Awareness of professional employer organizations (PEOs) has risen by 44% since 2018, according to an annual survey of more than 500 business owners and decision makers conducted for the National Association of Professional Employer Organizations (NAPEO) by market research firm Povaddo.
PEOs provide payroll, benefits, and other HR services to hundreds of thousands of primarily small and mid-size businesses employing 4 million people. Through a PEO, the employees of small businesses gain access to employee benefits such as 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits typically provided by large companies. More than 15 percent of all employers with 10 to 99 employees partner with a PEO.
Business decision makers’ awareness of PEOs rose to 65% in 2022, an increase of 20 percentage points since 2018, when the association first began measuring PEO awareness. In addition, a record 33% of decision makers reported using a PEO last year, a nine-percentage point rise year over year, and more than double the reported PEO use in 2018.
All measures of familiarity and awareness of PEOs increased in 2022, reflecting the industry’s growing role as a vital resource for small and mid-sized businesses to provide the HR, payroll, and other benefits of a large firm.
“We continue to see unprecedented growth and awareness of the vital role the PEO industry plays in helping small and mid-sized businesses survive and thrive,” said NAPEO President and CEO Pat Cleary. “We hope to continue expanding the footprint of our industry so more and more businesses can fulfill their missions and reach their full potential.”
Some notable findings from this year’s report include:
- 33% of decision makers reported using a PEO in 2022, a nine-percentage point rise year over year.
- Unaided awareness of PEOs was 65% in 2022, a 20-percentage point rise since tracking began in 2018.
- Younger decision makers (25-34 years old) continue to be the strongest respective base of PEO users (42%).
- Of those who do not currently use a PEO, 81% reported interest in using one going forward.
This year’s survey also revealed small business owners and decision makers’ concerns with recruiting and maintaining top level talent as businesses re-emerge from the COVID-19 pandemic. Of those surveyed, 69% reported personnel recruiting issues over the past year, while competitive benefits (65%) and maintaining employee satisfaction (61%) also drove the most challenging aspects of running a business in 2022.
And those who represent the future of business in America have embraced the benefits of a PEO: 42% of younger decision makers (25-34 years old) reported using a PEO in 2022, the highest percentage across all age categories. Younger companies are also embracing PEOs: 40% of firms in business for less than ten years reported using a PEO, a figure higher than all other company age categories.
The annual survey, conducted by St. Louis-based research firm Povaddo, tracks awareness, understanding, and use of PEOs among business owners and key decision makers, or those who meet the following criteria:
- At least 25 years old
- Business decision maker for hiring a professional services firm to help handle internal business functions
- At least 10 full-time employees
- Annual business revenue of at least $500,000
Find the full report at napeo.org/marketresearch.
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