What changed in Paychex's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Paychex's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+130 added−139 removedSource: 10-K (2023-07-14) vs 10-K (2022-07-15)
Top changes in Paychex's 2023 10-K
130 paragraphs added · 139 removed · 117 edited across 2 sections
- Item 1. Business+93 / −99 · 82 edited
- Item 1A. Risk Factors+37 / −40 · 35 edited
Item 1. Business
Business — how the company describes what it does
82 edited+11 added−17 removed25 unchanged
Item 1. Business
Business — how the company describes what it does
82 edited+11 added−17 removed25 unchanged
2022 filing
2023 filing
Biggest changeWe support our small-business clients, reducing the complexity and risk of running their own payroll, while ensuring greater accuracy with up-to-date tax rates and regulatory information. We simplify their payroll with a combination of our solutions and customer service options for a quick and easy payday.
Biggest changeWe believe client retention is a useful indicator of client satisfaction with our solutions and support. For fiscal 2023, client retention was in the range of 82% to 83% of our beginning client base. We support our small-business clients, reducing the complexity and risk of running their own payroll, while ensuring greater accuracy with up-to-date tax rates and regulatory information.
The Paychex Values are: Integrity Service Innovation Partnership Accountability Respect Each of these values guide our decision-making process and are critical to our ongoing success.
The Paychex Values are: Integrity Accountability Innovation Partnership Respect Service Each of these values guide our decision-making process and are critical to our ongoing success.
However, during our third fiscal quarter, which ends in February, the number of new payroll clients, new retirement services clients, and new worksite employees associated with our ASO and PEO businesses tends to be higher than during the rest of the fiscal year, primarily because many new clients prefer to start using our services at the beginning of a calendar year.
However, during our third fiscal quarter, which ends in February, the number of new payroll clients, new retirement services clients, and new worksite employees associated with our ASO and PEO businesses tends to be higher than during the rest of the fiscal year, primarily because many businesses prefer to start using our services at the beginning of a calendar year.
For each of the first three methods, we electronically collect net payroll from the clients’ bank accounts, typically one business day before payday, and provide payment to the employees on payday. Our Readychex service provides a cost-effective solution that offers the benefit of convenient, one-step payroll account reconciliation for employers.
For each of the first three methods, we electronically collect net payroll from the clients’ bank accounts, typically one business day before payday, and provide payment to the employees on payday. Our Readychex solution provides a cost-effective solution that offers the benefit of convenient, one-step payroll account reconciliation for employers.
These services provide plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. Auto enrollment is an optional plan feature that allows employers to automatically enroll employees in their company’s 401(k) plan and increase overall plan participation.
These solutions provide plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. Auto enrollment is an optional plan feature that allows employers to automatically enroll employees in their company’s 401(k) plan and increase overall plan participation.
Our large-market retirement services clients include relationships with financial advisors. • HR administration solutions: We offer cloud-based HR administration software for employee benefits management and administration, time and attendance solutions, recruiting, and onboarding. These services include: • Paychex HR Online offers powerful tools for managing employee personnel information, performance management, HR compliance and reporting.
Our large-market retirement services include relationships with financial advisors. • HR administration solutions: We offer cloud-based HR administration software solutions for employee benefits management and administration, time and attendance reporting, recruiting, and onboarding. These services include: • Paychex HR Online offers powerful tools for managing employee personnel information, performance management, HR compliance and reporting.
We also offer comprehensive solutions to help employers and employees with certain mandates under the Affordable Care Act (“ACA”), which sets forth specific coverage and reporting requirements that employers must meet. • HR Solutions (ASO): Our ASO offers businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative, among other services.
We also offer comprehensive solutions to help employers and employees with certain mandates under the Affordable Care Act (“ACA”), which sets forth specific coverage and reporting requirements that employers must meet. • HR solutions: Our ASO offers businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and both virtual and on-site availability of a professionally trained HR representative, among other services.
Employee Retention Tax Credit Service, which proactively helps businesses retroactively identify tax credits available under the COVID-19 Cares Act, based on wages already paid, and file amended returns to claim the credit. In addition, through partnerships with third-party providers, we provide clients opportunities for services such as payment processing services, financial fitness programs, and a small-business loan resource center.
Employee Retention Tax Credit Service, which proactively helps businesses retroactively identify tax credits available under the COVID-19 Cares Act, based on wages already paid, and file amended returns to claim the credit. In addition, through partnerships with third-party providers, we provide clients opportunities for solutions such as payment processing services, financial programs, and a small-business loan resource center.
When combined with our workflow and approval engine, we offer clients the flexibility to capture ongoing performance feedback, recommend and enroll employees in specific training courses, and leverage automated workflows to track progress and approve compensation changes tied to performance. • Digital communication solutions, including Paychex Flex HR Connect and HR Conversations, which helps strengthen connections and keep workers engaged no matter their work location.
When combined with our workflow and approval engine, we offer businesses the flexibility to capture ongoing performance feedback, recommend and enroll employees in specific training courses, and leverage automated workflows to track progress and approve compensation changes tied to performance. • Digital communication solutions, including Paychex Flex HR Connect and HR Conversations, which helps strengthen connections and keep workers engaged no matter their work location.
We provide leading-edge HCM technology solutions, coupled with human expertise, to make complex HR, payroll, and benefits issues simple for our clients.
We provide leading-edge HCM technology, coupled with human expertise, to make complex HR, payroll, and benefits issues simple for our clients.
We handle regulatory correspondence, amendments, and penalty and interest disputes. • Employee payment services: Our employee payment services provide an employer the option of paying their employees by direct deposit, payroll debit card, a check drawn on a Paychex account (Readychex ® ), or a check drawn on the employer’s account and electronically signed by us.
We handle regulatory correspondence, amendments, and penalty and interest disputes. • Employee payment solutions: Our employee payment solutions provide an employer the option of paying their employees by direct deposit, payroll debit card, a check drawn on a Paychex account (Readychex ® ), or a check drawn on the employer’s account and electronically signed by us.
HR Conversations enables managers and HR leaders to initiate communications with employees, and enhancements to performance assessments allow for 360-degree feedback digitally within the tool. • Benefits administration software that manages the employee-benefit enrollment process for both open-enrollment and life events. • Time and attendance products, including our integrated Paychex Flex Time software, provide timekeeping, scheduling, and workforce analytics.
HR Conversations enables managers and HR leaders to initiate communications with employees, and enhancements to performance assessments allow for 360-degree feedback digitally within the tool. • Benefits administration software solution that manages the employee-benefit enrollment process for both open-enrollment and life events. • Time and attendance solutions, including our integrated Paychex Flex Time software, provide timekeeping, scheduling, and workforce analytics.
We believe that our leading-edge technology and mobility applications, combined with personalized service provided by industry professionals and our technology-enabled service capabilities, distinguishes us from our competitors. Software Maintenance and Development The ever-changing mandates of federal, state, and local tax and regulatory agencies require us to regularly update our proprietary software to provide payroll and HR services to our clients.
We believe that our leading-edge technology and mobility applications, combined with personalized support provided by industry professionals and our technology-enabled solution capabilities, distinguishes us from our competitors. Software Maintenance and Development The ever-changing mandates of federal, state, and local tax and regulatory agencies require us to regularly update our proprietary software to provide payroll and HR services to our clients.
