THE ROLE FOR PEOS IN AN UNPREDICTABLE ECONOMY

A few weeks ago, many of us (nearly 1,000!) gathered in Marco Island, Florida for NAPEO’s Annual Conference & Marketplace for three days of networking and learning from one another. It’s also an opportunity to take stock of where our industry is—and where we are headed.

There is a lot to consider. The PEO industry continues to evolve—shaped by changing workforce expectations, new technologies, economic pressures and an increasingly complex regulatory environment. But it was clear in Marco Island that our industry isn’t simply responding to change; we’re helping our clients navigate and respond to some challenging economic realities.

On one hand, our economy is strong. As I write this, the Dow has closed at a record high 24 times this year alone (the S&P 500 has reached that mark 27 times in 2026). NFIB’s Small Business Optimism Index reports small business owner optimism exceeding its more than five-decade average. But at the same time, uncertainty for small business owners is more than 20 points higher than the historical average. Business owners don’t know how to grow in this unpredictable environment.

Adding to the dichotomy, 36% of small businesses reported openings they are struggling to fill – the highest in over a year. Our own small business research identified recruiting, retention and shortages as major issues for PEO clients, all while economic data indicate a cooling labor market. Taking care of employees is also getting more expensive. Healthcare costs are at historic highs – up 53% in the last decade, and 6% year-over-year.

How businesses are run is also changing. Cost uncertainties related to geopolitical issues complicate future planning, while customers are getting more price sensitive. AI is accelerating small business startups as American entrepreneurs continue to do what they do best: adapt.

These sometimes-contradicting realities require more sophisticated solutions. As small businesses continue to face big business problems (just with shallower pockets), the need for PEOs has never been greater.

We are giving entrepreneurs the scale to compete, the expertise and infrastructure to navigate these complexities, and the opportunity/freedom to focus on what they do best – building their business.

The new research we released during the conference bears this out. 5.4 million American workers now rely on PEOs for payroll, health benefits, retirement savings plans and many other resources that impact their daily lives.

And, since 2008 worksite employment in the PEO industry is growing more than 10 times faster than total U.S. employment, highlighting the fact that businesses are increasingly choosing the PEO model.

The client data in the new research reinforces the point. Eighty-seven percent of PEO clients have fewer than 50 employees, and sixty-three percent have fewer than 20. These are precisely the businesses that are least likely to have deep internal HR, benefits and compliance infrastructure.

In my view, this makes NAPEO’s job more important than ever. As you grow and the needs of your clients expand, your association can serve a similar role by curating business, regulatory, legislative and informational environments where you can thrive.

The 2026 Annual Conference & Marketplace was a powerful reminder of how far this industry has come. But I’m even more excited about where we’re going.