Companies in this industry provide outsourced human resources (HR) management services to client businesses. Major companies include Automatic Data Processing (ADP), Insperity, and Paychex, all of which are based in the US.
Operations similar to the businesses known as professional employer organizations (PEOs) in the US can be found under different names in other countries. Companies that operate similarly to PEOs may be called employee leasing, pass-through, or umbrella companies.
The US PEO industry includes about 4,100 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $137 billion.
Unlike other providers of outsourced human resources services, PEOs serve as co-employers of their clients' employees. Personnel staffing agencies, which include temporary help and executive search services as well as PEOs, are covered in a separate industry profile.
Demand is driven by corporate spending and job growth. The profitability of individual companies depends on good marketing and efficient use of information technology. Large companies enjoy economies of scale in marketing and back-office operations. Small companies can compete successfully by specializing in an industry or a job function. The US industry is concentrated: the 50 largest companies generate more than 70% of industry revenue.
PEOs of all sizes face competition from other business process outsourcing (BPO) companies, some of which offer broad ranges of services beyond the HR field. PEOs may also compete with providers of outsourced human resources services, as well as a company's in-house human...