PEOS CLOSED OUT 2020 WITH SIGNS OF IMPROVEMENT & STRONG OPTIMISM
PEOs who participated in the fourth quarter Pulse Survey saw more increases in revenue than decreases for the first time in 2020.
- 14 percent of PEOs experienced significant revenue growth during the fourth quarter, compared with 5 percent reporting a significant decline; and
- 81 percent experienced only a mild change, if any.
PEO profits gained better footing in the fourth quarter of 2020 as well:
- After significant profit hits in the second and third quarters, fewer PEOs saw profits drop in Q4;
- Gross profits were up significantly for 11 percent of PEOs and up somewhat for 31 percent;
- Operating profit was more in line with Q4 of 2019 than any quarter of 2020;
- 73 percent of PEOs had as many or more clients in Q4 2020 than a year previously; and
- Wage increases are still slow moving by historic standards. Roughly 35 percent of PEOs saw worksite employee (WSE) wages rise during the quarter.
Client headcounts remained stable:
- Most clients maintained their headcounts in Q4; and
- While more clients are still reducing their employee headcount than during pre-pandemic times, many are also beginning to increase their staff sizes. 30 percent of clients increased their number of WSEs in Q4.
PEOs were consistent with their internal staffing levels:
- Two-thirds of PEOs maintained the same number of internal employees;
- 11 percent mildly reduced their internal employee numbers; and
- 24 percent mildly increased their staff size—which is the highest percentage of 2020—but from a historic perspective, much lower than in previous years.
PEOs continue to be confident about upcoming growth:
- 84 percent expect growth over the next 12 months;
- Only 8 percent expect WSEs to decrease over the next year—and none expects this to be a significant decline;
- PEOs are more optimistic now than they were prior to the pandemic; and
- The largest PEOs are most optimistic about future growth, though all groups reported strong optimism.
NAPEO’s Pulse Survey was developed by the Accounting Practices Committee in 2017 and is conducted quarterly among members to take the pulse of the PEO industry through a series of easy-to-answer questions. For more information about NAPEO’s Pulse Survey, please contact Melissa Viscovich at firstname.lastname@example.org or 703/739-8161.
1 Throughout this report, all data reflects the “typical” PEO, “typical” describing the median (middle) value for a given item.
2 Internal employees excluding sales staff.