More than 230,000 businesses across the United States use a PEO (Professional Employer Organization) to handle HR, payroll, and benefits. The typical PEO client has between 5 and 200 employees and works in a field where compliance is complex, benefits are hard to afford alone, or both.
If you’re wondering who uses a PEO and whether your business fits the profile, this guide breaks down PEO adoption by industry, company size, and region, with the data to back it up.
Who Uses a PEO Today?
According to NAPEO’s industry data, PEO adoption has grown steadily for over a decade:
- 230,000+ businesses use a PEO as of 2025
- 4.5 million workers are employed in a PEO arrangement
- The industry has grown at roughly 7.5% per year since 2008
- About 15% of businesses with 10 to 99 employees now use a PEO
Those numbers make PEOs one of the fastest-growing segments of the HR services industry. But the averages hide a lot of variation. The real question is which types of businesses are driving that growth.
Which Industries Use PEOs Most
According to NAPEO’s 2024 white paper, four industries account for the majority of PEO clients:
- Professional, scientific, and technical services: 22% of all PEO clients
- Manufacturing: 13%
- Construction: 12%
- Healthcare and social services: 11%
What these industries share: complex compliance requirements, high workers’ comp costs, a need to offer competitive benefits to attract talent, and limited internal HR resources. A PEO addresses all four. For a closer look at the services involved, see our guide to what a PEO does.
| Industry | Share of PEO Clients | Key Reasons for PEO Adoption |
|---|---|---|
| Professional, scientific, and technical services | 22% | Competing for talent demands strong benefits; firms often lack dedicated HR staff |
| Manufacturing | 13% | Workers’ comp costs are high; OSHA and safety compliance is demanding; shift-based payroll adds complexity |
| Construction | 12% | Workers’ comp premiums are among the highest of any industry; multi-state projects create compliance layers |
| Healthcare and social assistance | 11% | Licensing and credentialing requirements; HIPAA compliance; high turnover in many roles |
Percentages from NAPEO 2022 white paper. Industries do not sum to 100% because the remaining ~42% spans dozens of sectors.
Industry penetration tells a different story
The client-share numbers above tell you which industries send the most businesses to PEOs. But penetration rates, the percentage of businesses within an industry that use a PEO, tell a different story.
- Real estate, rental, and leasing: 31% penetration
- Professional, scientific, and technical services: 28% penetration
- Information technology: 27% penetration
- Financial services: 27% penetration
- Manufacturing: 20%+ penetration
Real estate firms, for example, represent a small slice of total PEO clients, but nearly a third of all real estate businesses use one. These are typically small offices with a few agents and an office manager, exactly the profile where a PEO’s pooled benefits and compliance support make the most difference.
What Size Company Uses a PEO?
The average PEO client company has about 16 employees. But that average masks a wide range:
- 5 to 19 employees: the largest single group of PEO clients
- 20 to 49 employees: the second-largest group, and the fastest-growing segment
- 50 to 99 employees: a significant share, often businesses crossing the ACA threshold
- 100 to 200 employees: less common but growing, especially in industries with complex compliance
About 85% of PEO client companies have fewer than 50 employees. The sweet spot is clear: businesses large enough to need real HR infrastructure but too small to justify building it in-house.
Quick fact: Roughly 1 in 6 U.S. businesses with 20 to 49 employees uses a PEO today.
If you’re in that range and curious what a PEO would cost, our PEO cost calculator estimates fees based on your headcount, and the PEO savings calculator shows what you might save on benefits and administration.
Where PEO Usage Is Highest
PEO adoption varies significantly by state. The top four states by total PEO client count:
- Florida: 25% of all PEO clients (the PEO industry was essentially born here)
- Texas: 13%
- California: 11%
- New York: 10%
But just as with industries, penetration tells a richer story. Hawaii, Florida, and Utah all have PEO penetration rates above 38%, meaning more than a third of eligible businesses in those states use a PEO. Warm-weather states with tourism-heavy economies and seasonal hiring tend to index higher.
A Real‑World Example
Carlos owns an electrical contracting company in Houston with 28 employees. His crew works across residential and commercial job sites, and he’s licensed in Texas and Louisiana.
Before his PEO, Carlos spent about 12 hours a week on payroll, workers’ comp paperwork, and chasing down compliance updates for two states. His workers’ comp premiums were high because his experience mod rate had crept up after two claims. And he was losing good electricians to larger firms that offered health insurance and retirement plans.
With a PEO, Carlos got access to a master workers’ comp policy with lower premiums, a benefits package that includes health insurance and a 401(k), and a compliance team that handles the multi-state regulatory overlap. He still runs every job site, hires every electrician, and signs every contract. The PEO handles the paperwork. For more on how this split works, see PEO responsibilities vs. employer responsibilities.
Five Signs Your Business Fits the PEO Profile
Not every business needs a PEO. But if several of these sound familiar, you’re in the target profile.
- 1. You have 5 to 200 employees. This is the range where PEOs deliver the most value. You have enough people to create real HR complexity but not enough to justify a full-time HR department.
- 2. HR tasks are eating into your week. If payroll, benefits administration, and compliance paperwork are taking 10 or more hours a week, a PEO can give that time back.
- 3. You struggle to offer competitive benefits. Small businesses pay 8 to 18% more for health insurance than large ones. A PEO’s pooled buying power can close that gap. Use our PEO time savings calculator to estimate how many hours you’d reclaim each month.
- 4. You operate in a compliance-heavy industry or multiple states. Construction, healthcare, manufacturing, and any business with multi-state operations faces a web of overlapping regulations. A PEO’s compliance team monitors changes so you don’t have to.
- 5. You want to offer a retirement plan but haven’t set one up. According to NAPEO, 52% of PEO clients with 10 to 49 employees offer a retirement plan, compared to just 23% of comparable businesses without a PEO. If you’ve been meaning to add a 401(k) but keep putting it off, a PEO makes it turnkey.
Who a PEO Is Not Ideal For
PEOs aren’t the right fit for every business. Three profiles that typically don’t benefit:
- Solo operators and very small teams (fewer than 5). The minimum fees most PEOs charge don’t make economic sense when you only have a handful of people. You’re often better served by a payroll service and an insurance broker.
- Very large companies (200+ employees). At this size, you can typically negotiate your own group insurance rates and justify an in-house HR team. An ASO (Administrative Services Organization) or HR consulting firm may be a better fit.
- Businesses that need full control over every HR process. Co-employment means sharing some employer-of-record responsibilities. If you need to control every detail of payroll processing, benefits selection, and tax filing yourself, a PEO’s model won’t feel right.
If you’re on the fence, understanding how a PEO works can clarify whether the model fits your management style. And our PEO ROI calculator can help you see whether the numbers make sense for your specific situation.
The Bottom Line
PEOs serve a wide range of industries and company sizes, but the core profile is consistent: businesses with 5 to 200 employees that need professional HR support without the overhead of building it in-house. Professional services, manufacturing, construction, and healthcare lead the way, and adoption is highest in states like Florida, Texas, and California.
If your business fits the profile, the next step is straightforward. Browse our PEO directory to see which providers serve your industry and state, or request a free consultation to connect with our brokerage team. They’ll walk you through your options over the next several business days.
