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What changed in Paychex's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Paychex's 2024 and 2025 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 2025 report.

+551 added−496 removedSource: 10-K (2025-07-11) vs 10-K (2024-07-11)

Top changes in Paychex's 2025 10-K

551 paragraphs added · 496 removed · 393 edited across 3 sections

Item 1. Business

Business — how the company describes what it does

57 edited+17 added−43 removed17 unchanged
Biggest changeOur 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. • 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.
Biggest changeClients can select the modules they need and easily customize solutions as they grow including Payroll, HR, Talent Acquisition, Talent Management, Benefits Administration and Workforce Management. • Payroll 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.
With access to numerous top national and regional insurance carriers, our professional insurance agents have access to a wide selection of plans from which they can best match the insurance needs of small businesses. Additionally, clients have the option to integrate their insurance plans with Paychex payroll processing for easy, accurate plan administration.
With access to numerous top national and regional insurance carriers, our professional insurance agents have access to a wide selection of plans from which they can best match the insurance needs of small businesses. Additionally, clients can integrate their insurance plans with Paychex payroll processing for easy, accurate plan administration.
We have over 650 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 over 650 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 guidance on HR issues.
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. We believe client retention is a useful indicator of client satisfaction with our solutions and support.
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. We believe client retention is a useful indicator of client satisfaction with our solutions and support.
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.
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 solutions.
Also, copies of our Annual Report to Stockholders and Proxy Statement, to be issued in connection with our 2024 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
Also, copies of our Annual Report to Stockholders and Proxy Statement, to be issued in connection with our 2025 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. 8 Table of Contents
Census data indicates that in the U.S., there are over 6 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.
Census data indicates that in the U.S., there are over 6 million employer firms in our target markets. The market for HCM solutions is highly competitive and fragmented. We have one primary national competitor and we also compete with other national, international, regional, local, and online payroll providers.
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.
However, during our third fiscal quarter, which ends in February, the number of new payroll clients, new retirement solutions clients, and new worksite employees associated with our HR Outsourcing businesses tends to be higher than during the rest of the fiscal year, primarily because many businesses prefer to start using our solutions at the beginning of a calendar year.
Paychex was incorporated in Delaware in 1979, maintains a corporate headquarters in Rochester, New York, and has a fiscal year that ends on May 31st. For any organization, a key function is effective HCM, which requires both resources and expertise.
Paychex was incorporated in Delaware in 1979, maintains a corporate headquarters in Rochester, New York, and has a fiscal year that ends on May 31st. For any organization, a key function is effective human capital management, which requires resources and expertise.
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; • Expertise in HR and payroll with our technology backed by approximately 250 compliance experts and over 650 HR business professionals; • Streamlined workforce management that combines technology with flexible, tech-enabled support options; • Modern, mobile, and intuitive user experience with 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 • Advanced data analytics and artificial intelligence (“AI”) capabilities powered by large data sets.
Key features of our solutions include: • Comprehensive cloud-based HCM platforms optimized to meet clients' HR and payroll needs; • Expertise in HR and payroll backed by approximately 250 compliance experts and over 650 HR business professionals; • Streamlined workforce management that combines technology with flexible, tech-enabled support options; • Modern, mobile, and intuitive user experience with self-service capabilities; • Scalable and customizable platforms that provide clients the flexibility to add solutions as they grow; • Software as a service, or “SaaS”, delivery model that reduces total cost of ownership for our clients; and • Advanced data analytics and artificial intelligence (“AI”) capabilities powered by large data sets.
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, 2024, we employed approximately 16,500 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 Corporate Responsibility report is not and should not be viewed as being incorporated by reference into this Form 10-K. Our Employees: As of May 31, 2025, we employed approximately 19,000 people, primarily in the U.S. and on a full-time basis. None of our employees were covered by collective bargaining agreements.
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. 9 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 employees’ unique heritages, and it reflects our Company's commitment to our staff. Employee Engagement : We regularly ask our employees to share their views on working at Paychex through company-wide engagement surveys.
Facilitated internally by our Human Resources Organizational Development Team, the survey methodology is periodically updated to reflect currents trends and issues including company direction and strategy, DE&I, individual development, collaboration, and our Paychex Values. A third-party administers the survey in order to maintain confidentiality of responses.
Facilitated internally by our Human Resources team, the survey methodology is periodically updated to reflect current trends and issues including company direction and strategy, inclusion, individual development, collaboration, and our Paychex Values. A third-party administers the survey to maintain confidentiality of responses.
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 2024, compensation-related expenses accounted for approximately 58% of our total expenses.
We are also committed to rewarding employees with a comprehensive, competitive benefits 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 the fiscal year ended May 31, 2025 (“fiscal 2025”), compensation-related expenses accounted for approximately 55% of our total expenses.
We offer the PEO Protection Plus Package, which helps business owners protect their bottom line from unforeseen costs, including cyberattacks and employee lawsuits. • 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 also provide insurance offerings which help business owners protect their bottom line from unforeseen costs, including cyberattacks and employee lawsuits. • 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.
Within this space, we serve a diverse client base operating in a broad range of industries throughout the U.S. and parts of Europe. The flexibility and scalability of our solutions allow our clients to select the best solution that meets their needs.
Our Clients We provide HCM solutions to a diverse client base operating in a broad range of industries throughout the U.S. and parts of Europe. The flexibility and scalability of our solutions enable our clients to select the best solution that meets their needs.
As a result of our commitment to these principles, in 2024 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 16 times, and consecutively since 2012.
As a result of our commitment to these principles, in 2025 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. Paychex is one of only three companies to have achieved this recognition 17 times, doing so consecutively since 2012.
We believe we are well positioned to capture the AI opportunity with large and growing data sets, 3 Table of Contents predictive analytics and AI models, and increased AI investments to improve efficiency, enhance the customer experience, and unlock new growth opportunities. • Engaging in strategic acquisitions .
We believe we are well positioned to capitalize on the AI opportunity with large and growing data sets, predictive analytics and AI models, and increased AI investments to improve efficiency, enhance the customer experience, and unlock new growth opportunities. • Pursuing strategic acquisitions .
Overview We are an industry-leading human capital management (“HCM”) company delivering a full suite of technology and advisory services in human resources (“HR”), employee benefit solutions, insurance, and payroll processing. As of May 31, 2024, we served greater than 745,000 small- to medium-sized businesses and their employees across the U.S. and parts of Europe.
Overview We are an industry-leading human capital management (“HCM”) company delivering a full suite of technology and advisory solutions in human resources (“HR”), employee benefit solutions, insurance, and payroll processing. As of May 31, 2025, we served approximately 800,000 clients and their employees across the U.S. and parts of Europe.
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.
PEO and Insurance Solutions: We provide comprehensive employment outsourcing and insurance solutions to best meet our clients’ needs. • PEO solutions: Our licensed PEO subsidiaries offer businesses a combined solution 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 solutions.
