A Message to Our Shareholders

A Message to Our Shareholders

This year’s annual report is confirmation of our continuing investments in HR technology, service, and people to help our clients build better businesses.

Despite challenging times for the U.S. economy, Paychex beat projections. We delivered record financial results while providing services that helped many of our clients stay in business. I am so proud of what we accomplished in fiscal 2022 through the strategic efforts of our 16,000 employees.

Since our success was a total team effort, I’d like you to hear directly from a few members of the executive team as we joined together to discuss our results and direction.

Thank you for investing in Paychex. We are excited to build on all we’ve accomplished and share new insights and innovations with you in fiscal 2023.

Martin Mucci
Chairman of the Board and Chief Executive Officer

Fiscal 2022 Results

Fiscal 2022 Results

$4.6 Billion Total Revenue

Paychex revenues increased 14% to $4.6 billion, with a market capitalization of $44.6 billion as of May 31, 2022.

$1 Billion Dividends Paid

Shareholders received $1 billion in dividends in fiscal 2022, or $2.77 per share — an increase of 10%.

Paychex achieved record financial results in FY22, which reflect strong business performance from our unique blend of human capital management (HCM) solutions and the hard work and dedication of our 16,000 employees. Our results contributed to Paychex being in the top five for annualized total shareholder return (TSR) of all S&P 500 companies that have traded since the Paychex IPO.1

Top 5 shareholder return graphicChart of shareholder returns over time

Total Revenue ($ Millions)*

2018

$3,378

2018

Total revenue increased 7% from 2017. Diluted earnings per share increased 21% to $2.75 per share. Adjusted diluted earnings per share increased 14% to $2.55 per share.

2019

$3,773

2019

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.

2020

$4,041

2020

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.

2021

$4,057

2021

Total revenue was flat to 2020. Diluted earnings per share was flat at $3.03 per share. Adjusted diluted earnings per share increased 1% to $3.04 per share.

2022

$4,612

2022

Total revenue increased 14% from 2021. Diluted earnings per share increased 27% to $3.84 per share. Adjusted diluted earnings per share increased 24% to $3.77 per share.

Adjusted Operating Income ($ Millions)*

2018

$1,324

2018

Operating income increased 3% from 2017. Adjusted operating income, excluding costs related to termination of certain license agreements, increased 6%. Net income increased 20%. Adjusted net income increased 14%.

2019

$1,371

2019

Operating income increased 6% from 2018. Adjusted operating income increased 4%. Net income increased 4%. Adjusted net income increased 11%.

2020

$1,461

2020

Both operating income and adjusted operating income increased 7% from 2019. Net income increased 6%. Adjusted net income increased 5%.

2021

$1,493

2021

Operating income was flat to 2020. Adjusted operating income, excluding certain one-time costs, increased 2%. Net income was flat. Adjusted net income increased 2%.

2022

$1,840

2022

Operating income increased 26% from 2021. Adjusted operating income, excluding certain one-time costs in fiscal 2021, increased 23%. Net income increased 27%. Adjusted net income increased 24%.

Data on file
*For the fiscal year ended May 31. Adjusted operating income is a non-GAAP measure that excludes certain one-time costs related to cost-savings initiatives in FY21
1 Source: FactSet® financial data and analytics. Based on available FactSet data for companies that were publicly traded as of August 26, 1983 through May 31, 2022. Total Shareholder Return calculation based on same time period.

How would you summarize fiscal year 2022?

How would you summarize fiscal year 2022?

Martin headshot

MARTIN:

Chairman of the Board and Chief Executive Officer

Paychex achieved record financial results in FY22 — our best performance in the 50+ years since the company was founded. While I’m excited that we achieved double-digit revenue and earnings growth during one of the most challenging times in our history, I’m especially proud that we were able to help our clients, their employees, and communities succeed with support from our continuing innovations in human capital management (HCM) technology and service.

