The Future of Work Is Here
Martin Mucci President and CEO
Paychex reached more than $4.0 billion in revenues, with a market capitalization of more than $25 billion as of May 29, 2020. The company crossed $2 billion in revenues in 2010 and $3 billion in 2017.
Shareholders received $899 million in dividends, or $2.48 per share, in fiscal 2020, representing 82% of net income. Dividends increased 10% from fiscal 2019.
Our business was tested like never before in fiscal 2020, and I couldn’t be prouder of the results our employees achieved together. We’ve created innovative HR solutions to guide our clients and support the needs of our partners through this challenging business environment — from applying for federal loans to managing remote employees and paying them in real time.
The pandemic has changed how business is being done worldwide. Through it all, we’ve continued to invest in our people and technology to help make HR, payroll, retirement, and insurance simple for our clients, even as their needs have become more complex. For Paychex and our clients, the future of work is here now.
For fiscal 2020, we achieved a milestone with total revenue of $4.0 billion, up 7% over fiscal 2019, and doubling our revenue since 2010. We also set a record with operating income of $1.5 billion and increased our adjusted net income 5% to $1.1 billion. Adjusted diluted earnings per share increased as well, by 6%, to $3.00. Our shareholders received $889 million in dividends, or $2.48 per share, for the year.
Thanks to our continuing focus on product and service innovation, our clients are making a smooth transition to the new workplace demanded by the state of business today. Paychex gives clients the flexibility to pay employees on demand prior to payday and make real-time payments in minutes in time-sensitive or emergency situations.
As remote work becomes more common, our clients and their employees can clock in and out from anywhere through their phone or smart watch. Employees can also communicate with their employer through HR Connect in our Paychex Flex® mobile app as well as track and report workplace incidents to help support OSHA compliance. We also introduced new live reports in fiscal 2020 that are easily searchable online. They include job costing and labor distribution, employee change history, reports based on employee activity in HR Connect, and data analytics to allow our clients to analyze and compare their data to other businesses.
HR self-service options are also important. More than 50% of small to medium-sized businesses (SMBs) are offering employees online access to view their pay, tax withholdings, W-2s, retirement and insurance plans, and to update their personal information.1
Our self-service mobile experience includes more than 25 actions enabling client and employee independence. Clients can easily track, review, and approve HR changes across their organization. They can also capture e-signatures for direct deposit and federal and state withholding forms, and access reports, check stubs, tax documents, employee profiles, and time-off balances — to name a few. And we’ve never had more integration between our products and other popular business software.
As a human capital management (HCM) technology company, we recognized long ago that HR is driving the future of the workplace. Even before the economy was disrupted by the COVID-19 pandemic, we were making investments in our HR professionals, HR solutions, and professional employer organization (PEO) services. These investments have proved valuable in helping our clients transition employees to a work-from-home environment and prepare them for the future of the workplace.
We’ve become a leading provider of HR services and solutions for SMBs, serving more than 1.4 million client worksite employees. We continue to see an opportunity for growth in HR services far into the future, particularly in our PEO. It supports clients with payroll, benefits, HR, tax administration, and regulatory compliance assistance, while making it simpler to attract, develop, and retain talent, as well as establish and manage employee benefit plans.
We’ve also been making innovations in how we support our clients. We’ve trained and empowered more than 600 HR professionals with an average of eight years of experience at Paychex to help our clients learn what they need to know to stay in business, retain their employees, recover from this current pandemic environment, and position themselves for future growth.
Our professionals can show clients how best to run payroll and automate time and attendance to keep their employees paid. They can also set up benefit and retirement plans to help attract, retain, and support employees, while helping simplify complex HR issues. Paychex HR professionals leverage the expertise of our in-house compliance experts to help clients with new laws and regulations at the federal, state, and local level, and navigate changing workplace dynamics to help keep their businesses running efficiently.
"Paychex was the first to provide clients with a Paychex Protection Program (PPP) payroll report, available directly through their Paychex Flex login..."
