Alexandria, VA, February 3, 2026 — A new national survey of business decision-makers released today by the National Association of Professional Employer Organizations (NAPEO) finds that while small and mid-sized businesses remain broadly optimistic about growth, economic uncertainty and rising costs are reshaping how leaders think about the year ahead. The survey also finds a strong connection between the use of professional employer organizations (PEOs) and business confidence.
“Small and mid-sized businesses are remarkably resilient—they want to grow, hire and invest, but they’re balancing optimism with concerns about economic uncertainty,” said NAPEO President & CEO Casey Clark. “That’s exactly why PEOs are such a critical pillar of the small and mid-sized business economy. They provide the trusted expertise, resources and employee benefits businesses need to stay competitive, take care of their people and keep moving forward even in a volatile environment.”
According to NAPEO’s 2025 Annual Tracking Survey, 72% of decision-makers report their business grew in 2025, and 78% expect growth in 2026. Businesses that use PEOs were significantly more likely than non-users to report growth in 2025 (80% vs. 67%) and to expect growth in 2026 (83% vs. 75%). Expectations for revenue, profitability and hiring have softened slightly compared to last year, reflecting heightened concerns about inflation, healthcare costs and broader economic volatility.
The survey also showed that economic and financial issues dominate business leaders’ worries. More than three-quarters (76%) say uncertainty about the economy is one of the most challenging aspects of running a business, making it the top concern for the first time, followed closely by healthcare costs (68%). Economic and financial pressures have also surpassed workforce concerns as the number-one issue keeping business owners up at night.
“Business leaders are still confident in their long-term prospects, but they’re being far more strategic in how they manage risk,” Clark added. “They’re scrutinizing costs, planning more carefully and looking for partners who can help them weather uncertainty without sacrificing growth.”
PEO users also expressed higher expectations for increases in revenue, profitability and hiring compared to non-users, suggesting that access to outsourced HR expertise, compliance support and employee benefits may be helping businesses navigate a more complex economic environment.
At the same time, the survey highlights structural pressures facing employers:
- Recruiting and retaining workers remains difficult, with 67% citing hiring as a major challenge and 62% pointing to employee retention.
- A majority of businesses are outsourcing key functions such as health insurance (61%), payroll (56%) and retirement benefits (50%), primarily to save time and focus on core business growth.
- Nearly nine in ten non-PEO users (87%) say they are interested in using a PEO in the future, indicating continued demand for external support amid economic complexity.
“The growing interest in PEOs reflects a simple reality,” said Clark. “Today’s business environment is more complex than ever. Employers want trusted experts who can help them navigate compliance, offer affordable, robust benefits and build strong workplaces so they can stay focused on running and growing their businesses.”
The 2025 NAPEO Annual Tracking Survey was conducted online from November 18 to December 9, 2025, among 500 U.S. business decision-makers at companies with at least one employee and annual revenue of at least $250,000.
About NAPEO
The National Association of Professional Employer Organizations (NAPEO) is The Voice of the PEO IndustryTM. PEOs provide payroll, benefits, workers’ comp, regulatory compliance assistance and other HR services to more than 230,000 small and mid-size businesses employing more than 4.5 million people. NAPEO represents the interests of the PEO industry on behalf of a membership that includes both PEOs and companies that provide services to PEOs.