We have helped more than 40,000 clients apply for government tax credits of over $8 billion — an average of nearly $200,000 per client. A high percentage of businesses who used our Employee Retention Tax Credit (ERTC) Service have stayed in business — and have stayed Paychex clients. They’re continuing to look to us for long-term support of their HR, payroll, and benefits in the competitive hiring and employee retention marketplace.

Paychex has a strong history of solid financial results — and we’re growing at an accelerated rate. In FY22, our total revenue grew 14% year-over-year to a record $4.6 billion, and our adjusted diluted earnings per share rose 24% to $3.77. Our operating margin was 40%, an increase of 390 basis points over the prior year.

New opportunities have also been growing in this post-pandemic marketplace. To position and structure our company to best capitalize on those opportunities, I assumed the role of chairman of the board on December 1, 2021, adding to my role as CEO and succeeding Paychex founder Tom Golisano, who remains on the board as a director. To further strengthen our executive leadership team, I promoted longtime Paychex executive John Gibson to the new position of president and chief operating officer.

Following our performance in FY22, Paychex has entered the current fiscal year with momentum that positions us to build on our results and help clients continue to navigate this changing workplace environment.

Can you expand on the company's financial performance in FY22?

Can you expand on the company's financial performance in FY22?

Efrain headshot

EFRAIN:

Senior Vice President and Chief Financial Officer

Paychex rapidly innovates whenever we see a market opportunity, bringing technology and service together to provide a comprehensive solution to clients. While Paychex began as a payroll provider, we’ve since become a full-fledged HCM technology company.

We’ve had a unique opportunity to proactively suggest additional solutions through countless client interactions. Today, approximately 55% of our revenue is generated beyond payroll, from sources such as HR solutions, retirement services, insurance solutions, and our professional employer organization (PEO).

As the HR and benefits markets continue to grow, we’re making the right technology investments to sustain high levels of profitability. We achieved record revenues and earnings in FY22, increased our quarterly dividend by 20%, and paid shareholders over $1 billion in dividends for the first time in our history.

Highlights from FY22 include the results from our Management Solutions and PEO and Insurance Solutions. Management Solutions revenue increased 14% to $3.4 billion due to strong sales performance, high levels of retention, and an increase in revenue per client from rising employment and continued demand for our HR solutions. This led to growth in our payroll client base and product penetration across our expanded HCM offerings.

Our PEO and Insurance Solutions revenue also increased 14% to $1.1 billion due to growth in the number of average worksite employees served, along with increases in their average wage, higher revenue from Paychex PEO health insurance, and higher state unemployment insurance revenues.

 

In FY22, we also received special recognition at NASDAQ, celebrating our 50 years in business as well as the anniversary of Paychex becoming a public company in 1983. As of May 31, 2022, our total shareholder return is among the top five of current S&P 500 companies traded since our IPO.2 A $1,000 investment made then would be worth about $1.2 million today.

2 Based on available FactSet data for companies that were publicly traded as of August 26, 1983 through May 31, 2022. Total Shareholder Return calculation based on same time period.

Can you talk about how Paychex has evolved to become a technology leader?

Can you talk about how Paychex has evolved to become a technology leader?

John headshot

JOHN:

President and Chief Operating Officer

About John Gibson bullet points, details his Paychex career

Our investments in HR technology, HR services, and employee benefits have positioned us well to capture the growing demand in the market, and we continue to focus our product investments on the four main HR issues that research has shown affect businesses today.

1. Recruiting, Hiring, and Retaining Talent

This year we made significant enhancements to Paychex Flex® Hiring through expanded integrations with Indeed®, ZipRecruiter®, and LinkedIn®. More than 400,000 resumes per month were accessed by clients in FY22.

We also redesigned our online employee onboarding experience to allow administrators to welcome new employees virtually and begin self-onboarding. More than 1.7 million employees were digitally onboarded in FY22.