What do you do when you’re responsible for more than 680,000 business clients affected by catastrophic economic conditions? At Paychex, we cared for the safety of our employees, doubled down on product innovation, and helped carry our clients through the pandemic with us.
Paychex was the first to provide clients with a Paycheck Protection Program (PPP) payroll report, available directly through their Paychex Flex login, that simplified the loan application process by automatically uploading their payroll data. We followed that achievement by providing direct client access to third-party lenders, creating one of the most comprehensive PPP loan forgiveness estimators in the industry, and generating a signature-ready PPP Loan Forgiveness Application to simplify the loan forgiveness process for our clients.
We built our business continuity plan (BCP) to be ready for situations like this long before COVID-19. And we made it flexible, so our financial and operational stability would continue to help our clients through changing business dynamics and challenging times.
In addition to client success, the safety of our employees has always been a priority. So, after taking sensible precautions in our office locations, we undertook a company-wide effort to move 15,000 employees to remote work. Within one week, 95% of our people — all except essential on-site employees — were at home maintaining our client service relationships, monitoring the regulatory landscape, developing our products, and maximizing our sales potential.
With our employees safe and productive, we continued listening to the rapidly changing needs of our clients and engaged our expert compliance team to work directly with federal government agencies to create essential programs. We’re staying aware of fast-changing federal and state laws and regulations, and their provisions such as the PPP, and updating our interactive tool on a daily basis to help businesses navigate state guidance.
We share what we know about dealing with COVID-19 and related regulations with businesses through direct communication, industry webinars, and the resources in our Help Center, available to all businesses on Paychex.com, so they can take necessary steps to stay in business and retain their employees. Nearly 165,000 clients and CPAs have registered for our webinars to help them keep up with ever-changing content and guidance.2
We couldn’t have continued creating innovative solutions and supporting our clients in fiscal 2020 without the flexibility shown by our employees. Thousands of our people had to immediately adapt to working from home, establishing a new balance between their work and home lives while remaining accountable for providing the highest level of service. We’re proud to say that our people are coming through for our clients — and each other — in this difficult time.
Despite all the challenges happening at home, in the economy, and in the world in fiscal 2020, our people continue to provide exemplary service. They didn’t think about only themselves, they also thought about their client relationships. As a result, we increased client satisfaction and reached a new record level of client retention even with the challenges of the COVID-19 pandemic.
How do our people do it? By living our values: integrity, partnership, accountability, respect, service, and especially innovation. Even while distant in their homes, they were committed to working in partnership with their teams, strengthening their connections throughout the organization, and maintaining their close relationship with our clients as well as accounting professionals and our other business partners. We couldn’t be prouder to be Paychex — right here, right now — and we’re excited to see what our people will continue to accomplish in the future.
As the business environment continues to evolve, we’re helping clients recover and support their employees. Our compliance team is tracking the separate state initiatives, so our clients will have the specific information they need to confidently operate their business and retain or rehire their employees.
We’ve never had a time in our history when business conditions changed so quickly each month. We’re proud of how we’ve adapted as a company and served our clients, and we will continue to honor that commitment — as we always have.
Perhaps what I’m proudest of is how Paychex is one of the few companies that can say our efforts have had a significant, positive effect on the economy during these challenging times. The adaptability and innovation demonstrated by our people has helped thousands of clients stay in business and keep their employees working, contributing billions of dollars to federal, state, and local economies. That positive impact will continue to be a point of pride and a responsibility that we take seriously.
Thank you for your continued investment in Paychex. Our financial position remains strong despite the COVID-19 pandemic, and our investments in giving clients the most innovative products have never wavered. We hope you’ll join us as we continue delivering the future of work, today.
President and CEO
2. Data on file
Total revenue increased 9% from 2015. Diluted earnings per share increased 13% to $2.09 per share. Adjusted diluted earnings per share increased 10% to $2.03 per share.
