The United States professional employer organization (PEO) market was valued at USD 10,887 million in 2021 and is projected to reach USD 28,200 million by 2030, registering a CAGR of 11.15% 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.
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.
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."
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
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 U.S. 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.
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.
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.
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