 
"Being able to promote the jobs that we had... get our jobs out there and recruit more people... Paychex has made the onboarding process a lot easier for us to be able to hire as quickly as possible"
— Hunter Garrett, Assistant Director, Feghali Foods, multi-unit Little Caesar's franchise

2. Managing a Distributed Workforce With Mobile Technology

The adoption of our mobile app by both clients and their employees has grown at double-digit rates as we expanded our self-service capabilities. Our new Paychex Pre-Check product further automated online payroll processing for employers and provided employees with the opportunity to review their paychecks before payroll is processed. Paychex Pre-Check has received several awards, including our third consecutive Top HR Product of the Year award from Human Resource Executive® and the HR Technology Conference.

3. Benefiting From Government Programs and Staying Compliant

Our ERTC Service educated our clients and sales prospects about the program, assessed their eligibility, calculated their credit, and filed amended returns. Our service was awarded a Brandon Hall Group Gold Award for Excellence in Technology. In addition, more than 300,000 clients have used our Paycheck Protection Program (PPP) forgiveness tool to transition their loans into grants, applying for more than $65 billion in total forgiveness.

4. Leveraging Analytics to Improve Workforce Management and Efficiency

 

In FY22, we introduced Retention Insights to help employers identify employees who may be more likely to consider leaving their organization. We also launched an enhanced Compensation Summary Report designed to allow employers to communicate the impact of their pay and benefits packages to their employees.

As the workplace continues to evolve, running a business is becoming more complex. To help prepare our clients for the challenges they’re facing today, as well as what’s to come, we will continue to provide them with the flexible technology to do what they want, when they want, with access to personal service 24/7/365.

How are Paychex HR solutions being positioned to take advantage of market opportunities?

How are Paychex HR solutions being positioned to take advantage of market opportunities?

Martin headshot

MARTIN:

Chairman of the Board and Chief Executive Officer

Better human resource support delivers better business performance and results for our clients. This March, we launched Paychex HR, which brings together all our HR offerings under a single name, including Paychex HR PEO and Oasis®, as well as our administrative services organization (ASO) and HR Essentials product.

Stats about HR outsourcing and affect from covid

With a strategy based on extensive market research, Paychex HR is more than a convenient way to organize our HR products and services. By listening to clients and conducting our annual Pulse of HR Survey, we have been able to determine their top needs right now and position our HR solutions to meet them.

Paychex HR gives clients a full range of HR options to meet their specific needs, so they can more easily invest in their culture and employee development; deliver world-class benefits; comply with changing regulations; and support the physical, emotional, and financial wellness of their employees. Because we believe that happier, healthier, and more engaged teams create better businesses.

 
"Paychex PEO has freed up a lot of our time as business owners to help train and empower our management team, so that my brothers and I could be out of the day-to-day, to work on the business rather than in the business."
— Jesssi Faruas Tavera,COO, Plumbing M.D.

3 2021 Paychex Brand Research: A joint study conducted by ClearlyRated and Paychex.

Does Paychex HR address the rising importance of employee wellness in recruiting and retention?

Does Paychex HR address the rising importance of employee wellness in recruiting and retention?

John headshot

JOHN:

President and Chief Operating Officer

It’s more important than ever for employers to make a connection with employees, so they feel like their needs are being recognized and addressed.

Supporting employees quote from 65 year HR representative

Nearly 40% of employees surveyed said their organization’s benefits, policies, and culture fail to support their health across the four pillars of wellness in the workplace— mental, physical, financial, and social.4 To help, Paychex HR supports clients so they can effectively address these pillars in order to improve recruiting, retention, morale, and productivity.

To support employees′ mental health, we include an employee assistance program (EAP) through Paychex HR for confidential support, Paychex Flex Time to enable more flexible scheduling, and performance management and development tools in Paychex Flex.

Clients can access tools to support their employees’ physical well-being with help from our offerings, including group health insurance; voluntary vision, dental, and wellness programs; flexible spending accounts (FSA); and health savings accounts (HSA); as well as workplace safety programs.

We help enable financial peace of mind through the FinFit® wellness program, retirement services to help employees save for the future — including our new Pooled Employer 401(k) Plan (PEP) — flexible pay options to give employees convenient access to their earnings, and a discount program to help them save on a variety of products and services outside of work.