In addition, we have over 200 compliance professionals who are in real-time contact with tax agencies and regulators to understand upcoming or newly enacted laws and regulations and advocate for our clients’ interests.
In addition, we have over 250 compliance professionals who are in real-time contact with tax agencies and regulators to understand upcoming or newly enacted laws and regulations and advocate for our clients’ interests.
We have over 700 HR business professionals who are dedicated to our clients and have the experience and training to provide HR best practices and advice. Our HR business partners are available to provide our ASO and PEO clients with specific guidance on HR issues.
We have approximately 700 HR business professionals who are dedicated to our clients and have the experience and training to provide HR best practices and advice. Our HR business partners are available to provide our ASO and PEO clients with specific guidance on HR issues.
Our portfolio of solutions is comprised of the following: Management Solutions: • Payroll processing services: Our payroll processing services include the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; preparation of federal, state, and local payroll tax returns; and collection and remittance of clients’ payroll obligations. • Payroll tax administration services: Payroll tax administration services provide for accurate preparation and timely filing of quarterly and year-end tax returns, as well as the electronic transfer of funds to the applicable federal, state, and local tax or regulatory agencies.
Our portfolio of solutions is comprised of the following: Management Solutions: • Payroll processing solutions: Our payroll processing solutions include the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; preparation of federal, state, and local payroll tax returns; and collection and remittance of clients’ payroll obligations. 5 Table of Contents • Payroll tax administration solutions: Payroll tax administration solutions provide for accurate preparation and timely filing of quarterly and year-end tax returns, as well as the electronic transfer of funds to the applicable federal, state, and local tax or regulatory agencies.
This information aids the government in enforcing child support orders and minimizes fraudulent unemployment and workers’ compensation insurance claims. Our garnishment processing service provides deductions from employees’ pay, forwards payments to third-party agencies, including those that require electronic payments, and tracks the obligations to fulfillment. These services enable employers to comply with legal requirements and reduce the risk of penalties.
This information aids the government in enforcing child support orders and minimizes fraudulent unemployment and workers’ compensation insurance claims. Our garnishment processing solution provides deductions from employees’ pay, forwards payments to third-party agencies, including those that require electronic payments, and tracks the obligations to fulfillment. These solutions enable employers to comply with legal requirements and reduce the risk of penalties.
Sales and Marketing We market and sell our services primarily through our direct sales force based in the markets we serve. Our direct sales force includes sales representatives who have defined geographical territories and specialize within our portfolio of services. Our sales representatives are also supported by marketing, advertising, public relations, trade shows, and telemarketing programs.
Sales and Marketing We market and sell our solutions and support primarily through our direct sales force based in the markets we serve. Our direct sales force includes sales representatives who have defined geographical territories and specialize within our portfolio of solutions. Our sales representatives are also supported by marketing, advertising, public relations, trade shows, and telemarketing programs.
Clients can select services on an á la carte basis or as part of various product bundles. Our offerings often leverage the information gathered in our base payroll processing service, allowing us to provide comprehensive outsourcing services covering the HCM spectrum.
Clients can select solutions on an á la carte basis or as part of various solution bundles. Our offerings often leverage the information gathered in our base payroll processing service, allowing us to provide comprehensive outsourcing services covering the HCM spectrum.
The key features of our solutions are: • Comprehensive cloud-based platform optimized to meet the HR and payroll needs of small- and medium-sized organizations; • Streamlined workforce management that combines technology with flexible service options; • Modern, mobile, and intuitive user experience and self-service capabilities; • Scalable and customizable platform that allows clients the ability to add services as they grow; • Software as a service, or “SaaS”, delivery model that reduces total cost of ownership for our clients; and • Expertise in HR and payroll with our technology backed by over 200 compliance experts and more than 700 HR business professionals.
The key features of our solutions are: • Comprehensive cloud-based platform optimized to meet the HR and payroll needs of small- and medium-sized organizations; • Streamlined workforce management that combines technology with flexible support options; • Modern, mobile, and intuitive user experience and self-service capabilities; • Scalable and customizable platform that allows clients the ability to add services as they grow; • Software as a service, or “SaaS”, delivery model that reduces total cost of ownership for our clients; and • Expertise in HR and payroll with our technology backed by over 250 compliance experts and approximately 700 HR business professionals.
PEO and Insurance Solutions: • PEO solutions: Our licensed PEO subsidiaries offer businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative, among other services.
PEO and Insurance Solutions: • PEO solutions: Our licensed PEO subsidiaries offer businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and both virtual and on-site availability of a professionally trained HR representative, among other services.
We offer the PEO Protection Plus Package, which helps business owners protect their bottom line from unforeseen costs, including cyberattacks and employee lawsuits, as exposure to these risks rapidly increased due to the COVID-19 pandemic. • Insurance solutions: Our licensed insurance agency, Paychex Insurance Agency, Inc., provides insurance through a variety of carriers, allowing employers to expand their employee benefit and corporate offerings at an affordable cost.
We offer the PEO Protection Plus Package, which helps business owners protect their bottom line from unforeseen costs, including cyberattacks and employee lawsuits, as exposure to these risks rapidly increased during the COVID-19 pandemic and other economic concerns. • Insurance solutions: Our licensed insurance agency, Paychex Insurance Agency, Inc., provides insurance through a variety of carriers, allowing employers to expand their employee benefit and corporate offerings at an affordable cost.
Also, copies of our Annual Report to Stockholders and Proxy Statement, to be issued in connection with our 2022 Annual Meeting of Stockholders, will be made available, free of charge, upon written request submitted to Paychex, Inc., c/o Corporate Secretary, 911 Panorama Trail South, Rochester, New York 14625-2396. 11 Table of Contents
Also, copies of our Annual Report to Stockholders and Proxy Statement, to be issued in connection with our 2023 Annual Meeting of Stockholders, will be made available, free of charge, upon written request submitted to Paychex, Inc., c/o Corporate Secretary, 911 Panorama Trail South, Rochester, New York 14625-2396. 10 Table of Contents
Clients have the option of doing payroll online using our SaaS technology, outsourcing to our payroll specialists, or using a combination of those solutions. Payroll is then integrated with HCM software modules for clients who have more complex HR needs. We also provide comprehensive HR outsourcing through our administrative services organization (“ASO”) and PEO solutions.
Clients have the option of doing payroll online using our SaaS technology, outsourcing to our payroll specialists, or using a combination of these methods. Payroll is integrated with HCM software modules for clients who have more complex HR needs. We also provide comprehensive HR outsourcing through our administrative services organization (“ASO”) and PEO solutions.
Pay-on-demand functionality enables an employee to request access to a portion of earned pay before the scheduled pay date, which is deposited into a traditional bank account or a third-party account. 6 Table of Contents • Regulatory compliance services: We offer new-hire reporting services, which enable clients to comply with federal and state requirements to report information on newly hired employees.
Pay-on-demand functionality enables an employee to request access to a portion of earned pay before the scheduled pay date, which is deposited into a traditional bank account or a third-party account. • Regulatory compliance solutions: We offer new-hire reporting solutions, which enable clients to comply with federal and state requirements to report information on newly hired employees.
As a result of our commitment to these principles, in 2022 we were recognized by Ethisphere, a global leader in defining and advancing the standards of ethical business practices, as one of the World’s Most Ethical Companies. We have achieved this recognition 14 times, and consecutively since 2012.
