Q1 2025 PEO PULSE SURVEY: INSIGHTS & TRENDS

Our quarterly PEO Pulse survey reveals key trends about the state of the PEO industry. Our Q1 survey showed:

Strong Revenue and Profit Growth: Roughly two-thirds of PEOs reported year-over-year increases in revenue and gross profit in Q1 2025. Revenue growth remained widespread (64% of firms saw higher revenues), while gross profit gains accelerated (68% saw increases, up from 56% in Q1 2024).

Broad Operating Income Improvements: Operating incomes rose for the majority of PEOs (about 68% increased vs. 23% decreased), a significant jump from a year ago. Most gains were moderate, indicating steady improvement in profitability across the industry.

Moderating Client and WSE Growth: Client base expansion has slowed compared to last year – nearly half of PEOs grew their client count in Q1 2025 (48%, down from 62% in Q1 2024), while very few experienced client losses (13%). Worksite employee counts per client were flat overall, with about a quarter of PEOs seeing increases and a similar share seeing decreases, and the rest stable.

Stable Internal Staffing: Internal headcounts held largely steady. About half of PEOs made no staffing changes, 29% expanded their workforce, and 23% reduced staff. Fewer firms added employees than in Q4 2024, but year-over-year the net staffing trend remains slightly positive.

Workers’ Comp Claims Mostly Steady: Workers’ compensation claim activity remained mostly stable. 42% of PEOs saw no change in claims, 27% reported fewer claims, and 31% experienced an uptick. Notably, the share with rising claims has grown since last quarter, though over a quarter of firms saw declines in claim volume.

PEOs continue to show strong optimism for workforce expansion in the year ahead. In Q1 2025, 71.0% of respondents anticipate a moderate increase in their number of worksite employees (WSEs) over the next 12 months, while 19.4% expect significant growth. Only a small minority anticipate no change (6.4%) or a decline (3.2%). The PEO Expected Growth Index was 4.07, signaling continued confidence in industry expansion and a positive outlook heading into the remainder of 2025.