PEO Companies

BARRIERS TO ENTRY
High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the "real" growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND
Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

CO-EMPLOYMENT
An employment relationship where two or more companies share employer responsibilities with a common employee.

EMPLOYEE BENEFITS
A form of compensation that may be mandated by law (e.g. social security or unemployment insurance) or voluntary (e.g. life insurance or retirement).

EMPLOYEE LEASING
A term that is often used interchangeably to refer to PEO companies.

OUTSOURCE
To procure goods or services under contract with an outside supplier.

PROFESSIONAL EMPLOYER ORGANIZATION (PEO)
An organization that provides integrated services to business owners by outsourcing workers for human resources, employee benefits, payroll, workers' compensation and other services.

WORKSITE EMPLOYEE (WSE)
A term that refers to employees who work for industry operators’ clients and are managed by professional employer organizations.

While industry revenue has expanded rapidly during the current period, the COVID-19 (coronavirus) pandemic decelerated revenue growth. Amid high unemployment and low corporate profit, revenue declined 1.2% in 2020. At the same time, the pandemic has presented industry operators with an opportunity to prove the value of PEO services. A high number of new pandemic-related regulations introduced in 2020 and 2021 has enabled PEOs to navigate their clients through the pandemic more smoothly. According to the National Association of Professional Employer Organizations (NAPEO), the percentage of PEO clients who permanently closed in 2020 was only 1.1%. In contrast, this share for similar businesses that did not use PEO services and closed permanently was 2.6%.