Why PEOs Are on the Rise: A Healthy Outlook
By Chris PetersonFirst published Updated
The short answer
PEOs keep growing because they take payroll, benefits, workers' comp and compliance off small businesses' hands. According to NAPEO, the industry association, worksite employees at PEOs grew 7.2% a year from 2008 to 2025, against 0.7% for U.S. employment, reaching 5.4 million at the end of 2025.
PEOs have become the outsourced HR department for many small and mid-sized businesses across the U.S., and the industry keeps growing. NAPEO's latest figures (industry-sponsored, published September 2026, covering the end of 2025):
- 502 PEOs in the U.S.
- About 233,000 client businesses and 5.4 million worksite employees
- Worksite employees grew 7.2% a year from 2008 to 2025, compared with 0.7% for U.S. employment overall
- About one in seven U.S. businesses with 20 to 499 employees uses a PEO
- The average client has about 23 worksite employees
So what does that growth mean for you?
Why are so many businesses using PEOs?
Time. As an owner, your goal is to grow the business, and part of that is using every efficiency you can. If you're like many owners, a lot of your time goes to HR: payroll, health insurance, workers' comp and compliance paperwork. Is that the best use of your time, and how do you get it back? As HR keeps getting more complicated, many small businesses have answered that question by partnering with a PEO.
What value does a PEO bring?
PEOs deliver value through economies of scale, shared liability and industry-specific expertise. A good PEO brings efficiency, structure and accountability to the employer side of your business, combining outsourcing with consulting:
Payroll processing
More than cutting paychecks. Some PEOs also give you a clear cost structure for employee benefits and workers' comp.
Human resources
Whether or not you have HR staff, a PEO takes on the multiple vendors for medical and dental plans, retirement plans and workers' comp. Because it pools employees from many companies, it can often obtain these at a lower cost.
Regulatory compliance
Rules change constantly. PEOs track new regulations and changes to existing ones, and because they share some liability, they have a reason to get it right.
Some PEOs also offer safety and risk management, recruiting and retention help, and HR software that keeps your information in one place, often with an employee self-service side. When a PEO takes on HR administration, owners can focus on the company, which is where better results come from.