How Supplementary Services Help ADP Improve Client Stickiness

by Trefis Team
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Automatic Data Processing (NASDAQ:ADP), the largest payroll processing and human resource services provider in the US, has over 600,000 clients comprising small (1-49 employees), major (50-999 employees) and national (1,000+ employees) businesses.

In the payroll processing business, client retention is a major driver that helps businesses increase revenues. Client retention is particularly important since it provides payroll processing providers with an annuity income. Although the switching costs between two service providers is already high, ADP focuses on providing many supplementary services to its clients, which help it maintain an even higher retention rate. All of these services are fully integrated with its payroll processing platforms, providing for greater ease of operation for the clients. As per our estimates, payroll processing constitutes over 78% of the value of ADP’s stock.

See our complete analysis of ADP here

ADP Vitality Wellness

The ADP Vitality Wellness program is aimed at major or midsized employers that have between 50 and 1,000 employees. It helps in educating and assisting employees to live a healthy lifestyle while it helps employers to proactively manage rising healthcare costs, reducing healthcare claims and employee absenteeism. [1] We estimate that this service would help ADP in tapping more midsized clients as shown in the graph below.

ADP Vitality Wellness is an incentive-based program which includes an interactive wellness portal, health reviews, biometric screenings and personalized wellness plans with recommended goals and activities. It also seamlessly integrates with social networking sites and mobile applications to additionally motivate employees as they pursue their wellness goals. When employees achieve their goals, they earn points that they can use to lower their health plan contributions.

According to a recent study by the ADP Research Institute, almost 67% of human resources decision makers in midsized companies believe that the rate of growth in health care will be higher in the next three years compared to the previous years. The ADP Research Institute is a specialized group within ADP that conducts independent data analytics and provides insights to leaders in both private and public sectors around issues of human capital management, employment trends and workforce strategy. [2]

National Seminar Series To Help Employers Manage Complexities Of The Affordable Care Act

ADP, in association with global law firm Proskauer Rose LLP, is conducting a national seminar series for employers titled “Travel the Affordable Care Act Continuum: Past, Present and Future Employer Impact.” These seminars touch upon the various requirements and details of the Affordable Care Act (ACA), including the key compliance deadlines. [3]

As stated in the press release, multiple aspects of human resources management – payroll processing, summary of benefits disclosures, and time and attendance tracking – are directly involved in complying with the ACA. Human resources and benefits professionals seek insight and expertise to help them meet the current and future needs of their organizations. ADP’s all-in-one human capital management solutions help these businesses effectively manage all of their human resources functions on a single platform, making it easier to comply with health care reform requirements.

As the largest taxpayer to the IRS on behalf of its clients and with more than six decades of experience helping clients manage their business processes, ADP is in a unique position to help employers successfully manage regulatory changes and stay in compliance with new mandates.

Cloud Based Functionality

ADP provides its clients with cutting-edge cloud-based human capital management (HCM) platforms. As per ADP, more than 40,000 organizations have experienced the ease of managing their human resources through its cloud-based technology. ADP’s unified HCM platform provides its clients with a sophisticated workforce management tool, which also helps them to comply with the Affordable Care Act and related regulations.

ADP has an integrated cloud functionality in its ADP Workforce Now for midsized organizations, ADP Vantage HCM for large organizations and ADP GlobalView for multinational organizations. This would help employers in mitigating risks, drive employee productivity and optimize the talent management process.

We currently have a $61 price estimate for ADP, which is approximately 7% below the current market price.

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Notes:
  1. ADP Vitality Wellness []
  2. ADP Research Institute []
  3. ADP Press Releases []
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  • commented 1 years ago
  • tags: PAYX ADP
  • I believe that client retention is a clear indication that an organization has it right.