The current economic landscape is anything but stable. From persistent inflation and shifting interest rates to labor shortages and ever-evolving employment laws, business owners are navigating a sea of uncertainty. For Professional Employer Organizations (PEOs), these challenges can directly impact profitability. Rising operational costs, client churn, and compliance risks all threaten the bottom line.
Yet amid the chaos, opportunity awaits. Forward-thinking PEOs that adapt quickly—by embracing smarter technology, expanding service offerings, and targeting the right clients—can not only survive, but thrive.
In this article, we’ll explore four practical, high-impact strategies PEOs can implement today to protect and grow profitability, even in unpredictable times.
1. Diversify Revenue Streams with EOR Services
As businesses increasingly go global and hire remote talent across borders, the demand for Employer of Record (EOR) services is skyrocketing. For PEOs, this presents a golden opportunity.
Expanding into EOR is a natural evolution. While PEOs typically co-employ workers within a legal jurisdiction, EOR services allow you to legally hire employees on behalf of your clients in countries where they lack a local entity. This opens the door to a global workforce, compliance-as-a-service, and access to new, lucrative client segments like startups, tech firms, and distributed teams.
The reasons to choose EOR service as additional revenue stream
- PEOs already have infrastructure for HR, compliance, and payroll operations
- EOR adds a new revenue stream without cannibalizing existing services
- It boosts your value proposition by offering full global workforce solutions
Real-world shift: The biggest challenge for PEOs examining this is understanding the shift in value proposition from outsourcing services to outsourcing establishment risk. Managing this risk likely requires that you consider a upfront payment model and an upgraded billing system that allows for more complex/creative billing approaches.
Tools that help: Integrated EOR software platforms make it easier to manage employment contracts, taxes, compliance in different jurisdictions, and invoicing and payment management—streamlining service delivery and reducing your business risk.
2. Automate Admin Workflows to Reduce Operational Costs
Payroll processing, timesheet collection, benefits enrollment, and invoicing are critical—but they’re also time-consuming and expensive when done manually. In a volatile economy, operational efficiency is your profit lever.
By adopting SaaS-based PEO workforce management platforms or integrations PEOs can automate repetitive or manual tasks like:
- Employee onboarding/offboarding
- Payroll runs and payslip distribution
- Benefits administration and enrolment
- Expense submissions and approvals
- Invoicing and receivables reconciliation
Benefits of PEO operations automation:
- Reduced admin headcount
- Fewer human errors
- Faster service delivery
- Reduced Account Receivable (AR)
- Scalable operations as client volume grows
Case in point: A mid-sized PEO that implemented automated onboarding, benefit administration, and payroll processing saved 205% in back-office labor costs within six months—while improving accuracy and client satisfaction.
3. Strengthen Client Retention Through Value-Added Services
In economic crisis, your clients are under pressure to reduce costs. They’ll stick with business or channel partners who add strategic value into return of investment (ROI)—not just perform basic admin tasks.
That’s where value-added services come in.
Improve your core service offerings by including add-ons such as:
- HR analytics and reporting (e.g., attrition trends, cost-per-hire)
- Compliance audits to help clients avoid fines
- Training and development programs to onboard / upskill talent
- Workforce planning to align staffing with business KPIs and goals
- Integrated benefits solutions, with partnered brokerages
Bundle these add-ons into business packages to increase client LTV (lifetime value) and lock in loyalty. Industry-specific solutions are also a smart move—custom HR packages for sectors like healthcare, legal, cyber security, finance, or tech offer targeted value and higher profit margins.
Important Note: Educate clients on how these services help them navigate downturns—like optimizing benefit spend or improving workforce efficiency.
4. Refocus on High-Margin Clients and Strategic Niches
Not all clients contribute equally to your bottom line. Now is the time to take a hard look at your portfolio.
Start by conducting a client and worker profitability analysis. Identify which clients and employment:
- Require high range of service time but deliver low returns
- Are fast-growing, scalable, and have high margins
- Operate in sectors like healthcare, cyber security, defence, and IT resilient to economic downturns
Shift your sales and marketing focus toward industries such as:
- Remote-first companies
- Healthcare and life sciences organizations
- Tech startups and staffing agency with global hiring needs
- Financial services and compliance-heavy sectors
Use data tools and analytics to guide smarter decisions about which markets to serve and which clients to retain or let go. Some PEO / EOR back office platforms can calculate profitability and reporting out of the box.
Conclusion
Economic volatility isn’t new—but how your PEO responds can make all the difference.
To stay profitable in uncertain times, the most successful PEOs will:
- Expand globally through EOR offerings
- Automate operations to cut costs and scale
- Deliver strategic value to boost client retention
- Target the right clients with profitable, niche services
Rather than waiting for stability, adapt, evolve, and embrace the tools that prepare you for what’s next.