We also help clients to improve employees’ social health by offering them the tools to enhance workplace culture, including employee surveys; HR technology to help simplify employee management and benefits administration; and a learning management system (LMS) for online training and development. In addition, we offer clients proactive, experienced HR advice from a dedicated Paychex HR Professional.

4 Joint survey by Paychex and ClearlyRated of 2,142 employees of small and mid-sized businesses from November 2, 2020 to November 30, 2020. The survey was weighted to be representative of the U.S. adult workforce and included employees across industries and skills.

Which organizations recognized the Paychex team with awards and accolades in FY22?

Which organizations recognized the Paychex team with awards and accolades in FY22?

Martin headshot

MARTIN:

Chairman of the Board and Chief Executive Officer

I’m proud of the work our team delivered in FY22, from Marketing to Sales, Product Development, and Management. The awards we won reflect positively on our HR technology as well as our workplace culture and values.

For the 14th year, Paychex was named one of the World’s Most Ethical Companies® by the Ethisphere® Institute, and we were recognized by Forbes® as one of the Best Employers for Diversity. Fortune® magazine once again named us one of the World’s Most Admired Companies. Our new Paychex Pre-Check product won technology awards from HR Executive, the Brandon Hall Group, and the Business Intelligence Group. And our ERTC Service won a Gold Brandon Hall Award for helping clients receive billions of dollars in tax credits, to name just a few of the many accolades Paychex has received from respected industry and business organizations.

Brandon Hall Group Gold Award. Circular gold medal with blue ribbon
Brandon Hall Gold Award

Brandon Hall Gold Award

Paychex was recognized with a Gold Excellence in Technology Award from Brandon Hall Group for our Employee Retention Tax Credit (ERTC) Service, which was launched in 2021. This is the ninth consecutive year that the preeminent research and analyst firm has recognized Paychex technology solutions.

Brandon Hall Group Silver Award. Circular silver medal with blue ribbon
Brandon Hall Silver Award

Brandon Hall Silver Award

Our Paychex Pre-Check product won a Silver Excellence in Technology Award from Brandon Hall Group for its ability to help clients simplify payroll processing while improving accuracy and their employees payroll experience.

Fortune: The world's most admired companies 2022
World's Most Admired Companies

World's Most Admired Companies

Paychex was named to FORTUNE® magazine’s 2022 list of the World’s Most Admired Companies. The annual list is considered a definitive report card on corporate reputation, honoring companies globally for their outstanding financial performance and leadership in key areas of importance in today’s business environment. Companies are ranked based on nine criteria, including innovation, investment value, quality of management, ability to attract talent, and social responsibility.

NelsonHall NEAT Leader 2021
HCM Technology Leader

HCM Technology Leader

NelsonHall, a leading global analyst and research firm, identified Paychex as a “Leader” in its latest annual NEAT vendor evaluation report for human capital management (HCM) due to our persistent focus on HCM software innovations that meet the new way of working.

Forbes 2022 the best employers for diversity
Forbes Best Employers for Diversity

Forbes Best Employers for Diversity

Paychex was named among America's Best Employers for Diversity by Forbes magazine in 2022 based on a survey by 60,000 Americans working for businesses with at least 1,000 employees. They identified the companies most dedicated to diversity, equity, and inclusion through criteria such as age, gender, ethnicity, disability, and sexual orientation equality, as well as that of general diversity.

HR Tech Awards Core HR/Workforce Best SMB focused solution 2022
HR Tech Award

HR Tech Award

Paychex was recognized with an HR Tech Award for Best Small and Medium Business (SMB)-focused Solution in the Core HR/Workforce category, honoring our all-in-one HR, payroll, and benefits technology platform, Paychex Flex. The HR Tech Awards program, powered by Lighthouse Research & Advisory, is designed to give buyers a shortlist of vetted, capable providers specific to their needs.

