Paychex Inc (PAYX)

Paychex Inc

Paychex, Inc. is a company which has been providing payroll services, human resource services as well as outsourcing solutions for small to medium-sized businesses since 1979. Paychex provides a host of products and services targeted to enable small and medium scale businesses meet their payroll and human resource needs.

Products and Services

Products and services offered by Paychex Inc include:

  1. Payroll tax administration
  2. Payroll processing and employee payment services
  3. New-hire reporting
  4. Human resource solutions
  5. Administration of retirement services
  6. Insurance
  7. Cloud-based time and workplace attendance solutions.

Here is a summary of how Paychex interacts with clients using these various services.

  1. Payroll

Paychex provides a number of payroll services. These include the computation, preparation, and delivery of the payroll cheques of employees, preparation of records of internal accounting, preparation of payroll tax returns for local, state and federal govts, as well as collection and remittance of payroll obligations of its clients. These payroll services are done using the company’s core payroll service or via the Major Market Services (MMS). Paychex’s MMS software integrates freely with other software services offered by Paychex. The various software can be used as cloud-based software and also as part of a PC-based system.

Paychex also provides a SaaS solution for administration of its human resource and payroll services. In addition, Paychex is able to provide a clocking system to monitor time worked for remote employees as well as attendance for on-site employees. This is done using Paychex’s Time and Labor Online software. The software automatically prepares timesheets, streamlines data entry, and improves worker productivity. Paychex also deploys the Expense Manager, which is a nsoftware that integrates both payroll as well expense management. This software can control the discretionary spending of clients as well as aid in preparation of expense reports online. Recruitment processes can also be monitored better.

Paychex also collects payroll taxes from clients’ bank accounts automatically, prepares and files tax returns, and remits same to the appropriate tax agencies.

  1. Human Resource Services

The Company offers human resource outsourcing solutions that provide businesses a full-service approach to the outsourcing of employer and employee administrative needs. The Company’s Paychex HR Solutions offering is available as an administrative services organization (ASO) and a professional employer organization (PEO). Both options offer 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. PEO services continue to be sold through the Company’s registered and licensed subsidiary, Paychex Business Solutions, Inc.

Paychex provides insurance services via its Paychex Insurance Agency, Inc. (PIA). Insurance is provided on property, workers’ compensation, commercial auto as well as health benefits.  Paychex HR Online is the Internet-based human resource management system offered by Paychex. Using this software, management of employee benefits and personnel information as well as reporting needs can be met. BeneTrac is Paychex’s software for management and administration of employee benefits administration system.


What is the Future for Paychex’s Investors?

Paychex recently announced its Q2 earnings which showed the following:

  1. a) 7% rise in net revenues to $722 million for Q2 as compared with a year before.
  2. b) Revenues from its payroll service rose 4% to $427 million year-on-year.
  3. c) Paychex’s human resource services revenues rose 11% year-on-year to $284 million. Growth of revenues for the human resource services are as a result of an increase in its outsourcing business for this market segment.

Overall, Paychex is seeing an increase in its client base, as more and more companies outsource their payroll services to cut costs. In addition, the provision of specialist payroll services has put Paychex in a prime position to get lots of these outsourcing contracts.

Paychex is also seeing an increase in revenue in its health insurance revenues, driven by the Patient Protection and Affordable Care Act (PPACA), which mandates many employers to provide health insurance to employees. Paychex’s new health insurance offering have capitalized on higher average premiums for insurance products, which have led to higher revenues.

Paychex is therefore looking at a solid growth phase for 2016 and discerning investors can tap into the positive outlook for this stock to trade it on the AG Markets platform.