Paychex offers a full range of integrated HCM solutions from hire to retire for businesses and their employees that allows us to customize our offering to the client's business, whether it is small or large, simple or complex.
Paychex offers a full range of integrated HCM solutions from hire to retire for businesses and their employees that enables customization to the clients' businesses, whether it is small or large, simple or complex.
We believe 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.
In addition to traditional payroll processing and HR solution providers, we compete with in-house payroll and HR systems and departments. We believe our solutions also compete with a variety of providers of HR services, such as retirement solutions companies, insurance companies, HR and benefits consulting firms, and national and regional PEOs.
We believe that we have the breadth of solutions to cover the spectrum of the employee life cycle, but we also allow integrations with popular HR, accounting, point-of-sale, and productivity applications.
We believe that we have the breadth of solutions to cover the full spectrum of the employee life cycle, while also enabling integrations with popular HR, accounting, enterprise resource planning (“ERP”), and point-of-sale applications.
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). 7 Table of Contents Paychex also builds on its reputation as an expert in the HCM industry by providing education and assistance primarily to businesses and the CPA community.
The website enables us to market to existing and prospective clients that want to learn more about our solutions and support, and offers information about our core business solutions: human resources, payroll, benefits, and insurance. Paychex also builds on its reputation as an expert in the HCM industry by providing educational resources to our clients.
Organizations are faced with continuous evolution in employer-employee relations including: an increasing number and complexity of federal, state, and local regulations; changing workforce dynamics; and challenges attracting and retaining talent. The workplace is rapidly changing as employees increasingly become mobile, work remotely, and expect a user experience similar to consumer-oriented applications.
Organizations are faced with rapid evolution in employer-employee relations including: an increasing number and complexity of federal, state, and local regulations; changing workforce dynamics; and challenges attracting and retaining talent. Changing workplace dynamics reflect employees increasingly becoming mobile, working remotely, and expecting a user experience similar to consumer-oriented applications. We specialize in helping clients adapt to the rapidly evolving environment.
We market our solutions through a combination of direct and virtual sales forces and ecommerce solutions supported by various digital lead generation and multi-channel marketing initiatives. Over 50% of our revenues are from solutions other than payroll processing.
We market our solutions through a combination of direct and virtual sales forces supported by various digital lead generation and multi-channel marketing initiatives. Over 50% of our revenues are from solutions other than payroll processing. On April 14, 2025, we completed our acquisition of Paycor HCM, Inc. ("Paycor"), a leading provider of HCM, payroll and talent software.
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.
Sales and Marketing We market and sell our solutions primarily through our direct sales force based in the markets we serve. Our direct sales force includes field and inside sales representatives who specialize within our portfolio of solutions. Our sales representatives are also supported by marketing, advertising, public relations, and various other demand generation programs.
We provide a unique blend of innovative technology solutions, backed by our extensive compliance and HR expertise, that help customers more effectively hire, develop, and retain top talent in this challenging workforce environment.
For fiscal 2025, our client retention of Paychex clients was in the range of 82% to 83% of our beginning client base. Our Solutions We provide a unique blend of innovative technology solutions, backed by our extensive compliance and HR expertise, that help customers more effectively hire, develop, and retain top talent in this challenging workforce environment.
We also offer HR support to non-payroll clients through our HR Partner Plus solution. • 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.
We also offer HR support to non-payroll clients through our HR Partner Plus solution. • Retirement solutions: Our retirement solutions offer a variety of options to employers, including 401(k) plans, SIMPLE and SEP IRAs, and Pooled Employer Plans, among others.
Healthier employees are at lower risk of injury from workplace related exposures, perform work more safely with lower rates of absenteeism, experience better job performance, and can live their lives more fully outside of work. Our well-being program is a robust program focusing on the physical, emotional, community, career, and financial health of our employees.
Healthier employees are at lower risk of injury from workplace related exposures, perform work more safely with lower rates of absenteeism, experience better job performance, and can live their lives more fully outside of work.
We have not experienced a strike or similar work stoppage, and we consider our relations with our employees to be good. 8 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 belonging and engagement.
Clients may choose from a group of pre-defined fund selections or customize their investment options within their plan. We are the largest 401(k) recordkeeper for small businesses in the U.S.
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. Clients may choose from a group of pre-defined fund selections or customize their investment options within their plan. We are the largest 401(k) recordkeeper for small businesses in the U.S.
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.
Our large-market retirement solutions include relationships with financial advisors. • Funding solutions: We offer various funding solutions. 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).
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.
We have dedicated resources to ensure that our efforts in building and sustaining a safe and inclusive culture are realized. 6 Table of Contents 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 Responsibility report available on our website.
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: • Growing our client base and market share. We operate in a large and growing market, with significant potential to expand within our current target markets.
We believe that successfully executing this strategy will lead to strong, long-term financial performance. 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: • Growing our client base.
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.
Our powerful calculation engine enables fast and accurate payroll processing. We provide employers the option of paying their employees by direct deposit, payroll debit card, a check drawn on a Paychex account, or a check drawn on the employer’s account and electronically signed by us, or by ACH.
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 may face.
The integration of leading-edge technology and flexible support options enables us to meet our clients’ needs, from the tactical to the strategic. We closely monitor the evolving challenges and needs of our clients, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face.
We provide free webinars, podcasts, white papers, and other information on our website to inform businesses 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.
We provide free webinars, podcasts, white papers, and other information on our website to inform businesses on the impact of regulatory change as well as HR and business best practices. Paychex WORX and the Paycor HR Center for Excellence provide information on the latest trends, best practices, and industry benchmarks designed to drive business success.
Our Solutions Our solutions bring together payroll and HCM software with HR and compliance expertise, along with flexible, personalized, and technology-enabled support capabilities. Clients have the option of doing payroll online using our SaaS technology, outsourcing to our payroll specialists, or using a combination of these methods.
Clients have the option of processing 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.
This is also the Company's 23 rd 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.
After four consecutive years ranking among the top ten, Paychex was inducted into the Training Hall of Fame in 2025. 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.
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.
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”), benefit brokers, and banks for new client referrals. More than 50% of our payroll clients come from these referral sources. Our dedicated business development group drives sales through banking, national associations, and franchise channels.
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, we sponsor onsite health screenings, Red Cross blood donation events, flu vaccination clinics, vaping and tobacco cessation, weight management, resiliency training, meditation and yoga classes, and a variety of other programs.
In addition, we sponsor onsite health screenings, Red Cross blood donation events, flu vaccination clinics, vaping and tobacco cessation and weight management programs, meditation and yoga classes, and a variety of other programs. Our employees’ financial well-being is equally important, so we have developed programs for financial education and support.
In addition, we were also recognized by Forbes as a Best Employer for Diversity for 2024. 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.
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, has developed comprehensive processes to identify and recruit accomplished professionals.
