How Many Companies Use a PEO?

Professional Employer Organizations (PEOs) help businesses employ skilled workers by streamlining HR functions, keeping companies compliant with evolving regulations, and offering competitive employee benefits.

A PEO allows businesses to focus on their core operations and spur growth. In fact, companies that use a PEO grow 7% to 9% faster and are 50% less likely to close their doors compared to similar businesses.

The National Association of Professional Employer Organizations (NAPEO) also reports that businesses using a PEO see a 27.3% ROI in cost savings alone.

Using a PEO leads to many benefits, but how many companies use a PEO in the United States?

How Many Companies Use a PEO?

There are 523 professional employer organizations (PEOs) in the United States, which help thousands of American businesses employ workers and maintain compliance.

• In fact, 208,000 small and mid-sized businesses use PEO services.
• These companies represent 17% of all employers with 10 to 99 employees.

PEOs are a great resource for companies that want to offer their employees benefits and HR services without breaking the budget.

• The PEO industry provides a broad range of HR services at a cost of almost $450 less per employee.

PEO Industry Growth

Leasing employment in the U.S. began as early as the 1940s but became popularized in the 1970s. Since then, the industry has only continued to expand.

• In 2021, there were 487 PEOs in the U.S.
• At that time, only 173,000 small and mid-sized businesses used a PEO.
• This shows that from 2021 to 2024, PEO clients increased by more than 20%.
• These companies represented 15% of all employers with 10 to 99 employees.

As you can see, the PEO industry has grown steadily over the past few years and is expected to be worth billions in the coming decade.

This growth is no surprise, considering PEOs help lower turnover rates by 10-14% and help businesses grow 7-9% faster.

PEO Employment Statistics

Professional Employer Organizations help employ millions of people, providing competitive benefits, reliable payroll, and more.

• By providing services to more than 200,000 clients, PEOs employ 4.5 million people in 2024.
• The PEO industry’s worksite employees earned $305 billion in 2022.

In fact, the total employment created by this industry is roughly the same as the number of employees at Walmart (U.S. only), Amazon, Kroger, and Home Depot combined. These companies are the four largest employers in the United States, indicating that the PEO industry represents a significant portion of American employment.

PEO Client Demographics

All types of businesses can utilize PEO services; however, some industries have a higher concentration of PEO usage than others.

Almost half of all PEO clients are within the following three industries:

• Professional, Scientific, and Technical Services
• Manufacturing
• Construction

Data sourced from NAPEO PEO client analysis.

Almost two-thirds of all PEO clients have less than 50 employees:

• 37% of all clients have 20-49 employees.
• 28% have 10-19 employees.

Additionally, while PEO users are scattered across the United States, three states contain around half of all PEO clients.

• Florida has an estimated 43,600, or 25%, PEO clients.
• Texas has an estimated 22,800, or 13%, PEO clients.
• California has an estimated 19,400, or 11%, PEO clients.

The percentage of PEO clients of all companies within a certain industry is known as the penetration rate.

• The penetration rate among all US businesses is approximately 3%.
• This rate increases to 16% among businesses with 20-49 employees.

This indicates that smaller businesses in professional and technical spheres are more likely to use a PEO; however, PEO services are not limited to any sized business or industry.

The Bottom Line

Using a Professional Employer Organization brings companies many benefits. According to NAPEO, PEOs streamline business operations by providing payroll, benefits, and HR services while remaining compliant with state and federal laws.

Approximately 208,000 companies use a PEO in 2024, which is more than a 20% increase from 2021. Additionally, NAPEO and other researchers have found that companies that use a PEO see lower turnover rates, increased survival rates, and faster growth.

If you are interested in finding a PEO that works for your business, take a look at the best PEO for small businesses in 2024.