Use of PEOs on the rise

According to a report released by IDC, small employers are increasingly turning to PEOs to manage their HR functions after a decline in 2003. Lisa Rowan, program manager for HR and talent management services for IDC, pointed out that last year marked a turnaround point for this market segment, in part because of a strong economy, low unemployment, and an explosion in small-business growth.

“PEOs had declined in 2003 but made a 35-percent swing back (in 2006). They seem to be alive and well and kicking,” she said, noting that nearly five percent of all small businesses in the U.S. are covered by PEOs.

One reason for its recent strong growth was the rise in the number of employees at small businesses. Rowan pointed out that between 1999 and 2004, their ranks swelled 8.4 percent, pushing up the need for outsourced HR services for these organizations. And with this increase, many of those new companies also chose not to administer HR services on their own, instead opting for the services of PEOs and other providers.

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Source: HRO Today