NAICS 561330 Quarterly Industry Report
Employee Leasing Services
Comprehensive industry research for valuation professionals, business owners, buyers, and lenders
NAICS Code: 561330Sector: Administrative and Support and Waste Management and Remediation Services (56)Updated: Q1 2026
About This Report
This industry profile for Professional Employer Organizations (NAICS 561330) draws on data from the Bureau of Labor Statistics[7], U.S. Census Bureau, and SBA size standards database[6]. Published by Fair Market Value and updated quarterly, it provides valuation professionals, business brokers, and HR industry analysts with current market structure data. The editorial analysis reflects the independent assessment of FairMarketValue.com's research team, with all quantitative claims sourced to publicly verifiable databases.
Industry Snapshot
Key metrics for the employee leasing services industry.
Share of Administrative and Support and Waste Management and Remediation Services
0.9%
By establishment count, 2022 Census[2]
NAICS Sector
56
Administrative and Support and Waste Management and Remediation Services
Industry Definition & Overview
Professional Employer Organizations (NAICS 561330) encompasses establishments primarily engaged in providing human resources and personnel management services to client businesses through co-employment arrangements. PEOs assume responsibility for payroll processing, tax withholding, benefits administration, workers' compensation, and regulatory compliance. About 500 PEOs operate in the United States, serving over 200,000 primarily small and mid-size businesses and covering about 4.5 million workers per the U.S. Census Bureau[5].
PEO establishments provide services beyond basic payroll, including health insurance administration, retirement plan management, recruitment and onboarding, employee training, safety and risk mitigation, workers' compensation administration, and compliance with federal and state employment laws. Per the SBA Table of Size Standards[6], the size standard is $41.5 million in average annual receipts for federal contracting purposes.
Businesses using PEO services grow twice as fast as comparable non-PEO businesses, experience 12 percent lower employee turnover, and are 50 percent less likely to fail per industry research. Major providers include Insperity, ADP TotalSource, and Paychex PEO, though numerous regional and specialized PEOs serve specific market niches. Revenue typically flows through gross billings that include client payroll costs passed through the PEO, making reported revenue figures appear larger than the PEO's actual service fee margin per the Bureau of Labor Statistics[7].
What's Included in This Industry
- Payroll processing and tax withholding for client employees
- Health insurance benefits administration and enrollment
- Retirement plan management and 401(k) administration
- Workers' compensation insurance and claims administration
- Unemployment insurance and related tax filings
- Employee recruitment, screening, and onboarding services
- Human resource consulting and labor law compliance
- Workplace safety programs and risk mitigation
- Training and employee development programs
- Regulatory compliance assistance and documentation
NAICS Classification Hierarchy
| Level | Description | Code |
|---|---|---|
| Sector | Administrative and Support and Waste Management and Remediation Services | 56 |
| Subsector | Administrative and Support Services | 561 |
| Industry Group | Employment Services | 5613 |
| NAICS Industry | Professional Employer Organizations | 56133 |
| National Industry | Professional Employer Organizations | 561330 |
Related NAICS Codes
| Code | Description | Relationship |
|---|---|---|
| 561320 | Temporary Help Services | Temporary Help Services supply workers for limited periods, while PEOs provide ongoing co-employment relationships covering permanent workforces with full benefits and compliance administration |
| 561311 | Employment Placement Agencies | Employment Placement Agencies focus on matching and placing candidates in permanent positions, while PEOs take on employer-of-record responsibilities for the ongoing workforce |
| 561110 | Office Administrative Services | Office Administrative Services provide contracted backend functions like billing and recordkeeping, while PEOs assume full co-employer status with payroll, tax, and benefits responsibility |
| 541612 | Human Resources Consulting Services | Human Resources Consulting Services provide strategic HR advice and policy development, while PEOs assume employer-of-record responsibilities that consultants do not take on |
| 541611 | Administrative Management and General Management Consulting Services | Administrative Management Consulting advises on organizational processes and efficiency, while PEOs operationally manage HR functions through co-employment agreements |
| 524113 | Direct Life Insurance Carriers | Direct Life Insurance Carriers provide employee benefits products that PEOs bundle and administer as part of their co-employment service offerings to client businesses |
Geographic Concentration
Top states by share of national establishments.
