About Paychex Inc

Paychex, Inc. (Paychex) provides human capital management (‘HCM’) solutions for human resources (‘HR’), payroll, benefits, and insurance for small- to medium-sized businesses and their employees across the U.S. and parts of Europe. The company offers a comprehensive portfolio of HCM technology and HR advisory solutions that help the company’s clients navigate the evolving challenges of HR. The company serves clients throughout the U.S. and parts of Europe. As of May 31, 2023, the company served approximately 740,000 payroll and PEO clients. The company specializes in helping small- to medium-sized businesses who do not have the resources or expertise to adapt to the constantly evolving environment. Paychex offers a wide range of solutions – including HR outsourcing, HCM technology, payroll processing, retirement and insurance solutions – allowing the company to customize its offering to the client's business, whether it is small or large, simple or complex. The company has the breadth of solutions to cover the spectrum of the employee life cycle, but the company also allows integration with some of the most popular HR, accounting, point-of-sale, and productivity applications on the market. The company’s comprehensive solutions allow its clients to manage their workforces effectively from hire to retire. The company provides leading-edge HCM technology, coupled with human expertise, to make complex HR, payroll, and benefits issues simple for the company’s clients. The key features of the company’s solutions are comprehensive cloud-based platform optimized to meet the HR and payroll needs of small- and medium-sized organizations; streamlined workforce management that combines technology with flexible support options; modern, mobile, and intuitive user experience and self-service capabilities; scalable and customizable platform that allows clients the ability to add services as they grow; software as a service, or ‘SaaS’, delivery model that reduces total cost of ownership for the company’s clients; and expertise in HR and payroll with the company’s technology backed by over 250 compliance experts and approximately 700 HR business professionals. The company markets its solutions through its direct and virtual sales forces, which are supported by various corporate lead generation and marketing initiatives. Over 50% of the company’s revenues are gained from its services beyond payroll processing. Strategy The company’s strategy is to be the leading provider of HCM solutions for HR, payroll, benefits, and insurance by being an essential partner to small- and medium-sized businesses. The key elements of the company’s strategy include providing industry-leading, integrated technology; delivering superior client experiences; expanding the company’s leadership in HR; growing the company’s client base; and engaging in strategic acquisitions. Solutions The company’s solutions bring together payroll and HCM software with HR and compliance expertise, along with flexible, personalized, and technology-enabled support capabilities. Clients have the option of doing payroll online using the company’s SaaS technology, outsourcing to the company’s payroll specialists, or using a combination of these methods. Payroll is integrated with HCM software modules for clients who have more complex HR needs. The company also provides comprehensive HR outsourcing through the company’s administrative services organization (‘ASO’) and PEO solutions. The integration of leading-edge technology and flexible support options allows the company to meet its clients’ needs how, when, and where they want. The company closely monitors the evolving challenges and needs of small- and medium-sized businesses, and proactively aid the company’s clients in navigating macroeconomic challenges, legislative changes, and other complexities they face. The company provides a unique blend of innovative technology solutions, backed by the company’s extensive compliance and HR expertise, that help customers more effectively hire, engage, train, and retain top talent in this challenging workforce environment. As businesses operate in a tight labor market, having an online portal for employee self-service that is intuitive and easy-to-use helps increase employee retention and efficiency for the company’s customers. The company continues to invest in its technology, enhancing the company’s solutions to continuously improve the customer and employee experiences from hiring and onboarding through employee retention. HCM Technology Paychex Flex is the company’s proprietary HCM SaaS platform that provides seamless workforce management throughout the employee life cycle from recruiting and hiring to retirement through an integrated suite of solutions, including recruiting, onboarding, HR, time and attendance and employee benefits. It utilizes a single cloud-based platform, with single client and employee records. Clients can select the modules they need and easily customize solutions as they grow. In addition, Paychex Flex presents function-focused analytics throughout the platform, providing HR leaders with data to make more informed business decisions. Paychex Flex uses a device-independent design throughout the HCM suite, which allows full functionality of all application components, regardless of device or screen size. The company’s Paychex mobile solutions add greater value and convenience for the company’s clients and their employees by allowing them instant access on their mobile device. HR and Compliance Expertise Paychex supports its HCM software solutions with 50+ years of experience. The company has approximately 700 HR business professionals who are dedicated to the company’s clients and have the experience and training to provide HR best practices and advice. The company’s HR business partners are available to provide the company’s