PEO Predictions for 2023

Friday December 16th, 2022

What does the future hold for the PEO industry? We provide insight into the trends on our radar to help you navigate the year ahead.

Maintaining staff will become more challenging (and more critical)

Burnout, a record number of resignations and a reprioritization of employee values have contributed to the worst labor shortage in decades. HR leaders in all industries are prioritizing employee retention for good reason: according to our recent 2023 HR Trends Report, 49 percent of the employees surveyed said they plan to look for a new job in 2023. That number is trending upward, from 45 percent according to last year’s survey.

Maintaining a consistent and experienced workforce is essential for businesses to succeed, especially for service-oriented ones like PEOs. High turnover and an inexperienced or over-extended staff can lead to an inferior customer service experience and high client churn.

PEOs face the same challenges as the clients they serve and can benefit from the same solutions. When asked why they were tempted to look for a new job, employees stated “I wanted a higher salary” as the number one reason, followed by “I didn’t like my company’s culture.” Wanting better benefits and more flexibility were tied for third place. To boost retention, PEOs should consider these areas for improvement.

Flexible working arrangements will continue to impact the industry

While remote and hybrid work have become commonplace for many employers, the trend continues to evolve and affect the way PEOs operate. Many PEOs are conducting business with a remote or hybrid workforce, either because of the pandemic or to expand the talent pool. Having a workforce that’s geographically diverse offers many benefits, but it also presents challenges.

Employees working in different time zones can complicate coverage when it comes to providing service to customers. Savvy PEOs can use this to their advantage by expanding their hours of operation. PEOs must also have contingency plans in place in all areas where their employees work, in the event they are unable to perform their responsibilities.

On the client side, many of the employers that PEOs service are also embracing flexible working models. Having clients with employees in more states means PEOs must keep track of compliance regulations in those states. They must also consider licensing requirements and the ability to offer workers’ compensation and other benefits in those states. The fees for application and renewal of these licenses can get costly, an expense companies need to budget for in advance.

Employees demand a better EX and employers will invest in it

Boosting employee experience (EX) will continue to dominate employers’ initiatives in 2023. The past two years generated awareness and created urgency; this year employers will need to sharpen their focus and take action. According to our 2022 and 2023 HR Trends reports, they have their work cut out for them—more than half of the employees surveyed rated their company’s EX as poor or average.

Employers are investing in HCM technology to create exceptional EX that follows their employees throughout their employment journey. The goal is to create a consumer-grade experience—beginning with the application process and continuing through onboarding, learning management, benefits enrollment, time tracking and more.

Forward-thinking employers are turning to AI-based predictive analytics to gain an advantage. These tools analyze employee data to drive strategic decisions that affect turnover, time-to-hire, compliance and more. Despite concerns over these tools accessing personal employment data, most employees (77 percent) are comfortable with it, if it means a better EX.

By delivering traditional and AI-fueled HCM solutions, PEOs can help their clients shape a more desirable EX. This results in more meaningful client relationships, enabling PEOs to win more and grow faster.

One final prediction…

isolved will continue to be the HCM partner PEOs need to attract and retain more clients. Discover why we’re the partner of choice for your PEO business.

To read more about the trends we uncovered in our survey of nearly 1,000 full-time U.S.-based employees, download our report: Leveraging the Prominent HR Trends of 2023

Kerrin Jesson

Vice President of PEO Enablement at isolved