Total revenue increased 7% from 2016. Diluted earnings per share increased 9% to $2.28 per share.
Total revenue increased 7% from 2017. Diluted earnings per share increased 20% to $2.75 per share. Adjusted diluted earnings per share increased 14% to $2.55 per share.
Total revenue increased 12% from 2018. Diluted earnings per share increased 4% to $2.86 per share. Adjusted diluted earnings per share increased 11% to $2.84 per share.
Total revenue increased 7% from 2019. Diluted earnings per share increased 6% to $3.04 per share. Adjusted diluted earnings per share increased 6% to $3.00 per share.
Operating income increased 9% from 2015. Net income increased 12%. Adjusted net income increased 9%.
Operating income increased 9% from 2016. Net income increased 9%. Adjusted net income increased 10%.
Operating income increased 3% from 2017. Adjusted operating increased 6%. Net income increased 20%. Adjusted net income increased 14%
Operating income increased 6% from 2018. Adjusted operating income increased 4%. Net income increased 4%. Adjusted net income increased 11%.
Operating income increased 9% from 2019. Net income increased 6%. Adjusted net income increased 5%.
For the fiscal year ended May 31.
Economists have described 2020 as an unprecedented, difficult, and uncertain time. At Paychex, we have a different phrase for it — another chance to innovate.
Through our solid business continuity planning and our continuing commitment to innovating products and processes, we’ve supported many of our more than 680,000 clients to help them stay in business during the pandemic. At the same time, we’ve prepared them to meet the challenges of tomorrow’s workplace.
Paychex assisted many of our clients in fiscal 2020 thanks to our proactive innovation, our experienced compliance team, and our national reach. We capitalized on our technology by making it easy for clients to access vital reports that helped them apply for emergency financing, and we prepared our team to address their evolving needs. We also provided daily information about changing federal and state laws and regulations, so businesses could easily apply for federal loans, transition to a remote work environment, and support the livelihoods of their employees.
Paychex reached more than $4.0 billion in revenue in fiscal 2020 with a market capitalization of more than $25 billion as of May 29, 2020. This reflected our long-term growth as a leading provider of human resources (HR) outsourcing and consulting, payroll, retirement and employee benefits, and insurance. We’re enabling tomorrow’s workplace for our clients, even as their HR needs grow. Paychex is delivering the future of work. Right here, right now.
Years ago, we recognized a shift — and an opportunity — occurring in the workplace. Businesses, particularly small and medium-sized businesses (SMBs), needed more help managing employees and simplifying tasks. Employers and employees alike wanted to make work more convenient by transitioning manual, paper-based processes to an online mobile app. And changing federal and state regulations were making it more complex to stay in compliance.
We immediately understood that those needs would define and drive the future of work, and we knew Paychex could provide the product and service innovations to make that future a reality. So, we invested significant time and resources into ensuring our HR services, including our professional employer organization (PEO), offered the capabilities that businesses need — when, where, and how they need them.
While HR trends such as remote work and employee self-service were slowly becoming part of the workplace, the effects of the COVID-19 pandemic accelerated the shift. Among SMBs, 55% plan to allow or require employees to work remotely, according to a Paychex survey from June 2020.1 At the same time, 41% see more flexible work schedules becoming a permanent change to the work environment.1
Even before the pandemic, businesses had been transitioning to mobile HR technology. That trend accelerated in fiscal 2020 as remote work became the rule rather than the exception. And the workplace will never be the same — 46% of SMBs said they’ll lean on technology to support more remote work.1
Paychex has made sure clients are prepared for this trend with our mobile-first Paychex Flex platform. It allows managers and employees to make more than 25 self-service actions anytime, anywhere through their mobile devices.
From the Paychex Flex mobile app, clients can customize screens and online access for different types of users. They can also administer self, peer, and manager self-service options, workflows, and approvals, as well as review and approve HR changes, capture e-signatures for direct deposit and Forms W-4, and access reports, check stubs, tax documents, employee profiles, and time-off balances.