ASO and PEO clients with specific guidance on HR issues. In addition, the company has over 250 compliance professionals who are in real-time contact with tax agencies and regulators to understand upcoming or newly enacted laws and regulations and advocate for the company’s clients’ interests. The contributions of these compliance experts are intended to ensure that the company’s HCM solutions are updated timely to adhere to regulations and to help the company’s clients stay in compliance. Technology-Enabled Client Service Paychex Flex also provides technology-enabled service with options that include self-service, a 24/7 dedicated service center, an individual payroll specialist, and integrated service via a multi-product service center. In addition, medium-sized clients can utilize a relationship manager for more personalized service. This flexible platform services the company’s small- to medium-sized clients and a portion of the company’s PEO business. Within Paychex Flex, the company leverages embedded AI to assist its clients. The company’s Paychex Flex Intelligence Engine allows individual preference on learning style - via written how-to-documents, tutorial-style video vignettes, or a guided interactive tour. The Paychex Flex Intelligence Engine also includes the Flex Assistant, a customer service chatbot that can answer questions across thousands of topics and provides access to over 1,200 instructional resources. At any time, a live Paychex agent is just a click away, with the entire chat conversation available in real-time to provide a more personalized service experience. The Flex Assistant consistently handles nearly two-thirds of questions that would otherwise reach a payroll/HR functionary or a customer service representative, with high satisfaction scores. The platform embeds self-service capabilities that empower client employees to manage their HR and benefits information from any location, on any device. These self-service capabilities allow for greater access and convenience for client employees and greater productivity for clients. Clients Paychex has HR solutions to fit the needs of any small- to medium-sized business, from do-it-yourself payroll to comprehensive HR outsourcing. The target market for the company’s integrated HCM solutions is small- to medium-sized businesses. Within this space, the company serves a diverse client base operating in a broad range of industries throughout the U.S. and parts of Europe. The company supports its small-business clients, reducing the complexity and risk of running their own payroll, while ensuring greater accuracy with up-to-date tax rates and regulatory information. The company simplifies their payroll with a combination of its solutions and customer support options for a quick and easy payday. Clients may choose to have the company’s service team handle everything for them, or process payroll themselves utilizing the company’s proprietary, robust SaaS Paychex Flex platform and its SurePayroll SaaS-based solutions. Both solutions allow users to process payroll when they want, how they want, and on any device (desktop, tablet, and mobile phone). While Paychex Flex is the company’s primary SaaS-based platform utilized by the majority of the company’s clients for their HCM needs, there are some clients that use other platforms, including SurePayroll clients, and certain PEO clients. Both the company’s small- and medium-sized clients can choose one of the company’s comprehensive HR outsourcing services, which include ASO and PEO solutions, and participate in the company’s benefits offerings, which include its insurance and retirement services. The company’s insurance services simplify the insurance process to make it easy to find plans with the features and affordability to meet the client’s needs. The company’s retirement services solutions offer many plan design options to meet the client’s requirements, as well as investment options. Description of Solutions Within the company’s HCM solutions, the company offers a comprehensive portfolio of HCM technology and HR advisory solutions that allow the company’s clients to meet their diverse HR and payroll needs. Clients can select solutions on an á la carte basis or as part of various solution bundles. The company’s offerings often leverage the information gathered in the company’s base payroll processing service, allowing the company to provide comprehensive outsourcing services covering the HCM spectrum. The company’s portfolio of solutions is consisted of the following: Management Solutions Payroll Processing Solutions: The company’s payroll processing solutions include the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; preparation of federal, state, and local payroll tax returns; and collection and remittance of clients’ payroll obligations. Payroll Tax Administration Solutions: Payroll tax administration solutions provide for accurate preparation and timely filing of quarterly and year-end tax returns, as well as the electronic transfer of funds to the applicable federal, state, and local tax or regulatory agencies. In connection with these services, the company electronically collects payroll taxes from clients’ bank accounts, typically on payday, prepares and files the applicable tax returns, and remits taxes to the applicable tax or regulatory agencies on the respective due dates. These taxes are typically paid between one and 30 days after receipt of collections from clients, with some items extending up to 90 days. The company handles regulatory correspondence, amendments, and penalty and interest disputes. Employee Payment Solutions: The company’s employee payment solutions provide an employer the option of paying their employees by direct deposit, payroll debit card, a check drawn on a Paychex account (Readychex), or a check drawn on the employer’s account and electronically