As a result of our commitment to these principles, in 2023 we were recognized by Ethisphere, a global leader in defining and advancing the standards of ethical business practices, as one of the World’s Most Ethical Companies. We have achieved this recognition 15 times, and consecutively since 2012.
All required implementation, administration, compliance, claims processing and reimbursement, and coverage tests are provided with these services. We offer state unemployment insurance services, which provide clients with prompt processing for all claims, appeals, determinations, change statements, and requests for separation documents. 7 Table of Contents • Business services: We offer various business services for small- to medium-sized businesses.
All required implementation, administration, compliance, claims processing and reimbursement, and coverage tests are provided with these services. We offer state unemployment insurance solutions, which provide clients with prompt processing for all claims, appeals, determinations, change statements, and requests for separation documents. • Business services: We offer various business solutions for small- to medium-sized businesses.
Insurance offerings include property and casualty coverage such as workers’ compensation, business-owner policies, cyber security protection, commercial auto, and health and benefits coverage, including health, dental, vision, and life. Our insurance services simplify the insurance process to make it easy to find plans with the features and affordability to meet the client’s needs.
Insurance offerings include property and casualty coverage such as workers’ compensation, business-owner policies, cybersecurity protection, commercial auto, and health and benefits coverage, including health, dental, vision, and life. Our insurance solutions simplify the insurance process to make it easy to find plans with the features and affordability to meet the client’s needs.
The information contained on our website and in our CSR report is not and should not be viewed as being incorporated by reference into this Form 10-K. Our Employees: As of May 31, 2022, we employed approximately 16,000 people, primarily in the U.S. and on a full-time basis. None of our employees were covered by collective bargaining agreements.
The information contained on our website and in our ESG report is not and should not be viewed as being incorporated by reference into this Form 10-K. Our Employees: As of May 31, 2023, we employed approximately 16,600 people, primarily in the U.S. and on a full-time basis. None of our employees were covered by collective bargaining agreements.
Paychex HR Essentials is an ASO product that provides support to our clients over the phone or online to help manage employee-related topics. • Retirement solutions administration: Our retirement solutions product line offers a variety of options to clients, including 401(k) plans, 401(k) SIMPLE plans, SIMPLE IRAs, 401(k) plans with safe harbor provisions, owner-only 401(k) plans, Pooled Employer Plans, profit sharing plans, and money purchase plans.
Paychex HR Essentials is a lower touch solution that provides support to our clients over the phone or online to help manage employee-related topics. • Retirement solutions administration: Our retirement solutions line offers a variety of options to employers, including 401(k) plans, 401(k) SIMPLE plans, SIMPLE IRAs, 401(k) plans with safe harbor provisions, owner-only 401(k) plans, Pooled Employer Plans, profit sharing plans, and money purchase plans.
Paychex offers a wide range of solutions – including fully outsourced HR, HCM software, payroll processing, retirement and insurance solutions – allowing us to customize our offering to the client's business, whether it is small or large, simple, or complex.
Paychex offers a wide range of solutions – including HR outsourcing, HCM technology, payroll processing, retirement and insurance solutions – allowing us to customize our offering to the client's business, whether it is small or large, simple or complex.
We continue to invest in artificial intelligence and machine learning and self-service capabilities to allow clients and their employees easy, intuitive, and flexible service how, when, and where they want it. • Expanding our leadership in HR. We have a comprehensive suite of value-added HR solutions for our clients and their employees.
We continue to invest in artificial intelligence ("AI") and self-service capabilities to allow clients and their employees easy, intuitive, and flexible service how, when, and where they want it. 3 Table of Contents • Expanding our leadership in HR. We have a comprehensive suite of value-added HR solutions for our clients and their employees.
Paychex Flex Time also works with wearable technology to allow for employees to clock in and out using their smartwatch. • Applicant tracking suite provides technology that streamlines, simplifies, and drives the applicant workflow and onboarding process for companies of all sizes. • Other HR services and products: We offer the outsourcing of plan administration under section 125 of the Internal Revenue Code, allowing employees to use pre-tax dollars to pay for certain health insurance benefits and health and dependent care expenses not covered by insurance.
Paychex Flex Time also works with wearable technology to allow for employees to clock in and out using their smartwatch. • Applicant tracking suite provides technology solutions that streamline, simplify, and drive the applicant workflow and onboarding process for companies of all sizes. • Other HR solutions and support: We offer the outsourcing of plan administration under section 125 of the Internal Revenue Code, allowing employees to use pre-tax dollars to pay for certain health insurance benefits and health and dependent care expenses not covered by insurance.
Our retirement services product line offers many plan design options to meet the client’s requirements, as well as investment options. Description of Solutions Within our HCM solutions we offer a comprehensive portfolio of products and services that allow our clients to meet their diverse HR and payroll needs.
Our retirement services solutions offer many plan design options to meet the client’s requirements, as well as investment options. Description of Solutions Within our HCM solutions we offer a comprehensive portfolio of HCM technology and HR advisory solutions that allow our clients to meet their diverse HR and payroll needs.
We are also committed to rewarding employees with comprehensive and competitive wellness benefits and well-being programs which include medical, prescription, dental, and vision insurance, short- and long-term disability, employee assistance program, paid family leave, and a variety of well-being programs. For fiscal 2022, compensation-related expenses accounted for approximately 59% of our total expenses.
We are also committed to rewarding employees with comprehensive and competitive benefits and well-being package which includes medical, prescription, dental, and vision insurance, short- and long-term disability, employee assistance program, paid family leave, and a variety of well-being programs. For fiscal 2023, compensation-related expenses accounted for approximately 60% of our total expenses.
Paychex Flex HR Connect provides the ability to digitally submit questions, requests, and incident reports directly to HR through an easy-to-use workflow.
Paychex Flex HR Connect 6 Table of Contents provides the ability to digitally submit questions, requests, and incident reports directly to HR through an easy-to-use workflow.
We focus on helping small- to medium-sized businesses who do not have the resources or expertise to adapt to the constantly evolving environment.
We specialize in helping small- to medium-sized businesses who do not have the resources or expertise to adapt to the constantly evolving environment.
This is just one of the many ways we celebrate our unique heritages, and it reflects our Company's commitment to diversity, equity, and inclusion and flexibility. 10 Table of Contents Employee Engagement : We regularly ask our employees to share their views on working at Paychex through company-wide engagement surveys.
This is just one of the many ways we celebrate our unique heritages, and it reflects our Company's commitment to DE&I and flexibility. Employee Engagement : We regularly ask our employees to share their views on working at Paychex through company-wide engagement surveys.
We intend to strengthen and extend our position as a leading provider through continued investments in both our technology and service offerings. Key elements of our strategy include: • Providing industry-leading, integrated technology .
We intend to strengthen and extend our position as a leading provider through continued investments in both our innovative technology and HR advisory solutions. Key elements of our strategy include: • Providing industry-leading, integrated technology .
We are continually engaged in developing enhancements to and maintaining our various software platforms to meet the changing requirements of our clients and the marketplace. We continue to enhance our SaaS solutions and mobility applications to offer our users an integrated and unified experience. Continued enhancement of the client and client employee experience is important to our future success.
We are continually engaged in developing enhancements to and maintaining our various software platforms to meet the changing requirements of our clients and the marketplace. We continue to enhance our SaaS solutions and mobility applications to offer our users an integrated and unified experience.
