Paychex, Inc. provides payroll and integrated human resource and employee benefits outsourcing solutions for small- to medium-sized businesses in the United States.
Products and Services
The Company offers a portfolio of payroll, payroll-related and human resource products and services to meet the needs of its client base. These include payroll processing; payroll tax administration services; employee payment services; regulatory compliance services (new-hire reporting and garnishment processing); human resource administrative services; retirement services administration; workers’ compensation insurance administration; employee benefits administration; time and attendance solutions; and other human resource products and services.
Payroll Processing
The Company’s payroll service includes the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; and the preparation of federal, state, and local payroll tax returns.
The Core Payroll service is targeted at clients with one to forty-nine employees, and clients with approximately fifty employees utilize this service. The Company’s average Core Payroll client employs approximately thirteen people and processes approximately thirty payrolls each year. Core Payroll clients might communicate their payroll information, including hours worked by each employee and personnel or compensation changes, by telephone, fax, use of the Paychex Paylink software, or the Internet. Clients receive payroll checks and reports from either a delivery service, the U.S. Postal Service, or by picking them up at the local Paychex branch.
The Company also offers Core Payroll services to its clients and their accountants through Paychex Online. This Internet site offers clients a suite of interactive, self-service products and services. These include Paychex Online PayrollSM, Internet Time Sheet, Paychex Online Reports, and General Ledger Reporting Service. Clients can communicate payroll information through the Internet Time Sheet or use the Online Payroll service, and can access current and historical payroll information using Paychex Online Reports. The General Ledger Reporting Service transfers payroll information calculated by the company to the clients’ general ledger accounting software, eliminating manual entries and improving the accuracy of bookkeeping. Approximately 180,000 clients are utilizing some form of Paychex Online service.
MMS primarily targets companies that have complex payroll and benefits needs or have outgrown its Core Payroll service, as well as new clients that have fifty or more employees. The company offers this service in all of its principal markets. Majority of Major Market Services (MMS) clients communicate their payroll information to the Company using its Preview software. Preview provides clients with control of payroll and human resource information. The Company handles the software maintenance and provides the client ancillary products and services as requested.
Ancillary Products and Services
The Company provides its clients with a portfolio of ancillary products and services. The Company offers various ancillary products and services, such as:
Payroll Tax Administration Services: The Company’s clients utilize payroll tax administration services (including Taxpay), which provide accurate preparation and filing of quarterly and year-end tax returns, as well as the electronic transfer of funds to the applicable tax or regulatory agencies (federal, state, and local). Its new clients purchase its payroll tax administration services. In connection with these services, the Company electronically collect payroll taxes from clients’ bank accounts, typically on payday, prepare and file the applicable tax returns, and remit taxes to the applicable tax or regulatory agencies on the respective due dates. These taxes are paid between one and 30 days after receipt of collections from clients, with some items extending to 90 days. The company handles all regulatory correspondence, amendments, and penalty and interest disputes.
Employee Payment Services: The Company’s clients utilize its employee payment services, which provide the employer the option of paying their employees by direct deposit, Paychex Access Visa Card, a check drawn on a Paychex account (Readychex), or a check drawn on the employer’s account and electronically signed by the company. The Company’s new clients purchase some form of employee payment services. The payroll tax administration services and employee payment services are integrated with its payroll processing service.
Regulatory Compliance Services: The Company offers new-hire reporting services, which enable clients to comply with federal and state requirements to report information on newly hired employees, to aid the government in enforcing child support orders, and to minimize fraudulent unemployment and workers’ compensation insurance claims. The Company’s garnishment processing service provides deductions from employees’ pay, forwards payments to third-party agencies, including those that require electronic payments, and tracks the obligation to fulfillment.
Comprehensive Administrative Services: The Paychex Premier Human Resource Services (Paychex Premier) provides businesses an approach to the outsourcing of employer and employee administrative needs. Paychex Premier offers businesses a combined package of services that includes payroll, employer compliance, human resource and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained human resource representative.
The Company also operates a Professional Employer Organization (PEO), which provides businesses with primarily the same services as Paychex Premier, except the Company serve as a co-employer of the clients’ employees, and provides health care offerings to PEO clients. The Company offers its PEO service through its subsidiary, Paychex Business Solutions, Inc. As of May 31, 2006, Paychex Premier serviced approximately 236,000 client employees and its PEO product serviced approximately 59,000 client employees.
Retirement Services Administration: The Company’s Retirement Services product line offers various options to clients, including 401(k) plans, 401(k) SIMPLE, SIMPLE IRA, 401(k) plans with safe harbor provisions, profit sharing, and money purchase plans. These services provide plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer access online, electronic funds transfer, and other administrative services. Retirement Services were utilized by approximately 38,000 clients as of May 31, 2006.
Workers’ Compensation Insurance Administration: The Company provides workers’ compensation insurance administration services by serving, through its licensed insurance agency, as a general agent providing workers’ compensation insurance through various insurance carriers who are underwriters. The Company’s Workers’ Compensation Payment Service uses rate and job classification information to enable clients to pay workers’ compensation premiums in regular monthly amounts. As of May 31, 2006, approximately 2,000 clients utilized the workers’ compensation insurance administration services.
Employee Benefits Administration: The Company offers the outsourcing of plan administration under section 125 of the Internal Revenue Code. The Flexible Spending Account Plan allows its clients’ employees to pay, with pretax, 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 Health Savings Account product serves as a tax savings tool for employers and employees, allowing individuals to save money tax-free to pay for medical expenses.
Time and Attendance Solutions: The Company offers Time In A Box and other time and attendance solutions, which help employers minimize the time spent compiling time sheet information. Certain clients are charged a monthly fee for use of hardware, software, and support. Clients also have the option to purchase the hardware and software with annual maintenance contracts. Time In A Box is marketed to its small- to medium-sized clients, while other time and attendance solutions are marketed to larger clients.
Other Human Resource Products and Services: Group health benefits are offered in select geographic areas, as are state unemployment insurance services, which provide clients with prompt processing for all claims, appeals, determinations, change statements, and requests for separation documents. Other Human Resource Services products include employee handbooks, management manuals, and personnel and required regulatory forms.
The Company’s subsidiary Advantage Payroll Services, Inc. (Advantage) has license agreements with 15 independently owned associate offices (Associates), which are responsible for selling and marketing Advantage payroll services and performing certain operational functions, and Paychex, Inc. and Advantage provide centralized back-office payroll processing and payroll tax administration services. In addition, Advantage has a relationship with New England Business Service, Inc. (NEBS) whereby Advantage performs client functions.
Customers
The Company serves a customer base of small- to medium-sized clients operating in a range of industries located throughout the continental U.S. As of May 31, 2006, the Company serviced approximately 543,000 clients. The Company also had approximately 500 clients in Germany as of May 31, 2006, which are serviced through offices in Hamburg and Berlin.
Competition
The Company’s competitor includes ADP (Automatic Data Processing, Inc.).
History
Paychex, Inc. was founded in 1971.