signed by the company. For each of the first three methods, the company electronically collects net payroll from the clients’ bank accounts, typically one business day before payday, and provides payment to the employees on payday. The company’s Readychex solution provides a solution that offers the benefit of convenient, one-step payroll account reconciliation for employers. The company also allows employers to opt for more flexible pay options. Same day ACH functionality is also available for clients using direct deposit, allowing employers the flexibility to pay employees via direct deposit on the same day they initiate payroll. In addition, the company is giving business owners the ability to leverage real-time payments to process payroll and deliver net pay to their employees immediately for time worked. Pay-on-demand functionality enables an employee to request access to a portion of earned pay before the scheduled pay date, which is deposited into a traditional bank account or a third-party account. Regulatory Compliance Solutions: The company offers new-hire reporting solutions, which enable clients to comply with federal and state requirements to report information on newly hired employees. This information aids the government in enforcing child support orders and minimizes fraudulent unemployment and workers’ compensation insurance claims. The company’s garnishment processing solution provides deductions from employees’ pay, forwards payments to third-party agencies, including those that require electronic payments, and tracks the obligations to fulfillment. These solutions enable employers to comply with legal requirements and reduce the risk of penalties. The company also offers comprehensive solutions to help employers and employees with certain mandates under the Affordable Care Act (‘ACA’), which sets forth specific coverage and reporting requirements that employers must meet. HR Solutions: The company’s ASO offers businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and both virtual and on-site availability of a professionally trained HR representative, among other services. Paychex HR Essentials is a lower touch solution that provides support to the company’s clients over the phone or online to help manage employee-related topics. Retirement Solutions Administration: The company’s retirement solutions line offers a variety of options to employers, including 401(k) plans, 401(k) SIMPLE plans, SIMPLE IRAs, 401(k) plans with safe harbor provisions, owner-only 401(k) plans, Pooled Employer Plans, profit sharing plans, and money purchase plans. These solutions provide plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. Auto enrollment is an optional plan feature that allows employers to automatically enroll employees in their company’s 401(k) plan and increase overall plan participation. Clients may choose from a group of pre-defined fund selections or customize their investment options within their plan. The company is the largest 401(k) recordkeeper for small businesses in the U.S. The company’s large-market retirement services include relationships with financial advisors. HR Administration Solutions: The company offers cloud-based HR administration software solutions for employee benefits management and administration, time and attendance reporting, recruiting, and onboarding. These services include: Paychex HR Online offers powerful tools for managing employee personnel information, performance management, HR compliance and reporting. The company’s Learning Management solution complements the company’s performance management tool. When combined with the company’s workflow and approval engine, the company offers businesses the flexibility to capture ongoing performance feedback, recommend and enroll employees in specific training courses, and leverage automated workflows to track progress and approve compensation changes tied to performance. Digital communication solutions, including Paychex Flex HR Connect and HR Conversations, which helps strengthen connections and keep workers engaged no matter their work location. Paychex Flex HR Connect provides the ability to digitally submit questions, requests, and incident reports directly to HR through an easy-to-use workflow. HR Conversations enables managers and HR leaders to initiate communications with employees, and enhancements to performance assessments allow for 360-degree feedback digitally within the tool. Benefits administration software solution that manages the employee-benefit enrollment process for both open-enrollment and life events. Time and attendance solutions, including the company’s integrated Paychex Flex Time software, provide timekeeping, scheduling, and workforce analytics. The InVision IRIS Time Clock, a biometric clock that scans the iris, provides fast and accurate time capture. Paychex Flex Time also works with wearable technology to allow for employees to clock in and out using their smartwatch. Applicant tracking suite provides technology solutions that streamline, simplify, and drive the applicant workflow and onboarding process for companies of all sizes. Other HR Solutions and Support: The company offers the outsourcing of plan administration under section 125 of the Internal Revenue Code, allowing employees to use pre-tax dollars to pay for certain health insurance benefits and health and dependent care expenses not covered by insurance. All required implementation, administration, compliance, claims processing and reimbursement, and coverage tests are provided with these services. The company offers state unemployment insurance solutions, which provide clients with prompt processing for all claims, appeals, determinations, change statements, and requests for separation documents. Business Services: The company offers various business solutions for small- to medium-sized businesses. The