We continually invest in new demand generation, sales tools, go-to-market strategies along with channel partnerships, eCommerce, and digital marketing. • Expand our share of wallet. We offer a full-suite of integrated solutions incorporating a unique combination of industry-leading HR technology and HR advisory solutions that sets us apart in the industry.
We operate in a large and growing market, with significant potential to expand within our current target markets. We continually invest in new demand generation, sales tools, go-to-market strategies along with channel partnerships, ecommerce, and digital marketing. • Expanding our share of wallet.
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 continue to enhance our SaaS solutions and mobile 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. 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.
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.
In addition, our Partner Portal provides brokers exclusive access to advanced HCM solutions, new revenue streams, and data-driven insights. Our corporate website is available at www.paychex.com , and is a cost-efficient channel that serves as a source of leads and new sales, while complementing the efforts of our direct, indirect, and virtual sales forces.
In addition, we have approximately 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.
Over the past year, top challenges for employers were macroeconomic pressures including inflation and interest rates, availability of qualified talent, providing appropriate employee development, keeping technology current, and ensuring legal and regulatory compliance. We have approximately 250 compliance professionals who are in real-time contact with tax agencies and regulators to understand upcoming or newly enacted laws and regulations.
Company Strategy Our strategy is to be the digitally driven HR leader, serving as an essential partner to small-to-medium sized businesses by providing them with the technology and advisory services they need for HR, payroll, benefits, and insurance. We believe that successfully executing this strategy will lead to strong, long-term financial performance.
The transaction aims to enhance the Company’s capabilities upmarket, expand its sales force and enhance its suite of AI-driven HCM solutions. 2 Table of Contents Company Strategy Our strategy is to be the digitally driven HR leader, serving as an essential partner to clients by providing them with the technology and advisory solutions they need for HR, payroll, benefits, and insurance.
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 workplace that encompasses diversity, equity, and inclusion (“DE&I”); attract, retain, and develop talented employees; and keep them safe.
We strive to foster a workplace that encompasses belonging and engagement and the ability to attract, retain, and develop talented employees; and keep them safe.
The contributions of these compliance experts are intended to ensure that our HCM solutions are updated in a timely fashion to adhere to applicable regulations and to help our clients stay in compliance.
The contributions of these compliance experts are intended to ensure that our HCM solutions are updated in a timely fashion to adhere to applicable regulations and to help our clients stay in compliance. 3 Table of Contents Management Solutions: We offer a comprehensive portfolio of HCM technology and HR advisory solutions that enable our clients to meet their diverse HR and payroll needs. • HCM technology: We deliver an integrated suite of HCM solutions through three technology platforms that enable seamless workforce management throughout the employee life cycle from recruiting and hiring to retirement.
Alterna Capital Solutions, LLC (“Alterna”), which was acquired in July 2023, offers funding to small businesses through the purchase of outstanding accounts receivable balances under non-recourse agreements. 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.
Alterna Capital Solutions, LLC (“Alterna”) offers funding to small businesses through the purchase of outstanding accounts receivable balances under non-recourse agreements.
Competition in the payroll processing and HR services industry is primarily based on service responsiveness, product quality and reputation, including ease of use and accessibility of technology, breadth of service and product offerings, and price. We believe we are competitive in each of these areas.
Competition in the HCM industry is primarily based on the breadth of offerings, technology, ease of use, integration with third-party applications, service model, and price. We believe we are competitive in each of these areas. Our leading-edge technology and mobile applications, combined with personalized support provided by industry professionals and our technology-enabled solution capabilities, differentiate us from our competitors.
Our leading-edge technology and mobility applications, combined with personalized support provided by industry professionals and our technology-enabled solution capabilities, differentiates 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.
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 HCM solutions to our clients. 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.
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 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. • Workforce management : Comprehensive workforce management solutions to optimize labor costs and enhance productivity through integrated time and attendance, scheduling, and labor management tools.
Our Talent Acquisition Team, in conjunction with certain third-party partners, have developed comprehensive processes to identify and recruit accomplished professionals. 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.
Once hired, our world-class Training Department provides functional training for service 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 by Training magazine.
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 monthly Paychex Small Business Employment Watch. Markets and Competition We remain focused on servicing clients based upon the growth potential that we believe exists in the markets we serve.
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. Our current partnership agreement with the AICPA is in place through September 2025. We also partner with numerous state CPA society organizations. Our website is available at www.paychex.com.
Complementing our direct sales, our Embedded HCM Solution partnerships efficiently extend our distribution while providing a modern, holistic solution to customers. We also utilize digital marketing to promote our solutions. 5 Table of Contents 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 ™ Program.
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We specialize in helping small- to medium-sized businesses who do not have the resources or expertise to adapt to the constantly evolving environment.
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We offer a full-suite of integrated solutions incorporating a unique combination of industry-leading HR technology and HR advisory solutions that sets us apart in the industry. We intend to continue to increase penetration across our HCM software, HR outsourcing, retirement, and insurance offerings. • Driving technology innovation .
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We intend to continue to increase penetration across our HCM software, HR outsourcing, retirement, insurance, and payments offerings. • Leveraging technology innovations . 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.
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We continue to invest significantly in our proprietary, award-winning HCM platforms to maximize efficiency and functionality for our clients and their employees. We have a robust product roadmap that is focused on enhancing our ability to address the needs of our customers and prospective customers.
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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. The integration of leading-edge technology and flexible support options allows us to meet our clients’ needs how, when, and where they want.
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We continue to invest in our technology, enhancing our solutions to continuously improve the customer and employee experiences from hire to retire. We also provide comprehensive HR outsourcing through our administrative services organization (“ASO”) and professional employer organization (“PEO”) solutions.
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In the fiscal year ended May 31, 2024 (“fiscal 2024”), top challenges for employers were macroeconomic pressures including inflation and interest rates, maintaining sufficient staffing levels, providing appropriate employee development, keeping technology current, and ensuring legal and regulatory compliance.
Added
SurePayroll serves the digitally driven small business self-service market. Paychex Flex is our proprietary HCM Software-as-a-Service (“SaaS”) platform for small and medium-sized businesses. Paycor is our primary SaaS-based HCM platform for larger businesses with more complex needs.
Removed
As businesses operate in a tight labor market, having an online portal for employee self-service that is intuitive and easy-to-use helps increase employee retention and efficiency for our customers. We continue to invest in our technology, enhancing our solutions to continuously improve the customer and employee experiences from hiring and onboarding through employee retention.
Added
We give employees flexibility to access earned pay before the scheduled pay date. • HR management: A comprehensive suite of HCM tools spanning HR, regulatory compliance, compensation management, employee surveys, expense management, reporting and analytics. Robust workflows and approval capabilities help leaders expedite and automate their most common tasks.
Removed
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.
Added
Digital communication and engagement solutions help strengthen connections and keep associates engaged. • Talent acquisition: Innovative set of tools designed to streamline and optimize the entire hiring process, from sourcing and attracting candidates to managing the recruiting process.
