If Johnny Paycheck had founded Paychex, his song might have been, "Take This Job and ... Let Us Do Your Payroll." The firm processes the payrolls of more than 600,000 clients, making it the second-largest payroll accounting firm in the US after Automatic Data Processing. Other services include the production of accounting records and management reports; the preparation of payroll tax returns; and the collection and remittance of clients' payroll obligations. Paychex also provides human resources services, benefits administration, and group insurance management. Paychex focuses on small and midsized businesses (fewer than 100 employees) and owns more than 100 offices worldwide.
Paychex has more than 100 offices in the US, Brazil, and Germany. Its German operations include offices in Berlin, Düsseldorf, Hamburg, and Munich. The majority of the company's revenue comes from the US.
Payroll services revenue accounts for almost 60% of the company's revenue, and human resource services (HRS) revenue accounts for the remainder. Its HRS operations include 401(k) plan record-keeping, time and attendance management services, and other administrative offerings.
Sales and Marketing
Paychex markets its services primarily through its direct sales force based in metropolitan markets, with sales representatives specializing within its portfolio of services. Sales representatives are supported by marketing, advertising, public relations, trade shows, and telemarketing programs.
In recent years, the company has increased its emphasis on the selling of ancillary services and products to both new clients and its existing client base. In 2015 it focused on segmenting its markets into payroll and retirement services.
It also solicits new client referrals through its relationships with existing clients, certified public accountants, and banks. About 50% of its new payroll clients come from these sources.
Paychex has enjoyed unprecedented revenue growth over the past several fiscal years. The company claimed about $2.95 billion in revenue for fiscal 2016. That was an increase of about 8% compared to the prior fiscal period, when its revenue was $2.7 billion.
In fiscal 2016 the company's payroll service revenue increased due to an increase in its client base and revenue per check. Revenue per check improved as a result of price increases. Its HRS revenue increase during fiscal 2016 was primarily driven by increases in its client base across all major HCM services.
Paychex reported net income of $756.8 million in fiscal 2016. That was a 12% increase compared to company's net income the prior fiscal year. The company had more than $1 billion in cash on hand from operations at the end of fiscal 2016, which was a 14% increase compared to fiscal 2015 levels.
Paychex’s strategy focuses on providing a comprehensive suite of value-added services and making strategic acquisitions. The company continues to invest in its business, particularly in technology. Paychex has positioned itself to capitalize on the opportunities arising from the shift to SaaS solutions. The company will continue to increase its investment in SaaS product development and technology.
During fiscal 2016 the company made significant enhancements to its Paychex Flex platform, which is its cloud-based HCM solution. Also during fiscal 2016, Paychex completed the integration of key HCM modules with the release of Paychex Flex Time, Paychex Flex Benefits Administration, and Paychex Flex Hiring.
Mergers and Acquisitions
In 2015 a wholly-owned subsidiary of Paychex acquired Advance Partners for $190.5 million. Advance Partners offers customizable solutions to the temporary staffing industry, including payroll funding and outsourcing services. The acquisition gave Paychex access to a growing industry serving small and medium-sized businesses.