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Who’s Using PEO? Key Takeaways from NAPEO’s 2025 PEO Clients Report

ExtensisHR6 minute read
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Quick look: NAPEO’s latest report, PEO Clients: Who They Are, What They Are, and What They Do, summarizes data from over 50,000 professional employer organization (PEO) customers to provide a current state of the industry. Read on to review which business sizes, industries, and regions rely on PEOs most, and how business leaders and brokers can choose a partner to fuel their success.

The small business landscape is constantly evolving: technology is rapidly advancing, employee expectations continue to rise, and economic conditions remain unpredictable. It’s no surprise that the way small and medium-sized businesses (SMBs) rely on professional employer organizations (PEOs) has also progressed.

The National Association of Professional Employer Organizations (NAPEO) offers a close look at current PEO adoption in its fall 2025 report, PEO Clients: Who They Are, Where They Are, and What They Do.

A follow-up to the 2022 edition, this year’s survey incorporates data from more than 50,000 PEO clients from 2023 through early 2025. Over half the figures were anonymously provided by PEOs. Additionally, to determine client location, size, and industry, NAPEO also sourced data from U.S. Department of Labor Form 5500 filings, manual research, and other government databases.

These insights allow business leaders to see how many of their competitors partner with a PEO, and they can help brokers refine their strategies to deepen client relationships and expand their portfolios. You can access the full report on NAPEO’s website, or review the highlights below:

Who uses PEO? Clients’ employee size, industry, and state

Of the over 200,000 PEO clients in the U.S., half have between 10 and 49 employees, and one-third have fewer than 10. On average, companies are slightly smaller than in the 2022 whitepaper, suggesting that PEO usage is expanding across smaller organizations.

Almost half of PEO customers belong to one of the following industries:

  • Professional, scientific, and technical: Defined as services that require a high degree of expertise and training (i.e., law, accounting, consulting, and engineering firms).
  • Construction: Companies involved in constructing buildings or engineering projects, as well as plumbing, electrical, HVAC, and carpentry businesses.
  • Healthcare: Medical and social assistance providers (hospitals, outpatient services), senior care (nursing homes and residential care), and children’s daycare facilities.
  • Manufacturing: Organizations that convert raw materials into finished goods, ranging from factories, plants, and mills, to smaller operations like bakeries.

Additionally, approximately half of all PEO customers are located in four states:

  • Florida (18%, or 43,000 clients)
  • California (16%, or 38,000 clients)
  • New York (9%, or 22,000 clients)
  • Texas (8%, or 18,000 clients)

How popular is PEO?

Next, NAPEO’s survey identified how prevalent PEO usage is among businesses of different sizes and found that:

  • Businesses with 50 to 99 employees lead the pack, with 15% using a PEO
  • Close behind are companies with 20 to 49 employees, with a 14% PEO penetration rate
  • Organizations with 100 to 499 employees rank third, with a 13% adoption rate

The same three groups, in the same ranking, were also the leading PEO users in NAPEO’s 2022 whitepaper.

NAPEO then looked at which industries among companies with 20 to 499 employees most frequently adopt PEO services and found four front-runners:

Lastly, when assessing where PEO clients are most concentrated geographically, three states exceeded the national average penetration rate of 38%:

  • Hawaii (50%)
  • Florida (45%)
  • Utah (38%)

Not every PEO is the same

PEOs provide tremendous value to SMBs and brokers alike by simplifying day-to-day HR activities, opening the doors to comprehensive benefits at competitive rates, helping companies remain compliant, and more.

However, with over 500 PEOs nationwide, how do you choose which one to partner with? Here are some important considerations:

Accreditations

When a PEO is deeply involved in day-to-day business operations, trust matters. Look for one with these three key certifications (which only 1% of PEOs achieve):

  • IRS Certified PEO (CPEO): These PEOs routinely pass strict IRS audits and maintain tax compliance, uphold rigorous financial standards, and complete routine background checks.
  • Certification Institute (CI): Shows that the PEO meets all professional risk management best practices, maintains safe work environments, and successfully manages workers’ compensation losses.
  • Employer Services Assurance Corporation (ESAC) accreditation: Demonstrates that a PEO consistently complies with state and federal regulations, maintains financial reliability, and adheres to industry best practices.

A SOC 1 Type 2 certification is also essential, as it validates the PEO follows strict financial and data security standards. And when that same PEO has won awards for its workplace culture, it signals an even stronger, people-focused partnership.

Customer service

Another feature that distinguishes PEOs is the quality of their customer support. While every PEO strives to understand each client’s unique operations, its level of detail and personalization can differ.

As you evaluate potential partners, ask whether they provide dedicated account management, access to HR specialists, and total payroll support.

And don’t overlook the employee experience: does the PEO offer a direct, human point of contact for staff questions, or do they always rely on automated chatbots and long phone queues? How quickly do they resolve employee issues? Can they guide your employees through tasks like navigating its HR portal, adjusting payroll withholdings, or comparing benefit options?

Personalization

Today’s top talent wants benefits and perks that suit their individual lifestyle. It’s important to choose a PEO partner that provides flexibility so you can tailor your benefits and HR approach to your workforce’s needs.

The ExtensisHR difference

If you’re searching for a PEO partner to support your company during every stage of its growth journey, or a partner to help you deepen your book of business, ExtensisHR may be the ideal fit.

Here’s what sets us apart:

  • Three layers of dedicated customer support, including an Account Manager, HR Business Partner, and Payroll Specialist.
  • An ultra-responsive Employee Solution Center that picks up the phone in 15 seconds or less.
  • Flexible HR and benefits plans tailored to what your business needs at any given time.
  • A long list of awards and accolades, including CPEO, ESAC, and CI, as well as SOC 1 Type 2 and multiple company culture awards.

With ExtensisHR, you get all the advantages of partnering with a PEO, plus the assurance that you have an adaptable, future-proof solution backed by a team that truly understands your business priorities.

Want to learn more about what makes ExtensisHR stand out? Explore our PEO solution for SMBs or discover the benefits of an ExtensisHR broker partnership.

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