NAPEO’S 2024 WHITE PAPER

During our Annual Conference and Marketplace in September, we unveiled the findings of our latest white paper. This year’s study was conducted by noted economists Dr. Laurie Bassi and Dan McMurrer of McBassi & Company. Titled PEO Clients: Faster Growing, More Resilient Businesses with Lower Turnover Rates, the study examined how PEO clients fare compared to similar businesses that do not use a PEO. The study looked at three metrics: business growth rates, employee turnover rates and business resiliency. In each case, PEO clients fare better than similar businesses that do not use a PEO.

Relative to comparable non-PEO users, businesses using a PEO:

• Have a growth rate that is more than 2 times higher
• Have an employee turnover rate that is 12 percent lower
• Are 50 percent less likely to go out of business

GROWTH RATES:
PEO clients grow faster – as measured by employee growth rates – than comparable other businesses that do not use a PEO. PEO client growth (4.3 percent annually) was more than twice as high as any available national comparisons. This higher growth rate among PEO clients likely reflects primarily their increased capacity to focus on strategic business matters while the PEO provides all of the employee-related services.

EMPLOYEE TURNVOER
PEO clients have lower employee turnover rates than comparable businesses growing at the same rate. On an annual basis, the employee turnover rate of PEO clients is 12 percent lower than it is among non-clients, calculated by dividing the turnover rate of PEO clients by the turnover rate of non-clients. Stated differently, employee turnover is more than 7 percentage points higher among non-clients calculated by subtracting the turnover rate of PEO clients from
the turnover rate of non-PEO clients.

BUSINESS RESILIENCY
Reflecting their higher growth rates and more stable employee workforces, it is not surprising that PEO clients also consistently demonstrate more resilience – the ability to survive and thrive, even during difficult economic circumstances – relative to comparable companies not using a PEO. It can be challenging to capture the concept of business resilience statistically. Fortunately, there is some available organization-level data – such as business survival rates over multiple years – that can be used as a proxy measure for resilience. Our analysis of this proxy variable shows that, in recent years, organizations not using a PEO are 50 percent more likely to go out of business on an annual basis than comparable businesses that were PEO clients at the
start of the analysis period.

LEARN MORE
Past white papers have focused on the size and composition of the PEO industry and analysis of PEOs and their relationships with clients. Topics have included PEOs’ impact on client organizations as well as industry-related data.

You can read the entire 2024 study here and view all previous white papers here.