Paychex is ready to meet the challenges of the future workplace today. Our HR innovations are helping clients support employees, whether they’re in the office or working remotely, by managing critical communications, keeping them engaged, and helping them stay productive.
We introduced HR Connect on our Paychex Flex platform to simplify remote communication between our clients and their employees. HR Connect allows employees to submit any questions, requests, and issues directly to their employer to help ensure they are quickly addressed and resolved. It also includes a new OSHA dashboard that lets clients prepare documentation for reportable events, track open items, access forms, and view a snapshot of injuries by location.
Paychex Flex also includes an updated feature that facilitates communication between managers and employees. This feature is useful during the COVID-19 pandemic and may be essential in the new workplace to come. Clients can now print notes and filter results based on tags and dates, enable employees to add their own notes, and allow administrators to share notes with other leaders.
Employees can clock in and out from remote locations through their Paychex Flex app — or even from their smartwatch — while managers can transfer departments, check schedules, and review and approve time cards.
With many employees working remotely during the COVID-19 pandemic, our investments in wearable technology allow employees to easily clock-in, clock-out, and transfer between jobs or assignments right from their smartwatch.
Our investments in iris recognition technology are more important than ever during the COVID-19 pandemic. The Paychex InVision Iris Time Clock allows employees to keep their face mask on when they clock-in, making it a safer, contactless time clock option for businesses.
New workflow approvals allow clients to customize and implement workflows to help them track, review, and approve HR changes across their organization. They can also capture and store electronic signatures for direct deposit and changes to tax withholding forms in an employee’s record.
To simplify the process of adding new workers, administrators can now create templates to include default settings that automatically populate commonly used fields within Paychex Flex. They can create these templates by position type, full- or part-time status, and other common scenarios.
Paychex is uniquely positioned to provide our clients with a comprehensive set of analytics allowing them to benchmark and compare specific data sets against other businesses within their industry classification or geographic location. Access to the comparison provides another competitive advantage for business owners who partner with Paychex.
To help clients quickly access employee data and make informed business decisions, our new live reports provide improved visibility on important topics ranging from job costing and labor distribution to workers’ compensation, employee change history, OSHA documentation, and HR requests through our conversations feature.
As the COVID-19 pandemic surprised and overwhelmed businesses across the country, our HR clients turned to their Paychex HR professionals for guidance. Our more than 600 professionals across the country are knowledgeable consultants trained to provide more than just best practices. They average eight years of experience at Paychex, so they know the businesses they serve and can provide specific ideas for solving HR issues.
Our HR professionals helped clients apply for vital funding through sources like the federal Paycheck Protection Program (PPP), worked with clients to transition employees to work from home, and continue to provide clarity on how their employees can work safely and in compliance with federal, state, and local guidelines.
With all the investments we continue to make in our products and services, Paychex is unquestionably a leading HR company. Today, we are one of the top HR outsourcing providers in the United States, serving 1.4 million worksite employees. And our innovations are getting noticed by our clients, trusted HR organizations, and leading business associations and publications.
Paychex is building the future of HR with technology, dedicated service, and expert regulatory analysis. We know the best is yet to come.