Company Strategy Our mission is to be the leading provider of HCM solutions for HR, payroll, benefits, and insurance by being an essential partner to small- and medium-sized businesses across the U.S. and parts of Europe. We believe that success in this mission will lead to strong, long-term financial performance.
Company Strategy Our strategy is to be the leading provider of HCM solutions for HR, payroll, benefits, and insurance by being an essential partner to small- and medium-sized businesses. We believe that successfully executing this strategy will lead to strong, long-term financial performance.
We market our solutions through our direct and virtual sales forces which are supported by various corporate lead generation and marketing initiatives. Over 50% of our revenues are gained from our services beyond payroll processing. We focus on providing an industry-leading client experience.
We market our solutions through our direct and virtual sales forces which are supported by various corporate lead generation and marketing initiatives. Over 50% of our revenues are gained from our services beyond payroll processing.
In addition, medium-sized clients can utilize a relationship manager for more personalized service. This flexible platform services our small- to medium-sized clients and a portion of our PEO business. Within Paychex Flex there is embedded technology to assist clients.
In addition, medium-sized clients can utilize a relationship manager for more personalized service. This flexible platform services our small- to medium-sized clients and a portion of our PEO business. 4 Table of Contents Within Paychex Flex, we leverage embedded AI to assist our clients.
Organizations are faced with complex and ever-changing requirements, including diverse and complicated federal, state, and local regulations across multiple jurisdictions. In addition, the workplace is rapidly changing as employees increasingly become mobile, work remotely, and expect a user experience similar to consumer-oriented applications.
For any organization, a key function is effective HCM, which requires both resources and expertise. Organizations are faced with complex and ever-changing requirements, including diverse and complicated federal, state, and local regulations across multiple jurisdictions. In addition, the workplace is rapidly changing as employees increasingly become mobile, work remotely, and expect a user experience similar to consumer-oriented applications.
We continue to focus on sales productivity with the intent of expanding our market share across all our product lines. • Engaging in strategic acquisitions . In the past, we utilized acquisitions as a means to expand our portfolio, enter new markets or increase our scale.
We continue to focus on sales productivity with the intent of increasing our market share across all our solutions. • Engaging in strategic acquisitions . We utilize acquisitions, when appropriate, as a means to expand our portfolio, enter new markets or increase our scale.
We continue to evaluate and monitor potential acquisitions and will utilize this when the acquisition targets are in alignment with our overall strategy. Our Solutions Our solutions bring together payroll and HCM software with HR and compliance expertise, along with flexible, personalized, and technology-enabled service capabilities.
We will continue to evaluate and monitor potential acquisitions and target acquisitions that are in alignment with our overall strategy. Our Solutions Our solutions bring together payroll and HCM software with HR and compliance expertise, along with flexible, personalized, and technology-enabled support capabilities.
We continue to invest significantly in our award-winning Paychex Flex ® platform and mobility applications to increase efficiency and functionality for our clients and their employees. 3 Table of Contents • Increasing client satisfaction. Our flexible and technology-enabled service model allows us to provide a personalized experience for our clients and their employees.
We continue to invest significantly in our proprietary, award-winning Paychex Flex ® platform and mobility applications to maximize efficiency and functionality for our clients and their employees. • Delivering superior client experiences. Our flexible and technology-enabled service model allows us to provide a personalized experience for our clients and their employees.
Our wholly owned subsidiary, Paychex Advance, LLC, provides a portfolio of services to the temporary staffing industry, including payroll funding (via the purchase of accounts receivable) and outsourcing services, which include payroll processing, invoicing, and tax preparation. Paychex Promise, a subscription-based service, offers protection against payroll interruptions and solutions to address routine challenges of running a successful business.
Our wholly owned subsidiary, Paychex Advance, LLC, provides a portfolio of solutions to the temporary staffing industry, including payroll funding (via the purchase of accounts receivable) and outsourcing services, which include payroll processing, invoicing, and tax preparation.
The Paychex Flex Intelligence Engine includes the Flex Assistant, a customer service chatbot that can answer approximately 680 commonly asked questions and offer access to over 1,200 instructional resources. Our Paychex Flex Intelligence Engine allows clients to elect their preference for learning – via written how-to-documents, tutorial-style video vignettes, or a guided interactive tour.
Our Paychex Flex Intelligence Engine allows individual preference on learning style - via written how-to-documents, tutorial-style video vignettes, or a guided interactive tour. The Paychex Flex Intelligence Engine also includes the Flex Assistant, a customer service chatbot that can answer questions across thousands of topics and provides access to over 1,200 instructional resources.
We have not experienced a strike or similar work stoppage, and we consider our relations with our employees to be good. 9 Table of Contents Paychex Culture : Our core cultural values (“Paychex Values”) are designed to guide decision making aligned to the expectations of clients, stockholders, regulators, employees, and the multiple communities in which we operate and to reflect our continuing commitment to DE&I.
Paychex Culture : Our core cultural values (“Paychex Values”) are designed to guide decision making aligned to the expectations of clients, stockholders, regulators, employees, and the multiple communities in which we operate and to reflect our continuing commitment to DE&I.
We maintain procedures for events such as fires, severe weather, medical emergencies, and active shooters, as well as other important information related to general workforce safety. In recognizing the ever-growing diversity of our workplace, we announced the Paychex Culture Day in May 2022.
We maintain procedures for events such as fires, severe weather, medical emergencies, and active shooters, as well as other important information related to general workforce safety. In recognizing the ever-growing diversity of our workplace, we annually celebrate Paychex Culture Day. This is an additional paid day off for employees to celebrate and recognize a holiday that is significant to them.
Clients may choose to have our service team handle everything for them, or process payroll themselves utilizing our proprietary, robust SaaS Paychex Flex platform and our SurePayroll ® SaaS-based products.
We simplify their payroll with a combination of our solutions and customer support options for a quick and easy payday. Clients may choose to have our service team handle everything for them, or process payroll themselves utilizing our proprietary, robust SaaS Paychex Flex platform and our SurePayroll ® SaaS-based solutions.
Overview We are a leading human capital management (“HCM”) software and services company, offering integrated solutions for human resources (“HR”), payroll, benefits, and insurance services for small- to medium-sized businesses. We offer a comprehensive portfolio of technology solutions and services, supported by HR and compliance expertise, that help our clients address the evolving challenges of HR.
Overview We are a leading provider of human capital management (“HCM”) solutions for human resources (“HR”), payroll, benefits, and insurance for small- to medium-sized businesses and their employees across the U.S. and parts of Europe. We offer a comprehensive portfolio of HCM technology and HR advisory solutions that help our clients navigate the evolving challenges of HR.
Our solutions include industry leading HR technology for managing client's workforce along with comprehensive HR outsourcing delivered by over 700 HR business professionals. Our unique combination of industry leading HR Technology serviced by trained HR business professionals sets us apart in the industry.
Our solutions include industry leading HR technology with comprehensive HR outsourcing delivered by approximately 700 HR business professionals. Our unique combination of industry leading HR technology and HR advisory solutions sets us apart in the industry. • Growing our client base.
We are the second largest publicly traded provider of PEO services in the U.S. • Growing our client base. We believe we operate in a significantly under-penetrated and growing market, with significant potential to expand within our current target markets. We have invested significantly in new demand generation and sales tools and expanding certain areas of our sales force.
We believe we operate in a significantly under-penetrated and growing market, with untapped potential to expand within our current target markets. We have made substantial investments in new demand generation and sales tools and expanding certain areas of our sales force.
