PREDICTIONS FOR 2025

December is the perfect time to reflect and take stock of where we are as an industry, as well as where we want to go in the year ahead.

We achieved a lot in 2024. A few highlights: We passed legislation in Ohio and Kansas codifying the ability for a PEO to offer large group health plans to our customers’ WSEs. We defeated proposed legislation in Oregon that would have eliminated the co-employment model in the state. And, we were able to get PEO clarification language in Delaware for both the state retirement program and the paid family leave program.

We also showed remarkable resilience as an industry. Just to name a few of the hurdles we faced: We were challenged by ERTC relief payout delays, hindering our SMB customers. We navigated the fact that the IRS continues to hold the position that PEOs are liable for any inappropriately claimed payroll tax credits. And, we continued to face a roadblock in Oregon with regard to PEO recognition in the paid family leave program, causing some small businesses to be treated differently simply because they partner with a PEO.

But, what might the year ahead look like? Here are my predictions for 2025.

Industry consolidation will continue and we will need to adapt accordingly. Private equity investment has accelerated in our industry, which we should all be pleased by. It validates the value and importance of the work we do to serve our small business customers, and the fact that many members of this industry are entrepreneurs in their own right who have built impressive businesses. However, with this investment, we have also seen an acceleration in M&A, which is creating a revenue headwind for NAPEO despite the growth of our industry. I predict that this trend will continue, and the industry will need to address this negative revenue pressure. We will need to work together to match the needs we all have of NAPEO with a revenue model that is capable of sustaining the association’s positive impact for the long term.

We will double down in our focus on pushing PEO priorities when it comes to the 2025 tax negotiations. Our priorities for tax reform include: ensuring payroll tax credit liability remains with our clients, modernizing of aggregate taxpayer processing, and moving Treasury guidance on PEO clients being eligible for Section 199A into statute. We will continue working across the aisle to request provisions and tax credits which benefit small businesses.

We will see (and drive) continued emphasis on moving toward PEO recognition at the state level. This is something we have faced as an industry for quite some time, and to ground our industry position, we need to focus our efforts on moving toward PEO recognition in California, as well as strengthening the statute in Georgia. Just like we pushed for large group plan-focused legislation in Ohio and Kansas this year, we will now do the same in Maryland. I see this being a major focus in 2025.

There’s a lot of work to be done next year, and these three predictions are informed by our board meeting, which was held back in November. We learned a lot from each other, and our shared focus for the year ahead is clear. Of course, we will need to stay nimble and adaptive with a new administration coming in, and the inevitable ebbs and flows of the small business economy. But, if we can look back this time next year on accomplishments in each of these three areas—the future for our industry, and the small businesses we serve, will be brighter than ever.