Paychex Flex Assistant, our customer service chatbot, was a bronze Stevie Award winner for Best Use of Technology in Customer Service. "Our goal of any chatbot session is that it ends with a successful result and a satisfied customer." — Mike Gioja, Paychex SVP of IT and product development
Paychex has been recognized by the Ethisphere Institute as one of the World’s Most Ethical Companies 12 times, and consecutively since 2012. "From establishing a formal cross-functional steering committee, to enhancing our diversity and inclusion initiatives, to a project to map our carbon footprint and greenhouse gas emissions, we’re taking action on issues that matter." — Stephanie Schaeffer, Paychex chief ethics officer
Paychex won a Brandon Hall Group gold award for Excellence in Technology in the Best Advance in HR or Workforce Management Technology for Small and Medium-Sized Businesses category. "We’ve delivered solutions that help our customers solve critical business challenges. We’re proud of what we’ve brought to market this year and thank Brandon Hall Group for this validation of our work." — Tom Hammond, Paychex vice president of corporate strategy and product management
Paychex was honored as an industry leader at the HR Technology Conference & Expo with the "Awesome New Technologies for HR" award for the enhancements and increased flexibility of our Paychex Flex solution. "This is the culmination of a fantastic year that included several Paychex product releases aimed at bringing simplicity, efficiency, and productivity to HR and payroll activities. — Tom Hammond, Paychex vice president of corporate strategy and product management
Paychex received an HR Tech Award for Best SMB-focused Solution in the Core HR/Workforce category of the HR Tech Awards program, powered by Lighthouse Research & Advisory. "Paychex continues to push the envelope, developing and looking for new ways to pursue innovation." — Ben Eubanks, Lighthouse Research principal analyst
Honored for the 19th straight year by Training magazine, Paychex was recognized as the number 14 top training organization in the world for 2020. "We design unique and creative learning solutions to help the company reach strategic goals and position our employees to grow and thrive, all while working to deliver the best possible experience for our customers." — Laurie Zaucha, Paychex vice president of human resources and organizational development
The COVID-19 pandemic has had a serious effect on businesses across the country, with ramifications that will change the future of work. Although there hasn’t been a situation like this in a century, Paychex was prepared to respond to the needs of our clients and partners. We’ve processed more than 500,000 special COVID-19 payroll reports that have helped clients with the information they needed to apply for Paycheck Protection Program (PPP) loans and help them stay in business and retain their workers, which has had a significant, positive influence on national, state, and local economies.
While we helped clients find solutions, our own people were delivering a high level of service to our clients and partners regardless of the situation. Paychex employees adapted to new ways of working by communicating the way clients preferred — over the phone, through chat, or in online meetings when that was most effective. Despite the adversity our people faced, their flexibility during a difficult time resulted in our clients telling us they were even more satisfied with our service in fiscal 2020, and we improved our already high levels of client retention.
Another significant way we helped businesses respond to the COVID-19 pandemic was by sharing the latest information about changing federal and state laws and regulations. Currently, 96% of HR leaders have said they’re involved with ensuring regulatory compliance.1 On April 2, 2020, we launched an online COVID-19 Help Center to support HR managers and business owners with the invaluable input of our compliance, risk, and legal teams, as well as our subsidiaries Oasis and SurePayroll.
In the months since, we’ve regularly updated the Help Center with dozens of frequently asked questions and their answers, webinars, articles, and other information to help businesses and their accountants navigate the practical and regulatory challenges of staying in business, retaining employees, and returning to work. As of August 1, 2020, our Help Center resources had been viewed more than 330,000 times.2
Seeing the need for assistance with applying for PPP loans, we quickly enhanced Paychex Flex to be the first first human capital management (HCM) platform to provide clients with a detailed PPP payroll report. Developed in cooperation with our compliance, risk, and legal teams, we created the report feature to automatically update based on the latest payroll information.
We also developed the most detailed PPP Loan Forgiveness Estimator tool available to all businesses that have applied for a PPP loan, and a separate estimator for our clients accessible in Paychex Flex that provides the documentation they need to maximize their PPP loan forgiveness based on their 2019 and 2020 payroll data.
“Whenever we have a question, we give Katie Sanders, our representative at Paychex, a call and she gets back to us as soon as possible. … It’s just nice to have someone who’s reading up, does their research, and helps make sure you’re in compliance with all the rules, regulations, laws — and that’s something that’s been a big help.”
— Ben Cottrell, Cottrell Paper Company
2. Data on file
The demand for our services has been steadily increasing, especially among small to medium-sized businesses (SMBs). Starting in March 2020, businesses suddenly faced many challenges all at once. How do they close or remain partly operational and still do what’s best for the business and their employees? Where can they find help with financing? How can they stay compliant with changing laws and regulations depending on the state(s) where they operate? Paychex is well-positioned to meet these demands and many others thanks to our leading positions in HR, payroll, time and attendance, and insurance, as well as our strong financial position and nearly 50 years of experience.
