How PEOs Help Small Businesses: Key Takeaways from the NAPEO Report

For small and mid-sized businesses (SMBs), growth often comes with growing pains: more compliance risk, complex HR tasks, and limited time for strategy. That’s where Professional Employer Organizations (PEOs) come in—and a new 2017 study from the National Association of Professional Employer Organizations (NAPEO) shows how much they help.

Based on surveys of over 1,500 employees and 100 businesses, the report compares companies that use PEOs with those that don’t—uncovering major differences in growth, profitability, employee satisfaction, and more.

How Do PEOs Impact Business Growth?

Companies that work with a PEO report significantly better financial performance. The study found that PEO clients had twice the median revenue growth of comparable non-PEO firms. They also projected 40% greater expected revenue growth year over year and were 16% more likely to report increased profitability.

These gains are directly tied to what PEOs offer: outsourced support for HR, payroll, benefits administration, and compliance. By removing these time-consuming burdens, business leaders can focus on growth initiatives, customer service, and innovation.

What Business Challenges Are Eased by Using a PEO?

PEO clients report feeling more confident about navigating key business challenges. Business owners using PEOs expressed significantly lower levels of concern in three areas that often keep SMBs up at night:

• Hiring employees: Only 45% of PEO clients said this was a major concern, compared to 70% of non-PEO firms.
• Increasing revenue: 73% of PEO clients cited this as a concern, versus 90% of non-PEO firms.
• Raising capital: Just 18% of PEO clients reported this as a top concern, compared to 45% of their peers.

The takeaway: With more operational support and fewer administrative distractions, PEO clients feel better equipped to tackle what matters most.

How Do PEOs Improve the Employee Experience?

Employees at PEO-supported companies report higher satisfaction, engagement, and trust in leadership. Compared to employees at non-PEO firms, those at PEO client companies were more likely to agree that their employer:

• Demonstrates commitment to employees
• Has strong hiring and HR practices
• Provides training and development opportunities
• Designs jobs effectively

Employee engagement and loyalty were also stronger. PEO client employees showed:

• A 5-point increase in overall engagement
• An 8-point increase in intent to stay until retirement
• Greater belief that their company is competitive and growing

These results suggest that PEOs streamline HR and help companies build more attractive, supportive workplaces, especially over time.

What Do Business Owners Think of PEOs?

Business owners overwhelmingly recommend PEO partnerships.

In the survey, 98% of PEO clients said they would recommend a PEO to a fellow small business owner. Most also credited their PEO with helping them increase revenue and profitability—reinforcing the idea that PEOs are more than just a back-office service.

Key Takeaways from the 2017 NAPEO Report

This report offers clear evidence that PEOs drive measurable impact in the areas SMBs care about most: growth, employee retention, HR efficiency, and peace of mind.

Here’s a quick summary of what stands out:

• Revenue growth doubles for PEO clients compared to similar firms.
• Profitability increases more often in PEO-supported businesses.
• Hiring, compliance, and funding concerns are significantly reduced.
• Employee engagement and satisfaction are higher across the board.
• Owners trust the value—98% would recommend their PEO.

If you’re evaluating whether a PEO is worth the investment, this study offers a clear answer: it’s a proven path to better outcomes for many growing businesses.