Removed
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.
Added
This all-in-one solution empowers HR teams to efficiently manage talent acquisition, improve time-to-hire, and make data-driven decisions to build a high-performing workforce. • Talent management: Powerful tools for managing employee development and retention, spanning performance management, HR compliance, career development, and reporting.
Removed
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 usage of our mobile and self-service capabilities continue to grow. HR and Compliance Expertise: Paychex augments its HCM software solutions with 50+ years of experience.
Added
Paychex integrates these capabilities within its core platform, providing features for job costing, labor distribution, and expense management for detailed control over operational spending.
Removed
Technology-Enabled Client Service: Paychex Flex also provides technology-enabled service with options that include self-service, a 24/7 dedicated service center, an individual payroll specialist, and integrated service via a multi-product service center. 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.
Added
For upmarket and enterprise clients, the offering emphasizes automation and analytics, featuring AI-powered labor forecasting, real-time overtime insights, and robust employee self-service capabilities for tasks like mobile punch-in and shift trading. • Benefits administration : Software that provides comprehensive benefit administration capabilities for streamlined plan set-up, configuration, and management.
Removed
Within Paychex Flex, we leverage embedded AI to assist our clients. Our Paychex Flex Intelligence Engine allows individual preference on learning style - via written how-to-documents, tutorial-style video vignettes, or guided interactive tours.
Added
It facilitates a simplified and engaging experience for employees during open enrollment and for life event-based changes through intuitive self-service tools. The platform supports a wide array of benefit types, including group health, FSA/HSA, and voluntary benefits, and includes features for compliance management, such as COBRA administration.
Removed
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. At any time, a live Paychex agent is just a click away, with the entire chat conversation available in real-time to provide a more personalized service experience.
Added
For seamless operations, it features robust reporting and analytics for administrators and ensures data accuracy through direct carrier connectivity, which automates the transfer of enrollment information to benefit carriers. • Partner marketplaces : Paychex Flex Perks is a curated digital marketplace for employee benefits, including early access to earned wages, financial wellness solutions, and voluntary lifestyle benefits.
Removed
The Flex Assistant consistently handles nearly two-thirds of questions that would otherwise reach a payroll/HR functionary or a customer service representative, with high satisfaction scores. 4 Table of Contents The platform embeds self-service capabilities that empower client employees to manage their HR and benefits information from any location, on any device.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIncreases in costs not incorporated into service fees timely or fully could have a material adverse effect on our results of operations. Incorporating cost increases into service fees could also impact our ability to attract and retain clients. We made and may continue to make acquisitions that involve numerous risks and uncertainties.
Biggest changeAlso, as a co-employer in the PEO, we assume or share many of the employer-related responsibilities associated with health care reform and recent efforts by local, state and federal governments to deregulate, which may result in increased costs. Increases in costs not incorporated into service fees timely or fully could have a material adverse effect on 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 solutions and support we provide, which would reduce our revenue.
If they cease operations or file for bankruptcy protection, we may not be paid for solutions 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., 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., also contains covenants which may restrict our flexibility to operate our business.
Third-parties, including vendors that provide services for our operations, could also be a source of security risk to us in the event of a failure of their own security systems and infrastructure.
Third-parties, including vendors that provide services for our operations, could also be a source of security and reputational risk to us in the event of a failure of their own security systems and infrastructure.
The regulatory framework for privacy, AI, and machine learning issues are 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 framework for privacy, AI, and machine learning 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.
Furthermore, if the third-party service providers we rely on are unable to perform their services for us and our clients, our operations could be materially disrupted, and we could face significant penalties or liabilities. 15 Table of Contents We may be adversely impacted by volatility in the political and economic environment.
Furthermore, if the third-party service providers we rely on are unable to perform their services for us and our clients, our operations could be materially disrupted, and we could face significant penalties or liabilities. 14 Table of Contents We may be adversely impacted by volatility in the political and economic environment.
We may not be able to attract and retain qualified people, which could impact the quality of our services and customer satisfaction. Our success, growth, and financial results depend in part on our continuing ability to attract, retain, and motivate highly qualified and diverse personnel at all levels, including management, technical, compliance, and sales personnel.
We may not be able to attract and retain qualified people, which could impact the quality of our solutions and customer satisfaction. Our success, growth, and financial results depend in part on our continuing ability to attract, retain, and motivate highly qualified and diverse personnel at all levels, including management, technical, compliance, and sales personnel.
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. 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.
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. 9 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, our employees, and other third parties, 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 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 solutions. Because of spending constraints on our clients and competition in the industry, we may face pricing pressure on our solutions and challenges in onboarding new clients, which would reduce revenue and ultimately impact our results of operations.
We and our clients are subject to the impacts related to inflationary pressure, changes in interest rates, potential instability of the banking environment, climate change-based obligations, and other macroeconomic and/or political events.
We and our clients are subject to the impacts related to inflationary pressure, economic instability, changes in interest rates, tariffs, potential instability of the banking environment, climate change-based obligations, and other macroeconomic and/or political events.
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.
Our European operations are subject to the European Union’s General Data Privacy Regulation. 13 Table of Contents 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.
The increasing velocity of disruptive innovations involving cyberattacks, security vulnerabilities, and Internet disruptions enabled by new and emerging technologies, such as advancements in AI and machine learning, may outpace our organization's ability to compete and/or manage the risk appropriately.
The increasing velocity of disruptive innovations involving cyberattacks, security vulnerabilities, unintended data exposure, and Internet disruptions enabled by new and emerging technologies, such as advancements in AI and machine learning, may outpace our organization's ability to compete and/or manage the risk appropriately.
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.
Disclosure of our corporate governance, responsibility, and sustainability practices, 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.
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.
Defects in our solutions, errors or delays caused by our solutions and generative AI solutions not working as anticipated 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.
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, bias, 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, including generative AI solutions, that can encounter development delays, complexities with integrating new technologies, and the underlying software may contain undetected errors, bias, viruses, or defects.
Further, 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. In addition, new business formation may be affected by an inability to obtain credit.
Further, inflation and uncertainty about tariff implementation may negatively impact our business and/or our clients' business, raise costs and reduce profitability. Current or potential clients may decide to reduce their spending on payroll and other outsourcing solutions. In addition, new business formation may be affected by an inability to obtain credit.
Data Loss and Business Interruption: If our systems are disrupted or fail for any reason, including Internet or systems failure, or if our systems are infiltrated by unauthorized persons, both the Company and our clients could experience data loss, financial loss, harm to reputation, or significant business interruption.
Data Loss and Business Interruption: If our systems are disrupted or fail for any reason, or if our systems are infiltrated by unauthorized persons, the Company, our clients and employees of our clients could experience data loss, financial loss, harm to reputation, or significant business interruption.
