United States Professional Employer Organization (PEO) Market

Market Overview

The United States professional employer organization (PEO) market witnessed significant growth in the past and is expected to grow at a CAGR of 11.15% during the forecast period (2022-2030).

A Professional Employer Organization (PEO) is a staffing agency that provides businesses with adaptable and individualized administrative support. The concept of a PEO is relatively novel and is progressively gaining popularity. The employment demand for conventional departments is gradually declining, and outsourcing is significantly more cost-effective, efficient, and flexible.

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 States PEO Market Drivers

Increasing Difficulties Related to Employee Turnover

The primary element promoting the expansion of the PEO sector is the requirement for businesses to adhere to stricter labor laws. This is crucial since many large companies deal with issues brought on by high worker turnover rates, which need additional expenses like training new hires.

Professional employer organizations (PEOs) provide their clients with various services, including employee benefits and payroll administration. By partnering with a PEO, employers may effectively reduce the costs associated with managing employee benefits while providing employees more control over their benefits. As a result, this arrangement aids in boosting employee retention rates and lowering turnover, which benefits enterprises.

The United States PEO Market Restraints

Control Over Crucial Procedures has been Lost

When organizations migrate to a more flexible workforce model, they lose control over important procedures like payroll processing, tax preparation, and human resource management. Furthermore, due to their greater dependence on independent contractors for certain essential business processes, time-sensitive activities (including payroll) encounter significant delays. Control is one of the most crucial aspects of decision-making, especially when it comes to relationships between employers and employees. By utilizing a professional employer organization, a business might exchange a priceless service for the loss of total control over its workforce.

The United States PEO Market Opportunities

Growing Demand for Automated Human Resource Management Technology

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 optimize corporate value. The rising need for more sophisticated automation systems for employee benefits, payroll processing, and recruiting is fueling this market's ongoing expansion.

Regional Analysis

The U.S. dominates the North American market and is expected to grow at a CAGR of 11.15% 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

The United States 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 12.3% over the forecast period. ASO is expected to hold a significant share of the segment due to its implementation by small and medium-sized businesses. This can be attributed to the organizational need to save time in human resource management. Since small and medium-sized businesses generate most work, this form of ASO is advantageous.

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 11.6% 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- 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.