3 PEO Predictions for 2021

Tuesday December 22nd, 2020

A year of uncertainty has made one thing certain – business changes that were made as a result of the pandemic will surely influence business decisions going forward. 

These changes included a renewed appreciation for professional employer organizations (PEOs). This is because the challenges brought on by the pandemic made companies realize the importance of having the right resources in place to support new and/or complex compliance, payroll and benefits regulations. As a result, PEOs have been busy focusing on ways to better serve and support their clients for the better part of 2020. Moving into 2021, PEOs will continue to adjust and shift their strategies accordingly to provide the best value. Here are three predictions:

1. The relationship between PEOs and clients will flourish.

The pandemic’s stay-at-home orders led many business leaders to turn to their PEOs for assistance. isolved’s Director of PEO Solutions Shane Underwood notes that businesses particularly looked for guidance related to the changes in legislation and relief packages. And the data suggests that PEOs made an impact, with research from the National Association of Professional Employer Organizations (NAPEO) finding that PEO clients were twice as likely to receive Paycheck Protection Program (PPP) loans.

“PEO owners and executives got a chance to become consultants again. In some cases, for the first time in years,” said Underwood. “They helped clients track down information for PPP loans, complete loan applications, and call banks on their behalf to help them through this difficult time in any way possible.”

Heading into 2021, Underwood predicts these relationships will continue to flourish as businesses lean on their PEO’s expertise in navigating what comes next and how to prepare for the future.

2. PEOs will consume more tech, and software loyalty will shift.

The pandemic forced many industries to reduce their workforces. Although some industries have been able to recover – or partially recover – others will need the ability to increase their workforce substantially (and quickly) once more people return to pre-pandemic routines like traveling and dining out on a regular basis. The result? Employers, particularly those in the small and mid-market that suffered the greatest consequences from the pandemic, will have a greater need for robust applicant tracking software. 

To help meet clients’ needs, PEOs will rely on more tech than ever – which may come with a shift in software loyalty such as switching HCM providers more frequently than before. According to Underwood, applicant tracking software could see a 30 percent increase in adoption in 2021. PEOs that cannot currently offer applicant tracking, as an example, will need to evaluate HCM technology companies that deliver a more comprehensive platform.

“I see a shift in PEO software loyalty,” said Underwood. “With continued growth in this space, PEOs will start evaluating solution providers more and more. Competition makes everyone honest.”

3. Compliance and HR functions will remain key.

Something that won’t change in 2021 is that compliance will remain a key selling point for businesses seeking out a PEO. Since PEOs are required to stay in compliance with federal, state and local governments, their clients can focus on bigger-picture strategies and rely on their trusted business partner to manage some of the more tedious, legal processes.

Additionally, Underwood highlights that HR is still a selling/retention point for PEOs. For instance, since unemployment administration and rates affect everyone, PEOs can help insulate their clients from major increases since the PEO has a larger base to spread out claims.

“PEOs set small businesses up for success,” said Underwood. “They provide a foundation of compliance, processes and an overall lower cost by not only serving a large client base, but also taking what they’ve learned and sharing it with smaller businesses.” 

While we still don’t know how the pandemic will play out in 2021, PEOs are in a position to help their clients adapt and withstand disruption – not only in the upcoming year, but also in the years to come. 

Allie Howen

Senior Content Manager