If the business continuity plan is unsuccessful in a disaster recovery scenario, we could potentially lose client data or experience material adverse interruptions to our operations or delivery of services to our clients. If that were to occur, there could be a material adverse effect on our business and results of operations.
If the business continuity plan is unsuccessful in a disaster recovery scenario, we could potentially lose client data or experience material adverse interruptions to our operations or delivery of services to our clients.
In addition, an acquisition could adversely impact cash flows and/or operating results, and dilute stockholder interests, for many reasons, including charges to our income to reflect the impairment of acquired intangible assets including goodwill, interest costs and debt service requirements for any debt incurred in connection with an acquisition, and any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current stockholders.
In addition, an acquisition could adversely impact cash flows and/or operating results, and dilute stockholder interests, for many reasons, including charges to our income to reflect the impairment of acquired intangible assets including goodwill, interest costs and debt service requirements for any debt incurred in connection with an acquisition, and any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current stockholders. 11 Table of Contents If the integration of any or all of our acquisitions or future acquisitions is not successful, it could have a material adverse impact on our operating results and stock price.
Failure to comply with anti-money laundering laws and regulations, which require us to develop and implement risk-based anti-money laundering programs, and maintain transaction records, could result in civil and criminal penalties and adversely impact our business reputation.
Failure to comply with anti-money laundering laws and regulations, including but not limited to the Bank Secrecy Act of 1970 (as amended), which require us to develop and implement risk-based anti-money laundering programs, and maintain transaction records, could result in civil and criminal penalties and adversely impact our business reputation.
Acquisitions subject us to risks, including increased debt, assumption of unforeseen liabilities, and difficulties in integrating operations. 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.
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.
We receive interest income from investing client funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees. 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 our interest income.
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 our interest income.
Service providers include, but are not limited to, banks used to electronically transfer funds from clients to their employees, information technology vendors servicing cloud-based platforms, and couriers used to deliver client payroll checks.
These third-party service providers include, but are not limited to, banks used to electronically transfer funds from clients to their employees, information technology vendors servicing cloud-based platforms, and other third-party providers supporting customer interactions.
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.
Failure by these service providers, or their respective outsourced 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.
If a significant number of our clients are unable to cover payments we make on their behalf or we are not able to collect purchased receivable balances, our results of operations and financial condition could be materially adversely impacted. 13 Table of Contents Our interest earned on funds held for clients may be impacted by changes in government regulations mandating the amount of tax withheld or timing of remittance.
If a significant number of our clients are unable to cover payments we make on their behalf or we are not able to collect purchased receivable balances, our results of operations and financial condition could be materially adversely impacted.
At the same time, the continued occurrence of high-profile cyber and ransomware attacks and data breaches provides evidence of an external environment increasingly hostile to information security. We may be particularly targeted for cyberattack because of the amount and type of personal and business information that we collect, use, and retain.
At the same time, the continued occurrence of high-profile cyber and ransomware attacks and data breaches provides evidence of an external environment increasingly hostile to information security.
We may be adversely impacted by any failure of third-party service providers to perform their functions. As part of providing services to clients, we rely on a number of third-party service providers.
If that were to occur, there could be a material adverse effect on our business and results of operations. 10 Table of Contents We may be adversely impacted by any failure of third-party service providers to perform their functions. As part of providing services to clients, we rely on a number of third-party service providers.
The enactment of new laws and regulations, modifications of existing laws and regulations, or the adverse application or interpretation of new or existing laws or regulations can adversely affect our business.
The growth of our international operations also subjects us to additional risks, such as compliance with foreign laws and regulations. The enactment of new laws and regulations, modifications of existing laws and regulations, or the adverse application or interpretation of new or existing laws or regulations can adversely affect our business.
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.
We may be exposed to additional risks related to our co-employment relationship within our PEO business. 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.
In addition, in the event of expiration or cancellation of existing contracts, we may not be able to secure replacement contracts on competitive terms, if at all. Also, as a co-employer in the PEO, we assume or share many of the employer-related responsibilities associated with health care reform, which may result in increased costs.
In addition, in the event of expiration or cancellation of existing contracts, we may not be able to secure replacement contracts on competitive terms, if at all.
We have in the past, and may in the future, make payments on our clients’ behalf for which we may not be reimbursed, resulting in loss to us. Similarly, our ability to operate our Purchased Receivable reporting unit is dependent on the ability of our clients' clients to remit their accounts receivable to us.
Similarly, our ability to operate our Purchased Receivable reporting unit is dependent on the ability of our clients' clients to remit their accounts receivable to us.
As part of our payroll processing service, we are authorized by our clients to transfer money from their accounts to fund amounts owed to their employees and various taxing authorities. It is possible that we could be held liable for such amounts in the event the client has insufficient funds to cover them.
Financial Risks Our clients could have insufficient funds to cover payments we made on their behalf, resulting in financial loss to us. As part of our payroll processing solutions, we are authorized by our clients to transfer money from their accounts to fund amounts owed to their employees and various taxing authorities.
Such changes could reduce or eliminate the need for some of our services and substantially decrease our revenue. The addition of complex added requirements could also increase our cost of doing business. Our business and reputation may be adversely impacted if we fail to comply with U.S. and foreign laws and regulations.
The addition of complex added requirements could also increase our cost of doing business. Our business and reputation may be adversely impacted if we fail to comply with U.S. and 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.
Many of our services, particularly payroll tax administration services, employee benefit plan administration services, and PEO services are designed according to government regulations that often change. Changes in regulations could affect the extent and type of benefits employers are required, or may choose, to provide employees or the amount and type of taxes employers and employees are required to pay.
Changes in regulations could affect the extent and type of benefits employers are required, or may choose, to provide employees or the amount and type of taxes employers and employees are required to pay. Such changes could reduce or eliminate the need for some of our services and substantially decrease our revenue.
We cannot predict when changes will occur or forecast whether any future changes will be favorable or unfavorable to our operations.
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. We cannot predict when changes will occur or forecast whether any future changes will be favorable or unfavorable to our operations.
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.
Our debt obligations may expose us to risks affecting the operation of our business, and our failure to address these risks could have a material adverse effect on our results of operations and financial condition. In April 2025, we issued $4.2 billion aggregate principal amount of fixed rate corporate debt (“Corporate Bonds”).
If we do not comply with these covenants, it could result in material adverse effects on our operating results and our financial condition. Legal, Regulatory and Political Risks Our business, services, and financial condition may be adversely impacted by changes in government regulations and policies.
If we do not comply with these covenants, it could result in material adverse effects on our operating results and our financial condition. Future acquisitions or transactions may bring us closer to the covenant thresholds previously outlined, potentially requiring further amendments to our credit facilities and debt obligations on less favorable terms.
If the integration of any or all of our acquisitions or future acquisitions is not successful, it could have a material adverse impact on our operating results and stock price. Financial Risks Our clients could have insufficient funds to cover payments we made on their behalf, resulting in financial loss to us.