| # | State | % Est. | Total Est. |
|---|---|---|---|
| 1 | Florida | 13.3% | 554 |
| 2 | Texas | 10.7% | 446 |
| 3 | California | 10.3% | 427 |
| 4 | New York | 6.0% | 251 |
| 5 | Michigan | 4.7% | 194 |
| 6 | New Jersey | 4.5% | 188 |
| 7 | Pennsylvania | 3.4% | 143 |
| 8 | Illinois | 3.1% | 131 |
| 9 | Ohio | 3.1% | 130 |
| 10 | Georgia | 2.9% | 121 |
% Of Establishments
0%
13%
Source: County Business Patterns, U.S. Census Bureau[3]
SBA Lending Summary
160
Total SBA Loans
$25.5M
Total Loan Volume
$160K
Average Loan Size
9 yrs
Average Loan Term
11.38%
Average Interest Rate
1,560
Jobs Supported
Source: SBA 7(a) Program Data, U.S. Small Business Administration — FY 2025[4]
Key Insight: Per the SBA Table of Size Standards[6], Professional Employer Organizations (NAICS 561330) must meet the size standard of $41.5 million in average annual receipts to qualify as small for federal contracting purposes. PEO firms may qualify for SBA 7(a) loans[8] to finance business expansion, equipment purchases, and working capital. The SBA recognizes PEOs as important service providers supporting small businesses by giving them access to benefits and HR infrastructure typically available only to larger employers. Additionally, 504/CDC loans[9] provide long-term, fixed-rate financing for major fixed assets such as real estate and equipment.
Top SBA Lenders
| # | Lender | Loans | Volume | Avg Loan |
|---|---|---|---|---|
| 1 | Northeast Bank | 40 | $7.4M | $186K |
| 2 | The Huntington National Bank | 24 | $5.7M | $237K |
| 3 | FFB Bank | 8 | $4.5M | $567K |
| 4 | Manufacturers and Traders Trust Company | 16 | $2.0M | $128K |
| 5 | JPMorgan Chase Bank, National Association | 16 | $1.5M | $95K |
Frequently Asked Questions
Common questions about this industry.
What types of businesses typically use PEO services?
PEOs primarily serve small and mid-sized businesses with 10 to 1,000 employees, particularly in healthcare, professional services, manufacturing, construction, and technology. Over 200,000 businesses use PEO services per the U.S. Census Bureau[5], benefiting from cost-effective HR solutions and compliance expertise without maintaining large internal HR departments.
How is the Professional Employer Organization industry structured?
About 500 PEO establishments operate in the United States per the Bureau of Labor Statistics[7]. PEOs function as co-employers, becoming the employer of record for client workforces while clients retain day-to-day operational control. Major providers like Insperity and ADP TotalSource dominate alongside regional and specialty PEOs. Revenue flows through gross billings including client payroll pass-through.
What is the SBA size standard for Professional Employer Organizations?
Per the SBA Table of Size Standards[6], the size standard for NAICS 561330 is $41.5 million in average annual receipts. This determines small business status for federal contracting and SBA loan eligibility. Because PEO revenue includes pass-through payroll, many mid-sized PEOs may exceed this threshold despite relatively modest service fee margins.
What related NAICS codes apply to PEO operations?
Related codes include NAICS 561320 (Temporary Help Services), NAICS 561311 (Employment Placement), NAICS 561110 (Office Administrative Services), NAICS 541612 (HR Consulting), and NAICS 524113 (Direct Life Insurance). These codes involve complementary staffing and HR services but differ from PEOs in that they do not assume co-employment responsibilities per the U.S. Census Bureau[5].
Which industries frequently partner with PEO services?
Accounting firms (NAICS 541219), management consulting (NAICS 541611), health insurance providers (NAICS 524113), and professional training companies (NAICS 611430) frequently work alongside PEOs. Commercial banks (NAICS 522110) partner on payroll financing. These sectors provide complementary services such as tax preparation, benefits products, and employee development.
What specific activities are included in PEO services?
PEOs provide payroll processing, tax withholding, benefits administration, workers' compensation management, HR consulting, recruitment assistance, compliance support, workplace safety programs, and employee training per the U.S. Census Bureau[5]. PEOs assume co-employer responsibilities, distinguishing them from advisory-only HR consultants.
Can small PEO firms access SBA loans?
Yes, PEOs meeting the $41.5 million size standard qualify for SBA 7(a) loans[8], 504 financing, and federal contracting opportunities. SBA financing supports technology investments, office expansion, marketing, and working capital for growing PEO operations.
Which states have the highest concentration of PEO operations?
Florida, California, New York, and Texas account for over half of PEO client businesses. Florida leads due to favorable state regulations and a large small business population. California's diverse economy and New York's financial services sector drive demand. Texas offers a growing business environment. PEO adoption is expanding nationwide beyond these four states as awareness grows among small business owners.
Sources & References
Government datasets and editorial sources used in this report.
- [1]U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages bls.gov
- [2]U.S. Census Bureau, Economic Census census.gov
- [3]U.S. Census Bureau, County Business Patterns census.gov
- [4]U.S. Small Business Administration, SBA 7(a) Loan Program Data data.sba.gov
- [5]U.S. Census Bureau census.gov
- [6]SBA Table of Size Standards sba.gov
- [7]Bureau of Labor Statistics bls.gov
- [8]SBA 7(a) loans sba.gov
- [9]504/CDC loans sba.gov
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