We believe our Paychex mobile applications add greater value and convenience for our clients and their employees by allowing them instant access on their mobile device, and we have experienced strong growth in mobile and self-service usage over the past year. We continue to invest in Paychex Flex, making significant enhancements designed to simplify the complexity of HR.
We believe our Paychex mobile solutions add greater value and convenience for our clients and their employees by allowing them instant access on their mobile device, and we have experienced strong growth in mobile and self-service usage over the past year. HR and Compliance Expertise: Paychex supports its HCM software solutions with 50+ years of experience.
While Paychex Flex is our primary SaaS-based platform utilized by the majority of our clients for their HCM needs, there are some clients that use other platforms, including SurePayroll clients, certain PEO clients, and some smaller tenured clients.
Both solutions allow users to process payroll when they want, how they want, and on any device (desktop, tablet, and mobile phone). While Paychex Flex is our primary SaaS-based platform utilized by the majority of our clients for their HCM needs, there are some clients that use other platforms, including SurePayroll clients, and certain PEO clients.
In addition, calendar year-end transaction processing and client funds activity are traditionally higher during our third fiscal quarter due to clients paying year-end bonuses, clients requesting additional year-end services, and the preparation and delivery of end-of year reporting requirements.
In addition, calendar year-end transaction processing and client funds activity are traditionally higher during our third fiscal quarter due to year-end bonus payments, additional year-end services, and the preparation and delivery of end-of year reporting requirements. Available Information We are subject to the informational and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The website allows us to market to existing and prospective clients that want to learn more about our products and services and offers information about our core lines of business: human resources (www.paychex.com/human-resources), payroll (www.paychex.com/payroll), benefits (www.paychex.com/employee-benefits), and insurance (www.paychex.com/business-insurance). 8 Table of Contents Paychex also builds on its reputation as an expert in the HCM industry by providing education and assistance primarily to clients and the CPA community.
The website allows us to market to existing and prospective clients that want to learn more about our solutions and support, and offers information about our core lines of business: human resources (www.paychex.com/human-resources), payroll (www.paychex.com/payroll), benefits (www.paychex.com/employee-benefits), and insurance (www.paychex.com/business-insurance).
For detailed information regarding our human capital activities, we encourage investors to visit our Corporate Responsibility website page at https://www.paychex.com/corporate/corporate-responsibility. We have also made our Corporate Social Responsibility (“CSR”) report available on our website.
We also created a new DE&I leadership position to ensure that our efforts in building and sustaining a diverse culture of inclusion are realized. For detailed information regarding our human capital activities, we encourage investors to visit our Corporate Responsibility website page at https://www.paychex.com/corporate/corporate-responsibility. We have also made our Environmental, Social and Governance (“ESG”) report available on our website.
This marks the ninth time Paychex has earned such recognition from the Business Group on Health. Our award-winning well-being initiatives offer a wide variety of services, tools, and resources that can help employees achieve their health goals using a holistic approach.
Our well-being program is a robust program focusing on the physical, emotional, community, career, and financial health of our employees. 9 Table of Contents Our award-winning well-being initiatives offer a wide variety of services, tools, and resources that can help employees achieve their health goals using a holistic approach.
In addition to traditional payroll processing and HR service providers, we compete with in-house payroll and HR systems and departments. Payroll and HR systems and software are sold by many vendors. Our products also compete with a variety of providers of HR services, such as retirement services companies, insurance companies, HR and benefits consulting firms, and national and regional PEOs.
Our solutions also compete with a variety of providers of HR services, such as retirement services companies, insurance companies, HR and benefits consulting firms, and national and regional PEOs.
Employee Well-being Initiatives: In addition to providing a comprehensive compensation and benefits package, we are committed to providing a safe and healthy workplace for our employees. Healthier employees are at lower risk of injury from workplace related exposures, perform work more safely with lower rates of absenteeism, and experience better job performance.
Employee Well-being Initiatives: In addition to providing a comprehensive compensation and benefits package, we are committed to providing a safe and healthy workplace for our employees.
These self-service capabilities allow for greater access and convenience for client employees and greater productivity for clients. Our Clients Paychex has HR solutions to fit the needs of any small- to medium-sized business, from do-it-yourself payroll to comprehensive HR outsourcing. The target market for our integrated HCM solutions is small- to medium-sized businesses.
Our Clients Paychex has HR solutions to fit the needs of any small- to medium-sized business, from do-it-yourself payroll to comprehensive HR outsourcing. The target market for our integrated HCM solutions is small- to medium-sized businesses. Within this space, we serve a diverse client base operating in a broad range of industries throughout the U.S. and parts of Europe.
HCM Technology: Paychex Flex is our proprietary HCM SaaS platform that unites HR, payroll, time and attendance, and benefits processes to maximize efficiency and savings. Paychex Flex helps clients manage the employee life cycle from recruiting and hiring to retirement, providing an integrated suite of solutions including recruiting, onboarding, HR, time and attendance and 4 Table of Contents employee benefits.
HCM Technology: Paychex Flex is our proprietary HCM SaaS platform that provides seamless workforce management throughout the employee life cycle from recruiting and hiring to retirement through an integrated suite of solutions including recruiting, onboarding, HR, time and attendance and employee benefits. It utilizes a single cloud-based platform, with single client and employee records.
Paychex ranked number five on the list, its highest-ever ranking after 21 consecutive appearances, including a number seven ranking in 2021. Comprehensive Compensation and Benefits: We are committed to providing a fair wage and a total rewards package that allows our employees to be their best in every area of their lives.
This is also the Company's 22 nd consecutive appearance on the list that identifies organizations that excel at training and employee development. Comprehensive Compensation and Benefits: We are committed to providing a fair wage and a total rewards package that allows our employees to be their best in every area of their lives.
It utilizes a single cloud-based platform, with single client and employee records. Clients can select the modules they need and easily add on services as they grow. In addition, Paychex Flex presents function-focused analytics throughout the platform, providing HR leaders with data to make more informed business decisions.
Clients can select the modules they need and easily customize solutions as they grow. In addition, Paychex Flex presents function-focused analytics throughout the platform, providing HR leaders with data to make more informed business decisions. Paychex Flex uses a device-independent design throughout the HCM suite, which allows full functionality of all application components, regardless of device or screen size.
We utilize service agreements and arrangements with clients that generally do not contain specified contract periods and may be terminated by either party with 30-days notice of termination. For fiscal 2022, client retention was at approximately 84% of our beginning client base, remaining near record levels.
The flexibility and scalability of our solutions allow our clients to select the best solution that meets their needs. We utilize service agreements and arrangements with clients that generally do not contain specified contract periods and may be terminated by either party with 30-days notice of termination.
Talent Acquisition and Development: We compete for talent along with our direct competitors and other companies in the geographic areas we serve. We invest significant resources to attract and retain top talent. Our Talent Acquisition Team, in conjunction with certain third-party partners, have developed comprehensive processes to identify and recruit accomplished professionals.
In addition, we were also recognized by Forbes as a Best Employer for Diversity for 2023. Talent Acquisition and Development: We compete for talent along with our direct competitors and other companies in the geographic areas we serve. We invest significant resources to attract and retain top talent.
Our current partnership agreement with the AICPA is in place through September 2023. We also partner with numerous state CPA society organizations. Our website is available at www.paychex.com. It is a cost-efficient channel that serves as a source of leads and new sales, while complementing the efforts of our direct and virtual sales forces.