It is possible that we could be held liable for such amounts in the event the client has insufficient funds to cover them. We have in the past, and may in the future, make payments on our clients’ behalf for which we may not be reimbursed, resulting in loss to us.
Removed
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.
Added
We may be particularly targeted for cyberattack because of the amount and type of personal and business information that we collect, use, and retain, as well as during and after periods in which we acquire other companies.
Removed
In the U.S., we are subject to rules and regulations promulgated under the authority of the Federal Trade 14 Table of Contents 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.
Added
Incorporating cost increases into service fees could also impact our ability to attract and retain clients. We may not realize the expected financial or business benefits from the Paycor acquisition.
Added
The integration of Paycor into our existing operations may present challenges aligning disparate technology platforms, operational systems, and may divert management’s attention away from day-to-day operational responsibilities to managing the integration. Compatibility issues may arise between our respective infrastructures, potentially delaying performance enhancements and straining our technical resources.
Added
Additionally, financial performance of acquired businesses may not meet pre-acquisition projections potentially affecting our consolidated results of operations, financial position and return on investment. While we have devised comprehensive strategies to address the integration complexities and maintain our strategic focus, the risks associated with unforeseen hurdles could affect our ability to achieve expected synergies and strategic growth targets.
Added
We made and may continue to make acquisitions that involve numerous risks and uncertainties. Acquisitions subject us to risks, including increased debt, assumption of unforeseen liabilities, and difficulties in integrating operations.
Added
Our interest earned on funds held for clients may be impacted by changes in government regulations mandating the amount of tax withheld or timing of remittance. We receive interest income from investing client funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees.
Added
We used the net proceeds from this offering to fund our acquisition of Paycor. Refer to Note N of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of our Corporate Bonds.
Added
Our Corporate Bonds include certain covenants which may limit our ability to create liens on our assets, enter into sale and leaseback transactions, and merge or consolidate with another entity, subject to certain exceptions, limitations and qualifications as outlined in the Corporate Bond indenture.
Added
Our ability to make scheduled debt payments or to refinance our outstanding debt obligations depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic, and other factors that are beyond our control, including those discussed in this Risk Factors section.
Added
We may not be able to maintain a sufficient level of cash flow from operating activities to permit us to pay the principal and interest on any outstanding indebtedness.
Added
Any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which would also harm our ability to incur additional indebtedness.
Added
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, or seek to restructure or refinance our indebtedness. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more restrictive covenants.
Added
If we are unable to restructure or refinance our indebtedness on favorable terms, if necessary, our operating results and financial condition could be materially adversely impacted. 12 Table of Contents Change in our credit ratings could adversely impact our results of operations and lower our profitability.
Added
The major credit rating agencies periodically evaluate our creditworthiness and have given us a strong, investment-grade long-term debt rating. Our credit ratings depend on our performance and can also be impacted by events beyond our control, such as macroeconomic and/or political factors of the U.S. and global economy.
Added
Failure to maintain high credit ratings could increase the cost of short-term borrowing which would lower our profitability, reduce our ability to obtain short-term borrowing periodically required by our business, and adversely impact our competitive position, results of operations, and financial condition.
Added
Legal, Regulatory and Political Risks Our business, services, and financial condition may be adversely impacted by changes in government laws and regulations. Many of our services, particularly payroll tax administration services, employee benefit plan administration services, and PEO services are designed according to government regulations that often change.
Added
In the U.S., we are or may be subject to, oversight by various regulatory authorities, including but not limited to the Federal Trade Commission and Department of labor.
Added
We must also comply with such laws as the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, and the Patient Protection and Affordable Care Act of 2010 (as amended).
Added
Additionally, we must also comply with federal and state labor and employment laws, and state data breach notification and data privacy laws, such as the California Consumer Privacy Act, and biometric information privacy laws all as amended.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

298 edited+122 added−58 removed173 unchanged
Biggest changeCONSOLIDATED STATEMENTS OF ST OCKHOLDERS’ EQUITY In millions, except per share amounts Accumulated Additional other Common stock paid-in Retained comprehensive Shares Amount capital earnings income/(loss) Total Balance as of May 31, 2021 359.8 $ 3.6 $ 1,446.7 $ 1,445.9 $ 51.8 $ 2,948.0 Net income — — — 1,392.8 — 1,392.8 Unrealized losses on securities, net of $ 53.1 million in tax benefit — — — — ( 162.3 ) ( 162.3 ) Reclassification adjustment for realized gains on securities, net of $ 0.1 million in tax expense (1) — — — — ( 0.1 ) ( 0.1 ) Dividends declared ($ 2.77 per share) — — — ( 1,000.1 ) — ( 1,000.1 ) Repurchases of common shares (2) ( 1.2 ) ( 0.0 ) ( 5.2 ) ( 140.0 ) — ( 145.2 ) Stock-based compensation — — 52.8 — — 52.8 Foreign currency translation adjustment (3) — — — — ( 23.3 ) ( 23.3 ) Activity related to equity-based plans 1.3 — 51.6 ( 29.0 ) — 22.6 Balance as of May 31, 2022 359.9 3.6 1,545.9 1,669.6 ( 133.9 ) 3,085.2 Net income — — — 1,557.3 — 1,557.3 Unrealized losses on securities, net of $ 12.2 million in tax benefit — — — — ( 36.6 ) ( 36.6 ) Reclassification adjustment for realized losses on securities, net of $ 2.5 million in tax benefit (1) — — — — 7.4 7.4 Dividends declared ($ 3.26 per share) — — — ( 1,175.5 ) — ( 1,175.5 ) Repurchases of common shares (2) — — — — — — Stock-based compensation — — 62.6 — — 62.6 Foreign currency translation adjustment (3) — — — — 3.2 3.2 Activity related to equity-based plans 0.6 0.0 17.9 ( 28.3 ) — ( 10.4 ) Balance as of May 31, 2023 360.5 3.6 1,626.4 2,023.1 ( 159.9 ) 3,493.2 Net income — — — 1,690.4 — 1,690.4 Unrealized gains on securities, net of $ 2.6 million in tax expense — — — — 7.6 7.6 Reclassification adjustment for realized losses on securities, net of $ 0.7 million in tax benefit (1) — — — — 2.0 2.0 Dividends declared ($ 3.65 per share) — — — ( 1,315.4 ) — ( 1,315.4 ) Repurchases of common shares (2) ( 1.5 ) ( 0.0 ) ( 6.2 ) ( 163.0 ) — ( 169.2 ) Stock-based compensation — — 61.1 — — 61.1 Foreign currency translation adjustment (3) — — — — 5.2 5.2 Activity related to equity-based plans 1.1 0.0 48.2 ( 22.1 ) — 26.1 Balance as of May 31, 2024 360.1 $ 3.6 $ 1,729.5 $ 2,213.0 $ ( 145.1 ) $ 3,801.0 (1) Reclassification adjustments out of accumulated other comprehensive income/(loss) for realized (losses)/gains, net of tax, on the sale of available-for-sale (“AFS”) securities are reflected in interest on funds held for clients and other income/(expense), net on the Consolidated Statements of Income and Comprehensive Income.
