How many companies use a PEO?

More than 230,000 US businesses use a professional employer organization in 2025, and NAPEO's 187 member PEOs alone employ 4.5 million workers through co-employment arrangements, according to NAPEO's October 2025 research. This page pulls together the headline figures on PEO adoption, market size, industry and state concentration, and growth drivers, all sourced to NAPEO and Straits Research with the date each figure was published. If you're new to the PEO model itself, the broader guide to professional employer organizations covers what a PEO is and how the co-employment structure works before you get into the numbers below.

More than 230,000 US businesses partner with a PEO in 2025, up from roughly 208,000 in 2022 and 175,000 in 2021, according to NAPEO. More than 500 PEOs operate in the US in total, and NAPEO's 187 members generated $372 billion in revenue as of the October 2025 release, against an estimated $414 billion for the industry as a whole. NAPEO publishes an updated white paper roughly once a year; the figures on this page reflect its October 2025 release, checked against the 2023 Industry Footprint paper and the 2021 white paper where a trend line matters.

Adoption isn't evenly spread. Professional services, healthcare, construction, and manufacturing account for nearly half of all PEO clients, and the sweet spot for adoption is businesses with 10 to 49 employees, which make up half of all PEO clients nationwide.

NAPEO's $372 billion revenue figure and the $66.23 billion global market valuation describe two different things, not two conflicting estimates of the same industry. NAPEO's revenue number is gross revenue billed by PEOs, which includes the wages of worksite employees that pass through PEO billing on the way to payroll, not just the PEO's own service fee. That's why worksite employees alone earned $305 billion in 2022, a figure close to the size of the total revenue number in the same period.

The global market valuation, by contrast, comes from Straits Research and counts PEO service fees, the market for buying and selling PEO services worldwide, valued at approximately $66.23 billion in 2024 and projected to reach $170.8 billion by 2033 at an 11.10% compound annual growth rate. Once you separate wage pass-through from fee revenue, the US and global numbers stop looking contradictory: the US figure is dominated by wages processed on behalf of 4.5 million workers, while the global figure prices only the service layer PEOs charge for managing that workforce.

More than 500 PEO companies operate in the United States, according to NAPEO, though the market is concentrated among a small number of large players. NAPEO's 187 member PEOs account for more than 90% of the industry's revenue between them. Worksite employees aren't spread evenly across firms either: the five largest PEOs control approximately 39% of all worksite employees, the next 25 largest add another 19%, and the remaining, much larger group of smaller PEOs share the last 42%.

Approximately 15% of all US employers with 10 to 499 employees use a PEO, according to NAPEO's 2025 research. Among businesses with 20 to 499 employees specifically, the rate is 14%, and it rises slightly to 15% among businesses with 50 to 99 employees, the segment where HR complexity tends to outgrow a small internal team. These rates use different employee-size denominators depending on the business segment being measured, which is why the figures move by a point or two depending on which slice you're looking at.

Penetration varies sharply by state. In Hawaii, Florida, and Utah, the PEO penetration rate among businesses with 20 to 499 employees reaches 38% to 50%, while states with less established PEO markets see rates below 5%. Penetration also varies by industry: NAPEO's 2025 research shows the highest adoption rates, 27% or higher, among companies in Information (publishing, telecom, software, and data processing), real estate and rental leasing, professional and technical services, and financial services and insurance. These are people-driven, heavily regulated industries where expert HR support is a competitive advantage rather than a discretionary expense.

Half of all PEO clients have between 10 and 49 employees, and another 35% have fewer than 10 employees, according to NAPEO's 2025 client analysis. That means 85% of all businesses using PEOs have fewer than 50 people. The remaining 15% of PEO clients are companies with 50 to 499 employees, split between the 50-to-99 and 100-to-499 bands shown below.

Source: NAPEO 2025 client analysis.

The 50% figure for the 10-to-49 band is itself a change from NAPEO's 2022 data, which showed about 65% of clients in that range; the shift is driven by faster growth among clients with fewer than 10 employees rather than any drop-off in the 10-to-49 segment. Once a company crosses the 50-employee threshold, the economics of building an internal HR function start to compete directly with PEO pricing, which is why that group shrinks to 15% of clients. Larger PEOs tend to serve the 50-to-499-employee clients that remain, while smaller PEOs concentrate on service-based small businesses, startups, restaurants, and construction firms.