company’s wholly owned subsidiary, Paychex Advance, LLC, provides a portfolio of solutions to the temporary staffing industry, including payroll funding (via the purchase of accounts receivable) and outsourcing services, which include payroll processing, invoicing, and tax preparation. Employee Retention Tax Credit Service, which proactively helps businesses retroactively identify tax credits available under the COVID-19 Cares Act, based on wages already paid, and file amended returns to claim the credit. In addition, through partnerships with third-party providers, the company provides clients opportunities for solutions, such as payment processing services, financial programs, and a small-business loan resource center. PEO and Insurance Solutions PEO Solutions: The company’s licensed PEO subsidiaries offer businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and both virtual and on-site availability of a professionally trained HR representative, among other services. What differentiates the company’s PEO solutions from its ASO solutions is that the company serves as a co-employer of the company’s clients’ employees and assume the risks and rewards of certain workers’ compensation insurance and certain health insurance offerings. The company is certified under the Small Business Efficiency Act to provide PEO solutions. The company offers the PEO Protection Plus Package, which helps business owners protect their bottom line from unforeseen costs, including cyberattacks and employee lawsuits, as exposure to these risks rapidly increased during the COVID-19 pandemic and other economic concerns. Insurance Solutions: The company’s licensed insurance agency, Paychex Insurance Agency, Inc., provides insurance through a variety of carriers, allowing employers to expand their employee benefit and corporate offerings at an affordable cost. Insurance offerings include property and casualty coverage, such as workers’ compensation, business-owner policies, cybersecurity protection, commercial auto, and health and benefits coverage, including health, dental, vision, and life. The company’s insurance solutions simplify the insurance process to make it easy to find plans with the features and affordability to meet the client’s needs. With access to numerous top national and regional insurance carriers, the company’s professional insurance agents have access to a wide selection of plans from which they can best match the insurance needs of small businesses. Additionally, clients have the option to integrate their insurance plans with Paychex payroll processing for easy, accurate plan administration. Sales and Marketing The company markets and sells its solutions and support primarily through the company’s direct sales force based in the markets the company serves. The company’s direct sales force includes sales representatives who have defined geographical territories and specialize within the company’s portfolio of solutions. The company’s sales representatives are also supported by marketing, advertising, public relations, trade shows, and telemarketing programs. The company’s virtual sales force manages inbound sales leads for the under twenty employee space, sales in areas without a direct sales force presence, and sales of various ancillary solutions. In addition to the company’s direct selling and marketing efforts, the company utilizes other indirect sales channels, such as its relationships with existing clients, certified public accountants (‘CPAs’), and banks for new client referrals. The company’s dedicated business development group drives sales through banking, national associations, and franchise channels. The company also utilizes digital marketing as a means to market the company’s services. The company has a long-standing partnership with the American Institute of Certified Public Accountants (‘AICPA’) as the preferred payroll provider for its AICPA Business Solutions Program. The company’s partnership agreement with the AICPA is in place through September 2025. The company also partners with numerous state CPA society organizations. Paychex WORX, available at www.paychex.com/worx, is a digital destination for insightful resources useful for businesses at every stage, from entrepreneur to enterprise. Paychex WORX highlights the company's expertise and ability to help businesses of all sizes with a wide range of HR and financial information for clients and prospects alike. The company remains focused on servicing small- to medium-sized businesses. Software Maintenance and Development The company is continually engaged in developing enhancements to and maintaining the company’s various software platforms to meet the changing requirements of the company’s clients and the marketplace. The company continues to enhance its SaaS solutions and mobility applications to offer the company’s users an integrated and unified experience. Intellectual Property The ‘Paychex’ name, trademark, and logo are of material importance to the company. Seasonality There is no significant seasonality to the company’s business. However, during the company’s third fiscal quarter, which ends in February, the number of new payroll clients, new retirement services clients, and new worksite employees associated with the company’s ASO and PEO businesses tends to be higher than during the rest of the fiscal year (year ended May 2023), primarily because many businesses prefer to start using the company’s services at the beginning of a calendar year. In addition, calendar year-end transaction processing and client funds activity are traditionally higher during the company’s third fiscal quarter due to year-end bonus payments, additional year-end services, and the preparation and delivery of end-of year reporting requirements. History Paychex, Inc., a Delaware corporation, was founded in 1971. The company was incorporated in 1979.