It is a cost-efficient channel that serves as a source of leads and new sales, while complementing the efforts of our direct and virtual sales forces.
The integration of leading-edge technology and flexible service options allows us to meet our clients’ needs how, when, and where they want. As the global economy continues to evolve, we remain committed to helping our clients navigate the complexity of macroeconomic challenges, legislative changes, the COVID-19 pandemic, or other factors.
The integration of leading-edge technology and flexible support options allows us to meet our clients’ needs how, when, and where they want. We closely monitor the evolving challenges and needs of small- and medium-sized businesses, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they face.
Human Capital We believe our ability to attract and retain qualified employees in all areas of our business is critical to our future success and growth. We strive to foster a diverse, equitable, and inclusive (“DE&I”) workplace; attract, retain, and develop talented employees; and keep them safe.
Continued enhancement of the client and client employee experience is important to our future success. 8 Table of Contents Human Capital We believe our ability to attract and retain qualified employees in all areas of our business is critical to our future success and growth.
In addition to our direct selling and marketing efforts, we utilize other indirect sales channels such as our relationships with existing clients, certified public accountants (“CPAs”), and banks for new client referrals. More than 50% of our new small-market payroll clients (excluding business acquisitions) come from these referral sources.
Our virtual sales force manages inbound sales leads for the under twenty employee space, sales in areas without a direct sales force presence, and sales of various ancillary solutions. 7 Table of Contents In addition to our direct selling and marketing efforts, we utilize other indirect sales channels such as our relationships with existing clients, certified public accountants (“CPAs”), and banks for new client referrals.
Our internal database source indicates that in the U.S., there are approximately 8 million employer firms in our target markets. The market for HCM services is highly competitive and fragmented. We have one primary national competitor and we also compete with other national, international, regional, local, and online service providers.
Markets and Competition We remain focused on servicing small- to medium-sized businesses based upon the growth potential that we believe exists in the markets we serve. Our internal database source indicates that in the U.S., there are approximately 8 million employer firms in our target markets. The market for HCM services is highly competitive and fragmented.
Our corporate website, www.paychex.com, provides materials for investors and information about our services.
Therefore, we file periodic reports, proxy statements, and other information with the SEC. The SEC maintains a website (www.sec.gov) that includes our reports, proxy statements, and other information. Our corporate website, www.paychex.com, provides materials for investors and information about our services.
We maintain our corporate headquarters in Rochester, New York, and serve clients throughout the U.S. and parts of Europe. As of May 31, 2022, we served greater than 730,000 payroll and PEO clients. For any organization, a key function is effective HCM, which requires both resources and expertise.
Paychex was incorporated in Delaware in 1979 and has a fiscal year that ends May 31st. We maintain our corporate headquarters in Rochester, New York, and serve clients throughout the U.S. and parts of Europe. As of May 31, 2023, we served approximately 740,000 payroll and PEO clients.
Paychex WORX highlights our expertise and ability to help businesses of all sizes with a wide range of HR and financial information for current clients and prospects alike. We also track current regulatory issues that impact the business community and provide regulatory updates. We issue small business trend reports through our Paychex | IHS Markit Small Business Employment Watch.
We also track current regulatory issues that impact the business community and provide regulatory updates. We issue small business trend reports through our Paychex | IHS Markit Small Business Employment Watch. Our Paychex Accountant Knowledge Center is a free online resource available through our website that brings valuable information and time-saving online tools to accounting professionals.
Our dedicated business development group drives sales through banking, national associations, and franchise channels. We also utilize digital marketing as a means to market our services. We have a long-standing partnership with the American Institute of Certified Public Accountants (“AICPA”) as the preferred payroll provider for its AICPA Business Solutions TM Program.
More than 50% of our new small-market payroll clients (excluding business acquisitions) come from these referral sources. Our dedicated business development group drives sales through banking, national associations, and franchise channels. We also utilize digital marketing as a means to market our services.
Once hired, our world-class Training Department provides functional training for payroll and HCM specialists and sales associates and also offers personal training, professional development, and leadership-development programs. As a result of our efforts, we have been recognized as one of the top training organizations in the world with a 2022 Training APEX Award presented by Training magazine.
As a result of our efforts, we have been recognized as one of the top training organizations in the world with a 2023 Training APEX Award presented by Training magazine. Paychex ranked number five on the prestigious list for the second year.
We provide free webinars, podcasts, white papers, and other information on our website to inform existing and prospective clients on the impact of regulatory change as well as HR and business best practices. Paychex WORX, available at www.paychex.com/worx, is a digital destination for insightful resources useful for businesses at every stage, from entrepreneur to enterprise.
Paychex WORX, available at www.paychex.com/worx, is a digital destination for insightful resources useful for businesses at every stage, from entrepreneur to enterprise. Paychex WORX highlights our expertise and ability to help businesses of all sizes with a wide range of HR and financial information for current clients and prospects alike.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
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2022 filing
2023 filing
Biggest changeData Security and Privacy Leaks : We collect, use, and retain increasingly large amounts of personal information about our clients, employees of our clients, and our employees, including: bank account, credit card, and social security numbers, tax return 12 Table of Contents information, health care information, retirement account information, payroll information, system and network passwords, and other sensitive personal and business information.
Biggest changeBecause techniques used to obtain unauthorized access or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. 11 Table of Contents Data Security and Privacy Leaks : We collect, use, and retain increasingly large amounts of personal information about our clients, employees of our clients, and our employees, including: bank account, credit card, and social security numbers, tax return information, health care information, retirement account information, payroll information, system and network passwords, and other sensitive personal and business information.
Our clients may decrease their workforce, which would decrease their demand for our services. Because of spending constraints on our clients and competition in the industry, we may face pricing pressure on our services and face challenges in onboarding new clients, which would reduce revenue and ultimately impact our results of operations.
Our clients may decrease their workforce, which would decrease their demand for our services. Because of spending constraints on our clients and competition in the industry, we may face pricing pressure on our services and challenges in onboarding new clients, which would reduce revenue and ultimately impact our results of operations.
If they cease operations or file for bankruptcy protection, we may not be paid for services we already provided, and our client base will shrink, which will lower our revenue. If under financial pressure, our clients may determine that they are no longer willing to pay for the services and solutions we provide, which would reduce our revenue.
If they cease operations or file for bankruptcy protection, we may not be paid for services we already provided, and our client base will shrink, which will lower our revenue. If under financial pressure, our clients may determine that they are no longer willing to pay for the solutions and support we provide, which would reduce our revenue.
The Note Purchase and Guarantee Agreement (the “Agreement”) that we entered into in January 2019 in connection with our acquisition of Oasis Outsourcing Group Holdings, L.P. (“Oasis”), contains covenants which may restrict our flexibility to operate our business.
The Note Purchase and Guarantee Agreement (the “Agreement”) that we entered into in January 2019 in connection with our acquisition of Oasis Outsourcing Group Holdings, L.P., contains covenants which may restrict our flexibility to operate our business.
Failure by these service providers, for any reason, to deliver their services in a timely manner and in compliance with applicable laws and regulations could result in material interruptions to our operations, impact client relations, and result in significant penalties or liabilities to us. 13 Table of Contents We may be exposed to additional risks related to our co-employment relationship within our PEO business.