Biggest changeCONSOLIDATED STATEMENTS OF ST OCKHOLDERS’ EQUITY In millions, except per share amounts Accumulated other comprehensive loss Total Net accumulated Additional unrealized Cash Foreign other Common stock paid-in Retained loss on AFS flow currency comprehensive Shares Amount capital earnings securities hedges translation income/(loss) Total Balance as of May 31, 2022 359.9 $ 3.6 $ 1,545.9 $ 1,669.6 $ ( 101.1 ) $ — $ ( 32.8 ) $ ( 133.9 ) $ 3,085.2 Net income — — — 1,557.3 — — — — 1,557.3 Unrealized losses on securities, net of $ 12.2 million in tax benefit — — — — ( 36.6 ) — — ( 36.6 ) ( 36.6 ) Reclassification adjustment for realized gains on securities, net of $ 2.5 million in tax benefit (1) — — — — 7.4 — — 7.4 7.4 Dividends declared ($ 3.26 per share) — — — ( 1,175.5 ) — — — — ( 1,175.5 ) Repurchases of common shares (2) — — — — — — — — — Stock-based compensation — — 62.6 — — — — — 62.6 Foreign currency translation adjustment — — — — — — 3.2 3.2 3.2 Activity related to equity-based plans 0.6 0.0 17.9 ( 28.3 ) — — — — ( 10.4 ) Balance as of May 31, 2023 360.5 3.6 1,626.4 2,023.1 ( 130.3 ) — ( 29.6 ) ( 159.9 ) 3,493.2 Net income — — — 1,690.4 — — — — 1,690.4 Unrealized gains on securities, net of $ 2.6 million in tax expense — — — — 7.6 — — 7.6 7.6 Reclassification adjustment for realized losses on securities, net of $ 0.7 million in tax benefit (1) — — — — 2.0 — — 2.0 2.0 Dividends declared ($ 3.65 per share) — — — ( 1,315.4 ) — — — — ( 1,315.4 ) Repurchases of common shares (2) ( 1.5 ) ( 0.0 ) ( 6.2 ) ( 163.0 ) — — — — ( 169.2 ) Stock-based compensation — — 61.1 — — — — — 61.1 Foreign currency translation adjustment — — — — — — 5.2 5.2 5.2 Activity related to equity-based plans 1.1 0.0 48.2 ( 22.1 ) — — — — 26.1 Balance as of May 31, 2024 360.1 3.6 1,729.5 2,213.0 ( 120.7 ) — ( 24.4 ) ( 145.1 ) 3,801.0 Net income — — — 1,657.3 — — — — 1,657.3 Unrealized gains/(losses), net of $ 26.4 million in tax expense — — — — 81.9 ( 19.2 ) — 62.7 62.7 Reclassification adjustment to earnings, net of $ 0.1 million in tax benefit (1) — — — — 0.3 19.2 — 19.5 19.5 Dividends declared ($ 4.02 per share) — — — ( 1,448.7 ) — — — — ( 1,448.7 ) Repurchases of common shares (2) ( 0.8 ) ( 0.0 ) ( 4.0 ) ( 100.5 ) — — — — ( 104.5 ) Stock-based compensation — — 111.8 — — — — — 111.8 Fair value of awards included in transaction consideration — — 15.9 — — — — — 15.9 Foreign currency translation adjustment — — — — — — 9.2 9.2 9.2 Activity related to equity-based plans 1.2 0.0 47.9 ( 44.1 ) — — — — 3.8 Balance as of May 31, 2025 360.5 $ 3.6 $ 1,901.1 $ 2,277.0 $ ( 38.5 ) $ — $ ( 15.2 ) $ ( 53.7 ) $ 4,128.0 (1) Reclassification adjustments out of accumulated other comprehensive income/(loss) for realized (losses)/gains, net of tax, on the sale of available-for-sale (“AFS”) securities are reflected in interest on funds held for clients and other income/(expense), net on the Consolidated Statements of Income and Comprehensive Income.
Professional Employer Organization (PEO) Insurance Reserves - Workers’ Compensation Insurance Reserves As described in Note A to the consolidated financial statements, the Company offers workers’ compensation insurance to clients for the benefit of client employees. Workers’ compensation insurance is primarily provided under fully insured high deductible workers’ compensation insurance policies.
Professional Employer Organization (PEO) Workers’ Compensation Insurance Reserves As described in Note A to the consolidated financial statements, the Company offers workers’ compensation insurance to clients for the benefit of client employees. Workers’ compensation insurance is primarily provided under fully insured high deductible workers’ compensation insurance policies.
The estimated ultimate losses are primarily based upon loss development factors, and other factors such as the nature of employees’ job responsibilities, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.
The estimated ultimate losses are primarily based upon loss development factors, and other factors such as the nature of employees’ job responsibilities, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.
The assets related to both costs to obtain and costs to fulfill contracts with clients are capitalized and amortized using an accelerated method over an eight-year life to closely align with the pattern of client attrition over the estimated life of the client relationship.
The assets related to both costs to obtain and costs to fulfill contracts with clients are capitalized and amortized using an accelerated method over an eight-year life to closely align with the pattern of client attrition over the estimated life of the client relationship.
The estimated ultimate losses are primarily based upon loss development factors, and other factors such as the nature of employees’ job responsibilities, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.
The estimated ultimate losses are primarily based upon loss development factors, and other factors such as the nature of employees’ job responsibilities, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.
The assumptions of volatility, expected option life, and forfeitures all require significant judgment and are subject to change in the future due to factors such as employee exercise behavior, stock price trends, and changes to type or provisions of stock-based awards.
The assumptions of volatility, expected option life, and forfeitures all require significant judgment and are subject to change in the future due to factors such as employee exercise behavior, stock price trends, and changes to type or provisions of stock-based awards.
The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board of Directors; • Decrease in client fund obligations related to the timing of collections and remittances of semi-weekly tax payments that were deferred at the end of fiscal 2023 as a result of the Memorial Day holiday; and • Repurchases of 1.5 million shares of our common stock at a weighted-average price of $115.37.
The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board; • Decrease in client fund obligations related to the timing of collections and remittances of semi-weekly tax payments that were deferred at the end of fiscal 2023 as a result of the Memorial Day holiday; and • Repurchases of 1.5 million shares of our common stock at a weighted-average price of $115.37.
Subject to these factors and under normal financial market conditions, a 25-basis-point change in taxable interest rates generally affects our tax-exempt interest rates by approximately 19 basis points. Under normal financial market conditions, the impact to earnings from a 25-basis-point change in short-term interest rates would be approximately $5.0 million to $5.5 million, after taxes, for a twelve-month period.
