NAPEO
The results of NAPEO’s PEO Pulse Survey for the third quarter of 2023 show that PEOs continue growth, although at a slower pace than previous quarters. Yet, the vast majority of survey respondents express optimism when thinking about the next twelve months. NAPEO’s Pulse Survey is generously sponsored by SUNZ Insurance.
Here are some of the survey’s highlights:
REVENUE AND WAGE GROWTH DECELERATING
- While Q3 brought revenue increases for the majority (59%) of PEOs, the proportion of those reporting declines increased from 14% in Q2 to 23% in Q3.
- Eighty-seven percent experienced only a mild change, if any.
- The share of respondents reporting wage growth cooled from 74% in Q2 to 59% in Q3. Within this group, all reporting PEOs indicated relatively modest wage increases.
PEO CLIENT BASE GROWS, CLIENT SIZE HOLDS STEADY
- PEO client counts increased for nearly 60% of respondents in Q3, with 5% experiencing significant increases.
- The size of PEO clients (based on WSEs per client) remained mostly steady.
PROFIT MOMENTUM IS BEGINNING TO SLOW
- The number of PEOs that experienced gross profitability growth declined considerably from 66% in Q2 to 44% in Q3, the lowest mark since early 2021.
- PEOs reporting declines in Operating Profits jumped from 8% in Q2 to 31% in Q3.
- BALANCED GROWTH AND STABILITY IN INTERNAL STAFFING
- Internal employee staffing levels increased for 44% of PEOs. Among the group, most (41%) reported modest headcount growth.
- Nearly half of PEOs maintained their number of internal employees.
NEARLY ALL RESPONDING PEOS EXPRESSED OPTIMISM ABOUT THE FUTURE
- Eighty-two percent of PEOs expect WSE growth over the next 12 months.
- The PEO Expected Growth Index* for Q3 fell to 3.95 from 4.14 during Q2. The 5-year average for the index sits at 4.02.
- Smaller PEOs tend to be more optimistic about future growth than the largest group, though all groups reported strong optimism.
* Expected Growth Index is based on the average score of a 5-point scale where 1 = Significant Decrease / 3 = No Change / 5 = Significant Increase.
Thank you to SUNZ Insurance for sponsoring the Pulse Survey.
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