Failure by these service providers, for any reason, to deliver their services in a timely manner and in compliance with applicable laws and regulations could result in material interruptions to our operations, impact client relations, and result in significant penalties or liabilities to us. 12 Table of Contents We may be exposed to additional risks related to our co-employment relationship within our PEO business.
A change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to applicable tax or regulatory agencies could adversely impact interest income. 14 Table of Contents Certain of our debt agreements contain covenants that may constrain the operation of our business, and our failure to comply with these covenants could have a material adverse effect on our financial condition.
A change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to applicable tax or regulatory agencies could adversely impact interest income. 13 Table of Contents Certain of our debt agreements contain covenants that may constrain the operation of our business, and our failure to comply with these covenants could have a material adverse effect on our financial condition.
We could be subject to litigation or reputational risk if we or our third-party providers fail to utilize data practices sufficient to safeguard proprietary, confidential, or personal or identifying information.
We could be subject to litigation or reputational risk if we or our third-party providers fail to utilize data practices sufficient to safeguard proprietary, confidential, and personal or identifying information.
In the European Union, we are subject to the European Union’s General Data Privacy Regulation. Failure to comply with such laws and regulations could result in the imposition of consent orders or civil and criminal penalties, including fines, which could damage our reputation and have an adverse effect on our results of operations or financial condition.
Our European operations are subject to the European Union’s General Data Privacy Regulation. Failure to comply with such laws and regulations could result in the imposition of consent orders or civil and criminal penalties, including fines, which could damage our reputation and have an adverse effect on our results of operations or financial condition.
As part of providing services to clients, we rely on a number of third-party service providers. These service providers include, but are not limited to, couriers used to deliver client payroll checks, banks used to electronically transfer funds from clients to their employees, and information technology vendors servicing cloud-based platforms we use.
As part of providing services to clients, we rely on a number of third-party service providers. Service providers include, but are not limited to, couriers used to deliver client payroll checks, banks used to electronically transfer funds from clients to their employees, and information technology vendors servicing cloud-based platforms.
Many federal and state laws that apply to the employer-employee relationship do not specifically address the obligations and responsibilities of the “co-employment” relationship within our PEO business. State and federal positions regarding co-employment relationships are in a constant state of flux and changed with varying degrees of impact on our operations.
Many federal and state laws that apply to the employer-employee relationship do not specifically address the obligations and responsibilities of the “co-employment” relationship within our PEO business. State and federal positions regarding co-employment relationships are in a constant state of flux and change with varying degrees of impact on our operations.
To the extent that our intellectual property is not protected effectively by trademarks, copyrights, patents, or other means, other parties with knowledge of our intellectual property, including former employees, may seek to exploit our intellectual property for their own and others’ advantage. Competitors may also misappropriate our trademarks, copyrights or other intellectual property rights or duplicate our technology and products.
To the extent that our intellectual property is not protected effectively by trademarks, copyrights, patents, or other means, other parties with knowledge of our intellectual property, including former employees, may seek to exploit our intellectual property for their own and others’ advantage. Competitors may also misappropriate our trademarks, copyrights or other intellectual property rights or duplicate our technology and solutions.
We may experience software defects, undetected errors, and development delays, which could damage our relationship with clients, decrease our potential profitability and expose us to liability. Our products rely on software and computing systems that can encounter development delays, and the underlying software may contain undetected errors, viruses or defects.
We may experience software defects, undetected errors, and development delays, which could damage our relationship with clients, decrease our potential profitability and expose us to liability. Our solutions rely on software and computing systems that can encounter development delays, and the underlying software may contain undetected errors, viruses or defects.
Vulnerabilities, threats, and more sophisticated and targeted computer crimes pose a risk to the security of our systems and networks, and the confidentiality, availability, and integrity of our data. Furthermore, if any of our products contains a software vulnerability, the vulnerability may be exploited to obtain access to our data or our clients’ data.
Vulnerabilities, threats, and more sophisticated and targeted computer crimes pose a risk to the security of our systems and networks, and the confidentiality, availability, and integrity of our data. Furthermore, if any of our solutions contains a software vulnerability, the vulnerability may be exploited to obtain access to our data or our clients’ data.
The market for our products is characterized by rapid technological advancements, changes in customer requirements, frequent new product introductions and enhancements, and changing industry standards. To maintain our growth strategy, we must adapt and respond to technological advances and technological requirements of our clients.
The market for our solutions is characterized by rapid technological advancements, changes in customer requirements, frequent new product introductions and enhancements, and changing industry standards. To maintain our growth strategy, we must adapt and respond to technological advances and technological requirements of our clients.
Defects in our products and errors or delays caused by our products could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential clients, harm to our reputation and exposure to liability.
Defects in our solutions and errors or delays caused by our solutions could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential clients, harm to our reputation and exposure to liability.
The regulatory framework for privacy issues is rapidly evolving and future enactment of more restrictive laws, rules, or regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or restrictions on our business and noncompliance could result in regulatory penalties and significant legal liability.
The regulatory 14 Table of Contents framework for privacy issues is rapidly evolving and future enactment of more restrictive laws, rules, or regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or restrictions on our business and noncompliance could result in regulatory penalties and significant legal liability.
Any delays or failures caused by network outages, software or hardware failures, or other data processing disruptions, could result in our inability to provide services in a timely fashion or at all. The speed to closure of significant cyber security incidents may be influenced by the cooperation of governmental or law enforcement agencies.
Any delays or failures caused by network outages, software or hardware failures, or other data processing disruptions, could result in our inability to provide services in a timely fashion or at all. The speed to closure of significant cybersecurity incidents may be influenced by the cooperation of governmental or law enforcement agencies.
Our business is substantially dependent on our clients’ continued use of our solutions and services, and our results of operations will decline if our clients are no longer willing or able to use them. Our clients are sensitive to negative changes in economic conditions.
Additionally, our business is substantially dependent on our clients’ continued use of our solutions and support, and our results of operations will decline if our clients are no longer willing or able to use them. Our clients are sensitive to negative changes in economic conditions.
Our business continuity plan has been tested in the past by circumstances of severe weather, including hurricanes, floods, snowstorms, and rain storms and has been successful. However, these past successes are not an indicator of success in the future.
Our business continuity plan has been tested in the past by circumstances of severe weather, including hurricanes, floods, snowstorms, and rainstorms and has been successful. However, these past successes are not an indicator of success in the future.
In the event we receive negative publicity, our reputation and the value of our brand could be harmed, and clients may not use our products and services, which may have a material adverse effect on our business. We are committed to good corporate citizenship, which is reflected in our company culture and core values.
In the event we receive negative publicity, our reputation and the value of our brand could be harmed, and clients may not use our solutions and support, which may have a material adverse effect on our business. We are committed to good corporate citizenship, which is reflected in our company culture and core values.
In addition, refer to the cautionary note regarding forward-looking statements at the beginning of Part I of this Form 10-K. Business and Operational Risks We may not be able to keep pace with changes in technology or provide timely enhancements to our products and services.
In addition, refer to the cautionary note regarding forward-looking statements at the beginning of Part I of this Form 10-K. Business and Operational Risks We may not be able to keep pace with changes in technology or provide timely enhancements to our solutions and support.
In the U.S., we are subject to rules and regulations promulgated under the authority of the Federal Trade Commission, 15 Table of Contents the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, federal and state labor and employment laws, and state data breach notification and data privacy laws, such as the California Consumer Protection Act.
