PEO Industry: How did we Get Here? A Brief Overview.
With only about 20 years under its belt, the PEO industry is still relatively young. The initial need for “professional employers” emerged between 1980 and 2000 when the number of laws and regulations addressing employee and labor issues more than doubled. Needless to say, while managing human resources had once been relatively straight-forward and pain-free for smaller businesses, the job quickly became much more complex and labor-intensive, requiring a level of HR expertise that many small to medium-sized companies neither possessed nor could afford to hire in house.
For many, outsourcing the HR role, along with the responsibilities and liabilities associated with it, was the most pragmatic and cost-effective solution. A more recent factor contributing to the perpetuation of the PEO model is “The War on Talent.” With retirement at hand for many baby boomers and an increased demand for top performers, the market for talent has remained highly competitive for several years now. Not only are PEOs positioned to assist their clients with the procedural aspects of identifying, interviewing and hiring qualified job candidates, but they also often provide them access to better healthcare plans and benefit packages than they could obtain on their own, so they can attract and retain top notch talent.
Today, the National Association for Professional Employer Organizations (NAPEO) reports that there are approximately 700 PEOs operating across the 50 states. The industry’s gross revenue has grown exponentially in recent years as PEOs attract more diverse, fast-growth clients and the average salary of worksite employees increases. (The industry defines gross revenues as the total sum of PEO clients’ payrolls and the fees the PEOs charge.)
Companies of all shapes and sizes are choosing to partner with PEOs. According to NAPEO, the traditional PEO client, is typically a company with an average of 19 employees, however qualified PEOs can certainly service much larger companies as well. In fact, G&A Partners’ clients tend to average from 20 to 100 worksite employees, but G&A also serves companies with well over 100 employees. PEO clients can also cover the gamut of professional fields and industries to include professional service firms, retail businesses, high-tech companies, manufacturers, and government agencies, and the PEO industry has barely scratched the surface of potential clients.