Professional, scientific, and technical services holds the largest share of PEO clients in the US, followed by healthcare and social assistance, construction, and manufacturing, while Florida alone accounts for a quarter of all PEO clients nationwide, according to NAPEO's 2025 data. Together, the top four industries account for nearly half of all PEO clients, and the top four states account for roughly 59%.

Florida's dominance isn't accidental. The state was an early center of the PEO industry's development, and its large base of small businesses in professional services, construction, and healthcare drives strong demand for co-employment. NAPEO's 2025 research also names Hawaii, Florida, and Utah as the states with the highest per-capita PEO penetration, well above the roughly 14% national average, though the 2025 data shows a slightly flatter geographic distribution than 2022 as adoption spreads more evenly across the country.

PEO usage is growing because small businesses need enterprise-level benefits, compliance support, and payroll administration without the cost of building an in-house HR department, and NAPEO's own outcome data backs up the return. NAPEO's 2024 economic analysis, conducted by McBassi & Company and comparing PEO clients to non-clients from January 2023 to January 2024, found that PEO businesses grow at more than twice the rate of comparable non-PEO businesses, experience 12% lower employee turnover, and are 50% less likely to go out of business.

NAPEO's 2019 ROI study, also by McBassi & Company using 2018 data, put the cost-savings benefit of using a PEO at 27.2%: for every $1,000 spent on PEO services, the average client saves $1,272, a net benefit of $272. Those savings come from five areas: HR personnel costs, health benefits, workers' compensation, unemployment insurance, and other external HR spending. The pooling advantage shows up directly in benefits data too. For companies with 10 to 49 employees, 52% of PEO users offer a retirement plan compared with just 23% of non-PEO companies the same size, according to NAPEO.

The pandemic reinforced the same pattern. NAPEO's 2021 white paper on PEOs and the COVID-19 economy found that comparable non-PEO companies saw a 6% employment decline from early 2020 to mid-2021, while PEO clients grew employment by 1% over the same period, an 81% higher growth rate for PEO clients. As companies scale, PEOs also absorb five specific growth pains: administrative overload, employee morale and retention pressure, rising compliance and safety obligations, recruitment demands without a dedicated HR team, and the need for repeatable, well-documented processes when courting investors. The full breakdown of what a PEO does and doesn't cover is in our review of PEO benefits and drawbacks, and the cost side of that trade-off is covered in our PEO cost and ROI guide.

PEOs are a primarily US-based co-employment model, while employers of record are used for international hiring where the company has no local entity, and the two markets differ enormously in scale and maturity. Every PEO type requires the client to already hold its own legal entity in the US; the PEO becomes a co-employer sharing responsibilities with the client. An EOR becomes the sole legal employer instead, which means the client doesn't need an entity in the hiring country at all. See the full comparison on what an EOR is and how it differs from a PEO.

The US PEO market is far more mature: NAPEO members alone generate $372 billion in revenue, a figure built up over decades of state-level licensing since the 1990s. The reason companies reach for an EOR internationally rather than a domestic-style PEO comes down to how much employer obligations vary by country. Median employer social security contributions run 12.6% across the 196 countries in our Global Employer Burden Index dataset, with New Caledonia the highest at 36.49%. Statutory notice periods vary just as widely, from a median of 4.3 weeks up to 26 weeks in Gambia, per our Global Employer Burden Index dataset. That variability is exactly what an EOR is built to absorb, since it takes on local employer liability instead of the client. Some companies run both models at once: a PEO for their US workforce and an international PEO or EOR for hires abroad.

The data points to a clear profile: PEOs deliver the most value for US businesses with 10 to 99 employees in a regulated or people-driven industry that can't yet justify a full in-house HR team. If your company sits in that range, in professional services, healthcare, construction, manufacturing, real estate, or financial services, the penetration and outcome data above suggest a PEO is worth evaluating rather than an edge case. If you're hiring outside the US instead, that's an EOR decision, not a PEO one, since PEOs require a US entity you already hold.

You keep full operational control of your business in a PEO arrangement. The PEO administers payroll, tax filings, benefits, and compliance as a contractual co-employer, while you retain hiring, firing, job assignments, and day-to-day management. You remain the PEO's customer and can end the relationship at any time, typically with 30 to 90 days' notice depending on the terms in the agreement. Before signing, check a provider's IRS certification (CPEO status) and ESAC accreditation, since only a Certified PEO can assume federal employment tax liability for your worksite employees; a non-certified provider leaves that liability with you.

If you're ready to compare providers directly against these criteria, the best PEO services review breaks down pricing, service quality, and fit by company size and industry.