Beyond the Big Four: PEOs power growth nationwide
More than half of all PEO clients - 51% - are concentrated in just four states: Florida, California, New York, and Texas. That’s one of the most striking insights from the latest NAPEO PEO Clients Whitepaper, which maps where businesses are choosing to partner with Professional Employer Organizations across the United States.
Percentage of All Clients in PEO Industry, by State
Source: NAPEO Whitepaper 2025
But the real story isn’t about concentration, it’s about expansion. The other 49% of clients are now spread across dozens of states, reflecting a clear shift toward a more balanced national presence. The data shows that the PEO industry is no longer confined to regional markets; it’s steadily becoming a nationwide solution for small and midsized businesses seeking compliance, payroll, and HR expertise.
From Regional Hubs to a National Network
What’s changing now is the geography of adoption. Businesses in the Midwest, Mountain West, and even rural regions are joining the PEO ecosystem, driven by a mix of economic diversification, remote work, and new workforce demands.
This shift signals a deeper evolution: PEOs are no longer a niche solution for high-growth markets—they’re a standard business strategy nationwide. The broader spread of clients means PEOs are now reaching employers of all sizes and industries, helping them manage compliance, streamline HR, and deliver competitive employee benefits across multiple states.
California’s Share Grows Amid Complexity
While the overall footprint is expanding, California has recorded a modest increase in client share compared to last year. That’s significant because California also remains one of the most complex labor markets in the nation, where evolving legislation and high compliance costs often challenge small employers.
Rather than being deterred, many businesses in the state are turning to PEOs to stay compliant and manage risk. This reinforces a long-standing trend: when regulations tighten, the value of PEO partnerships becomes more apparent.
For brokers and carriers, California’s uptick is an important indicator of opportunity. As more employers seek guidance through the state’s dynamic employment laws, data-driven insights and tailored risk management will be key differentiators for PEOs operating there.
Industry Sector with Largest Number of PEO Clients, by State
Source: NAPEO Whitepaper 2025
Key Takeaways from the Data
PEO adoption is becoming more uniform across the country. Businesses in emerging regions are now adopting PEO services at higher rates.
White-collar industries continue to lead PEO adoption. The data indicates that the client mix is increasingly driven by HR-intensive and healthcare-related sectors, rather than traditional workers’ compensation-heavy industries. This shift highlights the growing role of PEOs in managing compliance, benefits, and people operations for knowledge-based workforces.
Diversified client bases reduce market concentration risk. The industry is no longer dependent on just a few states for growth.
Regulatory complexity drives adoption. California’s growth underscores the value of compliance-focused PEO services.
Remote work fuels nationwide expansion. Multi-state operations require unified HR and payroll systems, one of the PEO models’ biggest strengths.
This broader distribution strengthens the industry’s stability and signals that PEOs are here to stay as a key pillar of the small-business economy.
PEOs as a Nationwide Growth Engine
The numbers paint a clear picture of momentum. As PEOs extend their reach beyond traditional strongholds, they’re enabling thousands of small and midsized businesses to access the kind of HR infrastructure once reserved for large enterprises.
Whether it’s compliance guidance in California, benefits access in Texas, or payroll support for a multi-state startup in Colorado, the model is proving adaptable, resilient, and scalable.
The PEO model is ever-changing, and as it continues to evolve, we look forward to seeing the next chapter unfold through NAPEO’s insights and industry leadership.