In the U.S., we are subject to rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, federal and state labor and employment laws, and state data breach notification and data privacy laws, such as the California Consumer Privacy Act, as amended.
While we have security systems and IT infrastructure in place designed to detect and protect against unauthorized access to such information, if our security measures are breached, our business could be substantially harmed, and we could incur significant liabilities.
While we have security systems and IT infrastructure in place designed to detect and protect against unauthorized access to such information, if our security measures are breached, either internally or externally, our business could be substantially harmed, and we could incur significant liabilities.
Our reputation, results of operations, or financial condition may be adversely impacted if we fail to comply with data privacy laws and regulations. Our services require the storage and transmission of proprietary and confidential information of our clients and their employees, including personal or identifying information, as well as their financial and payroll data.
Our reputation, results of operations, or financial condition may be adversely impacted if we fail to comply with data privacy laws and regulations. Our solutions require the storage and transmission of proprietary and confidential information of our clients and their employees, including personal or identifying information, as well as geolocation and biometric data.
Successful integration involves many challenges, including the difficulty of developing and marketing new products and services, our exposure to unforeseen liabilities of acquired companies, and the loss of key employees of an acquired business.
Successful integration involves many challenges, including the difficulty of developing and marketing new solutions and support, our exposure to unforeseen liabilities of acquired companies, and the loss of key employees of an acquired business.
Disclosure of our corporate governance practices including our environmental, social and governance (“ESG”) initiatives, may draw negative publicity from stakeholders. 17 Table of Contents Negative publicity relating to events or activities attributed to us, our policies, our corporate employees, or others associated with us, whether or not justified, may tarnish our reputation and reduce the value of our brand.
Disclosure of our corporate governance practices including our ESG initiatives, may draw negative publicity from stakeholders. Negative publicity relating to events or activities attributed to us, our policies, our corporate employees, or others associated with us, whether or not justified, may tarnish our reputation and reduce the value of our brand.
Our future success will depend on our ability to: enhance our current products and introduce new products in order to keep pace with products offered by our competitors; enhance capabilities and increase the performance of our internal systems, particularly our systems that meet our clients’ requirements; and adapt to technological advancements and changing industry standards.
Our future success will depend on our ability to: enhance our current solutions and introduce new solutions in order to keep pace with solutions offered by our competitors, including the successful utilization of artificial intelligence and machine learning solutions; enhance capabilities and increase the performance of our internal systems, particularly our systems that meet our clients’ requirements; and adapt to technological advancements and changing industry standards.
Our services are subject to various laws and regulations, including, but not limited to, the ACA and anti-money laundering rules. The growth of our international operations via acquisition also subjects us to additional risks, such as compliance with foreign laws and regulations.
Our services are subject to various laws and regulations, including, but not limited to, the SECURE Act 2.0, data privacy regulations, and anti-money laundering rules. The growth of our international operations also subjects us to additional risks, such as compliance with foreign laws and regulations.
We also invest our corporate funds in short- to intermediate-term instruments. Funds held for clients and corporate investments are subject to general market, interest rate, credit, and liquidity risks. These risks may be exacerbated during periods of unusual financial market volatility and inflationary pressure.
Funds held for clients and corporate investments are subject to general market, interest rate, credit, and liquidity risks. These risks may be exacerbated during periods of unusual financial market volatility and inflationary pressure.
Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and variability. These conditions may impact our business due to lower transaction volumes or an increase in the number of clients going out of business. Further, rising inflation may negatively impact our business, raise costs and reduce profitability.
Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and variability. Additionally, instability in the banking environment may adversely affect our business. These conditions may impact our business due to lower transaction volumes or an increase in the number of clients going out of business.
Current or potential clients may decide to reduce their spending on payroll and other outsourcing services. In addition, new business formation may be affected by an inability to obtain credit. We invest our funds held for clients in high quality, investment-grade marketable available-for-sale (“AFS”) securities, money markets, and other cash equivalents.
In addition, new business formation may be affected by an inability to obtain credit. 15 Table of Contents We invest our funds held for clients in high quality, investment-grade marketable available-for-sale (“AFS”) securities, money markets, and other cash equivalents. We also invest our corporate funds in short- to intermediate-term instruments.
Our applications are subject to various complex government laws and regulations on the federal, state, and local levels, including those governing personal privacy.
Certain solutions are enhanced with the use of artificial intelligence and machine learning. Our solutions are subject to various complex government laws and regulations on the federal, state, and local levels, including those governing personal privacy, as well as ethical considerations.
As a U.S. company, we are required to comply with the economic sanctions and embargo programs administered by the Office of Foreign Assets Control (“OFAC”) and similar multi-national bodies and governmental agencies worldwide, and the Foreign Corrupt Practices Act (“FCPA”).
We are required to comply with regulations administered by multi-national bodies and governmental agencies worldwide including, but not limited to, the economic sanctions and embargo programs administered by the Office of Foreign Assets Control (“OFAC”), and the Foreign Corrupt Practices Act (“FCPA”). OFAC places restrictions on the sale or export of certain products and services to certain countries and persons.
General Risk Factors Our business, results of operations, and financial condition may continue to be impacted by COVID-19 and other macroeconomic events and such impact could be materially adverse. The global spread of COVID-19 created significant volatility, uncertainty and economic disruption.
General Risk Factors Our business, results of operations, and financial condition may be impacted by macroeconomic and/or political factors of the U.S. and global economy and such impact could be materially adverse. We and our clients are subject to the impacts related to inflationary pressure, the recent instability of the banking environment, and other macroeconomic and/or political events.
Furthermore, security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting IT products and businesses. Because techniques used to obtain unauthorized access or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
Furthermore, security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting IT products and businesses.
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In addition, there has been and may continue to be a significant number of new laws and regulations promulgated by federal, state, local, and foreign governments following the outbreak of the COVID-19 pandemic. We have expended additional resources and incurred additional costs in addressing regulatory requirements applicable to us and our clients.
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Banking volatility may subject us and our clients to losses on uninsured funds and may make equity or debt financing more difficult to obtain, and additional equity or debt financing might not be available on reasonable terms, if at all.
Removed
These regulations may be unclear, difficult to interpret or in conflict with other applicable regulations. Failure to comply with laws and regulations could result in the imposition of consent orders or civil and criminal penalties, including fines, which could damage our reputation and have an adverse effect on our results of operations or financial condition.
Added
Further, rising inflation may negatively impact our business, raise costs and reduce profitability. Current or potential clients may decide to reduce their spending on payroll and other outsourcing services.
Removed
OFAC places restrictions on the sale or export of certain products and services to certain countries and persons, including most recently to Russia, Belarus, and portions of Ukraine.
Removed
The restrictions imposed to prevent the spread of COVID-19 disrupted economic activity, resulting in reduced commercial and consumer confidence and spending, increased unemployment, closure or restricted operating conditions for businesses, volatility in the global capital markets, instability in the credit and financial markets, labor shortages, regulatory relief for impacted consumers, disruption in supply chains, and restrictions on many hospitality and travel industry operations.
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Inflationary pressure, caused in part by the pandemic, is ongoing and may be compounded by the Russian invasion of Ukraine and the resulting impact on commodity prices and supply chains. 16 Table of Contents We are subject to the impacts related to the COVID-19 pandemic and inflationary pressure for so long as our clients are exposed to those heightened risks and uncertainties.