Big Innovation logo 2022
BIG Innovation Award

BIG Innovation Award

Paychex Pre-Check received a BIG Innovation award in FY22 from the Business Intelligence Group. Entrants are judged by experienced and knowledgeable business executives. The organization's proprietary scoring system selectively measures performance across multiple business domains and rewards those companies whose achievements stand above those of their peers.

Recordkeeping Survey 2021 Largest 401(k) recordkeeping by number of plans
Largest 401(k) Recordkeeper

Largest 401(k) Recordkeeper

For the eleventh straight year, PLANSPONSOR magazine recognized Paychex as the largest 401(k) plan recordkeeper in the U.S. by number of plans. As of May 31, 2022 we serviced more than 100,000 retirement plans.

Winner 2021 Top HR Product Human Resource Executive
Top HR Product

Top HR Product

For the second consecutive year, Paychex earned recognition for a “Top HR Product of the Year” in the Core HR category by Human Resource Executive magazine and the HR Technology Conference & Exposition. Paychex earned the recognition for its Paychex Pre-Check solution, which gives employees the opportunity to confirm paycheck accuracy before payday and introduces more automation into the payroll cycle for employers.

Training APEX Awards 2022 winner
World's Best Training Organizations

World's Best Training Organizations

Paychex has been recognized as one of the top training organizations in the world with a 2022 Training APEX Award presented by Training magazine. Paychex ranked number five on the list, its highest-ever ranking after 21 consecutive appearances, including a number seven ranking in 2021. Ranking is determined by assessing a range of qualitative and quantitative factors, including demonstrated innovation and financial investment in employee development, the scope of development programs, and how closely such development efforts are linked to business goals and objectives.

2022 World's Most Ethical Companies Ethisphere 14 time honoree
World's Most Ethical Companies

World's Most Ethical Companies

Paychex was honored by the Ethisphere Institute® as one of the World's Most Ethical Companies® for 2022. Being a 14-year honoree underscores our commitment to ethical business standards and practices, ensuring long-term value to key stakeholders, including customers, investors, and employees.

AccountingToday 2022 Top New Products
Top New Products

Top New Products

The Paychex Employee Retention Tax Credit (ERTC) Service Service was named a Top New Product by Accounting Today for its ability to leverage payroll data and Paychex Flex technology to identify tax credits retroactively and file amended returns to claim the credits based on wages already paid.

How has Paychex supported employees; environmental, social, and governance (ESG); and communities?

How has Paychex supported employees; environmental, social, and governance (ESG); and communities?

Karen headshot

KAREN:

Vice President and Chief Human Resources Officer

At Paychex, we’re focused on maintaining the viability of the communities where we and our clients live and work by helping small to medium-sized businesses access expertise and support that they otherwise might not be able to achieve.

At the same time, we’ve been reinvesting in our employees and our technology to offer enhanced career development, more flexible workplace schedules, benefits, and support. Included among these are a new discretionary time-off policy and expanded annual bonus opportunities, a transition to the Fidelity® investment and multi-event platforms to make retirement benefits easier to manage, and an additional Cultural Day paid holiday.

We’re also investing in our communities. Thanks to our financial success, we’ve significantly increased the funding of the Paychex Foundation to nearly $20 million.5

We’re also leading the way in our efforts to help improve the environment. In addition to tracking and reducing carbon emissions from our owned and rented offices, we have approved goals and metrics for our plan to achieve net-zero greenhouse gas emissions by 2050, created an environmental management system, and adopted an official environmental policy. All of this is published in our 2022 Environmental Social and Governance Report.

Forbes 2022 the best employers for diversity

Diversity, equity, and inclusion (DEI) is also a major focus of our ESG efforts. In addition to earning recognition as one of The Best Employers for Diversity by Forbes, our board of directors approved a new nominating and ESG committee. Its charter includes assisting the board with identifying, evaluating, and recommending candidates for nomination for election to the board, as well as overseeing and improving the company’s ongoing corporate social responsibility (CSR) and ESG activities and performance.

5 Paychex 2022 ESG Report.

What’s next for Paychex?

