ADP vs. Paychex: Comparing Key Metrics For The Two Largest Payroll Processing Companies

-0.49%
Downside
123
Market
122
Trefis
PAYX: Paychex logo
PAYX
Paychex

ADP (NASDAQ:ADP) and Paychex (NASDAQ:PAYX) are the two largest payroll processing and human resource management companies. With unemployment levels in the U.S. staying around an all-time low for several months now, the larger workforce in the country has boosted the prospects for human resource-related outfits. In the interactive dashboard – How Have Revenues For ADP & Paychex Changed Over Recent Years? Trefis analyzes how the businesses of ADP and Paychex have evolved over the last decade. In addition, here is more Trefis Internet & Software Services Data

How have total revenues for ADP and Paychex changed over the last decade?

  • ADP has added roughly $5.9 billion in revenues since 2008 – growing at an average annual rate of 6% – while Paychex’s revenue grew at an average rate of 5% adding roughly $1.3 billion over this period.
  • HR outsourcing services have been the primary growth driver for both the companies. ADP’s HR business has grown at an average rate of 14% while Paychex’s HR business was able to achieve a growth rate of 12%.
  • However, payroll processing continues to be the largest business for the companies. As of 2018, ADP’s payroll business contributed 67% to total revenues while the contribution of Paychex’s payroll business was 53%.

Relevant Articles
  1. Can Paychex Stock Recover To Its Pre-Inflation Shock Highs?
  2. Can Paychex Stock Recover To Its Pre-Inflation Shock Highs?
  3. With The Job Market Holding Up, What To Expect From Paychex Q2 Results?
  4. What To Expect From Paychex Q1 Results
  5. What’s Happening With Paychex Stock?
  6. Forecast Of The Day: Paychex Management Solutions Revenue

How has the number of Payroll Clients trended for ADP and Paychex?

  • ADP’s client base has increased from 560,000 in 2008 to 740,000 in 2018, growing at an average rate of 2.8%. On the other hand, Paychex could only add 80,000 clients over the last decade at an annual rate of roughly 1.3%.
  • ADP’s leadership position in the industry has also helped it achieve a better retention ratio than Paychex.

How does Average Payroll Processing Fees Compare For Two Companies?

  • ADP’s average payroll processing fee per client has increased at an average annual rate of 1.8% over the last decade. This increase is in line with the average U.S. inflation rate of 1.8% per year between 2009 and 2019
  • However, Paychex’s processing fees could only increase at 0.9%, or roughly half the average inflation rate in the U.S. over the last decade.
  • ADP’s average fee figure is significantly higher than that for Paychex as ADP’s clients are primarily large, U.S.-based organizations with more than 500 employees. Paychex focuses more on small- and medium-sized businesses

How does the number of worksite employees served compare for ADP and Paychex?

  • ADP has added more than 315,000 worksite employees over the last decade, growing at an average rate of more than 10%.
  • Paychex was able to add about 157,000 worksite employees – achieving an average growth rate of around 7.7%

How does revenue per worksite employee compare for Paychex and ADP?

  • ADP’s average revenue per worksite employee grew from $5,600 in 2008 to roughly $7,700 in 2018 while Paychex’s average revenue has grown from $3,300 in 2008 to over $5,000 in 2018.
  • Although, ADP charges a higher average fee from its clients, Paychex was able to grow its average fee at an average rate of 4.3% while ADP could only grow its fees by 3.2%.
  • As mentioned above, the difference between the average fees charged by the two companies is due to the type of clients served.

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance TeamsProduct, R&D, and Marketing Teams
All Trefis Data
Like our charts? Explore example interactive dashboards and create your own