strategic HR planning to entice the most high-quality talent pool. PEO also offers valuable services such as employee immigration, global employee screening and recruitment, and international recruitment advertisements.

Market Dynamics

The United Kingdom PEO Market Drivers

Rapid Expansion of Small and Medium-Sized Businesses

The market for professional employer organizations (PEO) is anticipated to increase fast because of the continued growth and expansion of small and medium-sized businesses (SMEs). According to the Organization for Economic Cooperation and Development (OECD), "Small and medium-sized enterprises (SMEs) account for more than 95% of firms, 60%-70% of employment in OECD economies, and generate a significant proportion of new jobs."

The United Kingdom PEO Market Restraints

Control Over Crucial Processes is Lost

As firms transition to a more flexible workforce model, the administration of important processes like payroll processing, tax preparation, and human resource management are lost. They also rely increasingly on vendors to complete these essential business functions, which causes significant delays for time-sensitive procedures (like payroll). In the context of an employer-employee relationship, control is especially important when making decisions. A corporation contract with a reputable employer group gives up entire control over its employees in exchange for a valued service.

The United Kingdom PEO Market Opportunities

The Automated HRM Technology Industry is Growing

One of the largest changes in the PEO industry is the growing demand for technological tools that automate payroll management. When acquiring a competitive advantage is of the utmost importance, many enterprises turn to Professional Employer enterprises (PEOs), which offer sophisticated, automated, and integrated systems to assist firms in managing their human resources and optimizing corporate value. The rising need for more sophisticated automation systems for employee benefits, payroll processing, and recruiting is fueling this market's ongoing expansion.

The United Kingdom professional employer organization market is segmented based on type and end-use.

Regional Analysis

The U.K. is a significant contributor to the European market and is expected to grow at a CAGR of 10.5% during the forecast period. 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.

Segmental Analysis

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 10.7% over the forecast period. Due to its implementation by small and medium-sized businesses, ASO is anticipated to occupy a sizeable portion of the market. This can be attributed to the need for time savings in human resource management. This ASO is advantageous since small and medium-sized enterprises generate the majority of work.

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 10.2% over the forecast period. Due to the increasing demands for efficiency in the administrative service of large organizations, the majority was held by the larger firms. Benefits such as saving money on HR Services and freeing up resources to focus on the company's core function have led many large enterprises to use PEOs.

Recent Developments

• January 2022- 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- 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.