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Why Have I Never Heard of the Professional Employer Organization Industry?

by Dan FlanaganJune 27, 2017 8:00 AM

For an industry that serves over 2.5 million people, Professional Employer Organizations can still be a bit of a mystery for the average business owner. The industry has helped businesses manage important HR functions for decades, but one of the most common questions owners ask is “Why have I never heard of PEOs before?”

There are a few reasons for this, starting with the fact that there’s no simple, one-sentence explanation for what PEOs do.

Image of a business owner learning about what a PEO is.

It’s a Pretty Complex Industry

So exactly what is a PEO? A PEO doesn’t provide a tangible product. Instead, it offers an array of services and solutions. The National Association of Professional Employer Organizations states that PEOs “provide comprehensive HR solutions for small businesses.” In terms of an explanation, it’s a nice start, but it doesn’t go into nearly enough detail to truly describe how a PEO can help businesses and their owners.

Business owners recognize the various important human resource functions they need for their business, such as payroll processing, employee benefits, legal compliance, risk management, and more. A PEO is designed to manage all of these critical HR functions.

Of course, every business is different. This means that these HR solutions can change depending on each company’s specific needs. Combine that with the differences between compliance laws and other human resource distinctions and it can take a while to describe specifically what a PEO can do to improve your business.

You Don’t See PEOs in Ads

If a quick chat isn’t enough to explain the complexities of the PEO industry, that means that the traditional forms of advertisements are out. Unlike fast food chains, local furniture stores, and other businesses, you’ll rarely see or hear an advertisement for a PEO on TV or the radio because a 30-second spot won’t be able to really explain what the industry is all about.

PEOs Don’t Always Call You Directly

Another reason you may not have heard about PEOs is that not a lot of businesses in the PEO industry have the sales force to contact business owners by phone. At Group Management Services, we have the team in place to contact business owners and help educate them about PEOs, but not all of the roughly 1,000 PEOs in the country have the capacity to reach out to prospective businesses.

PEOs Have Grown Dramatically in Recent Years

While the PEO industry dates back to Marvin R. Selter and the late 1960s, the PEO industry has experienced a surge over the past five years that has helped introduce PEOs to more business owners. I joined GMS six-and-a-half years ago, when the PEO industry was worth around $85 billion. Today, it’s up to around $168 billion. 

What helped drive the industry to nearly roughly double in size? Four words: “Increased laws and regulation.” 

Over the past five years, a combination of the Affordable Care Act and increased regulations from the Department of Labor (DoL) and the Occupational Safety and Health Administration (OSHA) have added to what owners need to do to keep their businesses compliant. This development has led to more employers turning to PEOs to manage their HR functions to keep up with these regulations.

Learn More About PEOs

Now that you have an introduction into why you may not have known about PEOs, it’s time to learn more about the industry and how a PEO can help your business. Check out our PEO Education Center for additional resources on PEOs and HR management and contact us today to talk to one of our experts about exactly what kind of role a PEO can play for your company.

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