Our HR Services clients who worked with a dedicated HR representative quickly had many of their questions answered. These clients received recommendations for how to stay safe, set up employees to work efficiently from remote locations, and establish policies in line with their priorities moving forward.
Throughout the COVID-19 pandemic, Paychex has helped thousands of businesses stay in business and maintain employment while operating safely and in compliance with changing regulations. At the same time, we’re helping ensure the health and productivity of our own employees across the country.
For businesses to be allowed to operate, they need to understand and comply with complex federal, state, and local guidelines — sometimes in multiple states with conflicting rules. Our clients have access to resources that help them reduce the risk of penalties, and our dedicated HR professionals can help clients with the actions they need to take in order to safely and lawfully do business.
Our COVID-19 Help Center on Paychex.com provides timely information to businesses dealing with this evolving situation, including detailed webinars, podcasts, reports, and articles on essential topics related to the recovery.
For example, our easy-to-use interactive tool, COVID-19 Resources by State, helps businesses keep up with the latest state regulations. Each state’s page includes laws, executive orders, advisories, and processes businesses would need to follow. The tool also includes links to state government resources and state-specific articles to help businesses transition back to work.
While businesses navigate rules and regulations, many are also making significant changes to their operations. To become more efficient, the fastest-growing companies were most likely to use new technology to improve customer service (47%), communicate and collaborate more effectively (45%), improve recordkeeping (34%), and boost sales (32%).1
Employees face a new reality as well. Rather than return to traditional work hours and locations, 41% of businesses said they would rely on more flexible work schedules and work-from-home arrangements after reopening.2
It’s clear that business may never be the same. By continually communicating with clients and innovating based on their needs, we’re creating products and services — such as HR Connect, employee self-service capabilities, and Real-Time Payments — to help our clients create new workplaces that will allow them to stay in business and succeed in a post-pandemic market.
Even as we help enable these workplace changes, we’ll continue to monitor trends and work with our clients to develop new innovations in remote work, e-commerce, communications, and more to meet the evolving HR and operational goals of businesses across the country.
We know that doing the best for our clients means giving our people the support to stay safe and productive as well. We offer several health and life insurance options for our employees, and we pay a significant portion of the premiums, so our people can feel safe in the knowledge that they and their dependents are covered. And with 15,000 employees working remotely, successfully supporting clients and creating the next generation of HR technology, we’re taking the steps to ensure that our own eventual return to the office maintains the high level of service that our clients expect from Paychex.
Our purpose, mission, and values are the guiding principles behind all we do for our clients, coworkers, and communities. They’re who we are, what we work toward, and why we succeed as a company.
We provide our customers the freedom to succeed.
We will be the leading provider of human resource, payroll, retirement, and employee benefit services by being an essential partner with businesses across the U.S. and Northern Europe.
We act with uncompromising integrity.
We provide outstanding service and build trusted relationships.
We drive innovation in our products and services and continually improve our processes.
We work in partnership and support each other.
We’re personally accountable and deliver on our commitments.
We treat each other with respect and dignity.
There are nine nominees for election as director, as shown below. Each of the nominees is a current member of the Board. The nine persons listed have been nominated for election to the Board by the Company’s G&C Committee.
To cast your vote, visit our Shareholder Meeting Site.
Business was forever changed by the events of 2020. Through it all, Paychex has been prepared to support our clients and maintain our financial strength. Our efforts helped thousands of clients stay in business, which had a significant, positive effect on the economy.
While we’re proud of what we accomplished, we remain committed to looking ahead. We’re ready for what’s next — from our proactive business planning to innovative products and services. The future of work is here, and you are part of it.
Thank you for your investment in Paychex.