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Human Resources & Benefits


Performance Highlights
Outsourcing has steadily increased, particularly as business growth hastens following the pandemic. More outsourcing has raised demand for the services human resources and benefits administrators offer, causing revenue to expand. Rising corporate profit will enable greater spending from small businesses, boosting revenue. However, heightened competition from substitutes such as in-house services will limit growth.
Geographic Distribution
Providers are located near high-growth regions. New York and California are particularly attractive, as these states are home to high-growth financial and technology industries. Densely populated cities attract administrators. The Southeast has the largest population in the United States, making it a prime region for the industry.
Industry Outlook
Revenue is expected to grow at a CAGR of 1.9% from 2023 to 2028, reaching $103.1 billion. The industry will benefit from a rejuvenated economy, spurring corporate profit, employment growth, and a rise in the number of businesses. Downstream customers will also continue outsourcing tasks unrelated to their core business to better compete in their respective markets.
Competitive Forces
The industry is characterized by low concentration and high competition. Barriers to entry are generally low, leading to a highly fragmented market. Price competition is high, with establishments needing to differentiate themselves through unique services and niche markets.
Major Companies
Notable players include Automatic Data Processing, Inc. (ADP) with a 5.5% market share, Paychex, Inc. with a 1.3% market share, and Benefitfocus, Inc. with a 0.2% market share. These companies have varying degrees of market share and profit margins, with ADP leading in market share and profit margins.

Revenue
$93.8 billion

Employees
1 million

Businesses
440,000

Wages
$52.5 billion
Economic and External Factors
Businesses must have good knowledge of labor and tax laws to ensure that they sell a good product. Administrators also had to adapt to changing regulations resulting from COVID-19. The industry receives an extremely low level of support from the government. Instead, private associations support administrators with networking and growth opportunities.
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