What’s next for Paychex?

Martin headshot

MARTIN:

Chairman of the Board and Chief Executive Officer

We’re not taking our success for granted. We’re prepared to deliver an exceptional return in FY23 by anticipating what’s next in the world of work and delivering innovative solutions where HR, payroll, and benefits meet.

Our focus on our ERTC Service will continue by educating our existing client base and leveraging our service to attract new clients.

Paychex Flex will include completely redesigned modules for time and attendance, and recruiting and onboarding, to make them even easier for clients and their employees to use.

We’ll keep helping Paychex HR PEO clients recruit new employees with a full suite of benefits including traditional health, dental, vision, disability, and accident insurance, as well as voluntary benefits, part-time employee benefits, subsidies to help reduce student debt, and enhanced EAP and telemedicine offerings.

The integration of Flock Benefits Administration, by Paychex with Paychex Flex will let us provide advanced benefits capabilities for employers, administrators, and brokers.

We’re going to introduce the first hands-free payroll entry process — voice activated payroll — leveraging our integration with Google® smart speakers to make payroll processing quicker and easier for clients.

We’ll also be transitioning our real-time payments offering to allow clients to process payroll on the check date and fund employee direct deposit transactions within only eight seconds.

With 16,000 employees working together to innovate our technology and service solutions, Paychex is excited to continue to help our more than 730,000 clients thrive and grow in a changing remote work environment.

Paychex by the Numbers

Paychex by the Numbers

The story of Paychex began with payroll and tax services, but as these statistics show we’ve also become a leader in human resources, employee benefits, and technology through our all-in-one Paychex Flex platform. We’ve come a long way since our founding in 1971, and we’re excited about where our business is headed in FY23.

Payroll and Taxes
stat

1 in 12

U.S. Private Sector Workers Paid

Payroll and Taxes
stat

11 Million

Employee W-2s Created

Payroll and Taxes
stat

$8 Billion

in ERTC and Paid-Leave tax credits

Human Resources
stat

2 Million

Worksite Employees Supported by Paychex HR

Human Resources
stat

Nearly 30,000

HR Matters Addressed by Our HR Professionals

Human Resources
stat

700+

Paychex HR Professionals Providing HR Advice

Paychex Flex®
stat

1.7 Million

Employees Onboarded Electronically

Paychex Flex®
stat

2.4 Million

Monthly Paychex Flex Time Users

Paychex Flex®
stat

99.9%

Availability

Employee Benefits
stat

1.3 Million

Retirement Plan Participants

Employee Benefits
stat

Nearly 130,000

Insurance Clients — Top 30 U.S. Insurance Broker7

Employee Benefits
stat

11 Straight Years

— Largest 401(k) Recordkeeper in U.S. by Number of Plans6

Data on file as of May 31, 2022.

6 Largest 401(k) Recordkeeper by Number of Plans, PLANSPONSOR magazine, 2021.

7 Top 100 Brokers of U.S. Business, Business Insurance magazine, 2022.

Insurance is sold and serviced by Paychex Insurance Agency, Inc., 225 Kenneth Drive, Rochester NY 14623. CA license #0C28207.

Professional employer organization (PEO) services provided by Paychex Business Solutions, LLC (Florida employee leasing license GL7), Oasis Outsourcing, LLC (Florida employee leasing license GL42), and their affiliates, which are licensed or registered to provide PEO services where required by law.

Our Board Members

Our board fulfills its oversight responsibilities to the shareholders and the investment community through audit, compensation and leadership, corporate development advisory, executive, investment, and nominating and ESG committees.

Board of Directors

David J. S. Flaschen

Director

Joseph G. Doody

Director

Pamela A. Joseph

Director

Kevin A. Price

Director

Martin Mucci

Chairman of the Board and Chief Executive Officer

B. Thomas Golisano

Founder and Director

Kara Wilson

Director

Thomas F. Bonadio

Director

Joseph M. Tucci

Director

Joseph M. Velli

Director