By Brad Buttermore
Managing Partner and Chief Financial Officer
Revenue and gross profits rose year over year during the third quarter of 2019 for Professional Employer Organizations (PEOs) operating in the United States, with 25% of those surveyed reporting that revenue was up significantly, and 15% noting a significant increase in gross profits.
We see this latest survey, conducted by Industry Insights, as additional evidence of sustained and healthy growth for PEOs whose value proposition continues to rise for small to mid-sized businesses.
PEOs, which provide a variety of HR services including, but not limited to, payroll administration, benefits, compliance assistance and other HR services, can offer a suite of human resource benefits that small to mid-sized businesses might otherwise be unable to afford.
The latest survey shows the sustained health of the PEO industry, whose revenue grew by double-digits in 2018.
The National Association of Professional Employer Organizations (NAPEO) said 40 PEO executives responded to the survey. The typical survey respondent had 23 worksite employees per client.
*PEO revenue in Q3 2019, compared to Q3 2018. Courtesy NAPEO Pulse Survey
Here are a few highlights from the Q3 survey:
- About 43% of respondents said PEO revenue increased somewhat during Q3, while 25% said it increased significantly. 25% said it stayed about the same. Just 8% reported a decrease in revenue.
- About 43% of respondents said the annual wage per worksite employee stayed about the same over prior year, while another 43% said wages increased somewhat. 8% reported a decline in wages and 8% reported a significant increase.
- The average number of worksite employees (WSEs) per client stayed about the same over prior year for roughly 60% of the respondents.
- 56% of those surveyed reported an increase in gross profits, with 15% of those reporting a significant increase.
Here at Capital Alliance, we remain bullish on the PEO industry, and believe there are more good days to come. We’ll continue to use our blog to keep you updated on the latest news and trends in the PEO sector as we close out 2019 and look ahead to trends and merger and acquisition activity in 2020.
Capital Alliance Corporation is a Dallas-based investment banking firm with a four-decade history and deep operational and M&A experience across many sectors, including human resource management. Capital Alliance is affiliated with Oaklins International, the world’s most experienced mid-market M&A advisor, with 800 professionals globally and dedicated industry teams in 40 countries worldwide. We have closed over 1,500 transactions in the past five years.