Subject to these factors and under normal financial market conditions, a 25-basis-point change in taxable interest rates generally affects our tax-exempt interest rates by approximately 19 basis points. Under normal financial market conditions, the impact to earnings from a 25-basis-point change in short-term interest rates would be approximately $6.0 million to $6.5 million, after taxes, for a twelve-month period.
The fair value of stock awards is determined based on the stock price at the date of grant. For grants that do not accrue dividends or dividend equivalents, the fair value is the stock price reduced by the present value of estimated dividends over the vesting period or performance period.
The fair value of time-based stock awards is determined based on the stock price at the date of grant. For grants that do not accrue dividends or dividend equivalents, the fair value is the stock price reduced by the present value of estimated dividends over the vesting period or performance period.
Refer to Note D of the Notes to the Consolidated Financial Statements for additional discussion on this transaction; • Cash used to develop and enhance our client-facing internal-use software and the acquisition of third-party customer lists; and • Net purchases of short-term accounts receivable due to an increase in our client base, and funding to existing client base, and the timing of net cash collections; offset by • Net sales from AFS securities primarily due to a shift from investing in VRDNs to reinvesting in cash and cash equivalents due to more favorable interest rates.
Refer to Note D of the Notes to the Consolidated Financial Statements for additional discussion on this transaction; • Cash used to develop and enhance our client-facing internal-use software and the acquisition of third-party customer lists; • Net purchases of short-term accounts receivable due to an increase in our client base, and funding to existing client base, and the timing of net cash collections; and • Net sales from AFS securities primarily due to a shift from investing in VRDNs to reinvesting in cash and cash equivalents due to more favorable interest rates.
Fiscal years 2018 and 2020 are currently under audit by the IRS. With limited exception, state income tax audits by taxing authorities are closed through fiscal 2020, primarily due to expiration of the statute of limitations.
Fiscal years 2018 and 2020 are currently under audit by the IRS. With limited exception, state income tax audits by taxing authorities are closed through fiscal 2021, primarily due to expiration of the statute of limitations.
Other Information During the three months ended May 31, 2024 , none of our directors or officers (as defined by Rule 16a-1 under the Exchange Act), adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined by Item 408(c) of Regulation S-K).
Other Information During the three months ended May 31, 2025 , none of our directors or officers (as defined by Rule 16a-1 under the Exchange Act), adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined by Item 408(c) of Regulation S-K).
These procedures included testing the effectiveness of controls relating to the Company’s workers’ compensation insurance reserves, including controls over the development of management’s assumptions and actuarial estimates related to the loss development factors.
These procedures included testing the effectiveness of controls relating to the Company’s PEO workers’ compensation insurance reserves, including controls over the development of management’s assumptions and actuarial estimates related to the loss development factors.
Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Paychex, Inc. and its subsidiaries (the "Company") as of May 31, 2024 and 2023, and the related consolidated statements of income and comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended May 31, 2024, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements").
Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Paychex, Inc. and its subsidiaries (the "Company") as of May 31, 2025 and 2024, and the related consolidated statements of income and comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended May 31, 2025, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements").
Refer to Note M of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion on our credit facilities. Details of our credit facilities are as follows: Maximum May 31, 2024 Amount Outstanding Available $ in millions Expiration Date Available Amount Amount Credit facilities: JP Morgan Chase Bank, N.A.
Refer to Note M of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion on our credit facilities. Details of our credit facilities are as follows: Maximum May 31, 2025 Amount Outstanding Available $ in millions Expiration Date Available Amount Amount Credit facilities: JP Morgan Chase Bank, N.A.
We maintain a program designed to assess and manage the cybersecurity-related risk associated with third-party service providers that we rely on as part of providing services to our clients. This program incorporates a risk-based approach based on service criticality and type of information. Vendor risk assessments are performed and documented within our vendor management system.
We maintain a program designed to assess and manage the cybersecurity-related risk associated with third-party service providers that we rely on as part of providing solutions to our clients. This program incorporates a risk-based approach based on service criticality and type of information. Vendor risk assessments are performed and documented within our vendor management system.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2025 in conformity with accounting principles generally accepted in the United States of America.
Payments received for certain of the Company’s service offerings for set-up fees are considered a material right. Therefore, the Company defers revenue associated with these performance obligations, which exceed one year, and subsequently recognizes them as future services are provided, over approximately three years to four years .
Payments received for certain of the Company’s service offerings for set-up fees are considered a material right. Therefore, the Company defers revenue associated with these performance obligations, which exceed one year, and subsequently recognizes them as future services are provided, over approximately two years to four years .
The Company performs its annual impairment testing in its fiscal fourth quarter. During fiscal 2024 and fiscal 2023, a qualitative analysis was performed on all reporting units to determine if it is more-likely-than-not that the fair value of the reporting units had declined below their carrying values.
The Company performs its annual impairment testing in its fiscal fourth quarter. During fiscal 2025 and fiscal 2024, a qualitative analysis was performed on all reporting units to determine if it is more-likely-than-not that the fair value of the reporting units had declined below their carrying values.
Included in asset-backed securities as of May 31, 2024 were investment-grade securities primarily collateralized by fixed-rate auto loans and credit card receivables and all have credit ratings of AAA. The primary risk associated with these securities is the collection of the underlying receivables. Collateral on these asset-backed securities has performed as expected through May 31, 2024.
Included in asset-backed securities as of May 31, 2025 were investment-grade securities primarily collateralized by fixed-rate auto loans and credit card receivables and all have credit ratings of AAA. The primary risk associated with these securities is the collection of the underlying receivables. Collateral on these asset-backed securities has performed as expected through May 31, 2025.
The Company regularly reviews its deferred costs for potential impairment and did no t recognize an impairment loss during fiscal 2024, fiscal 2023, or fiscal 2022 . Cost of service revenue: The Company’s costs and expenses applicable to total service revenue represent direct costs associated with providing HR, payroll, benefits, and insurance services.
The Company regularly reviews its deferred costs for potential impairment and did no t recognize an impairment loss during fiscal 2025, fiscal 2024, or fiscal 2023 . Cost of service revenue: The Company’s costs and expenses applicable to total service revenue represent direct costs associated with providing HR, payroll, benefits, and insurance services.
Delivery service revenue is recognized at a point in time following the delivery of payroll checks, reports, quarter-end packages, and tax returns to the Company’s clients. 52 Table of Contents PEO and Insurance Solutions Revenue PEO solutions are sold through the Company’s registered and licensed subsidiaries and offer businesses HCM and HR outsourcing solutions.
Delivery service revenue is recognized at a point in time following the delivery of payroll checks, reports, quarter-end packages, and tax returns to the Company’s clients. 53 Table of Contents PEO and Insurance Solutions Revenue PEO solutions are sold through the Company’s registered and licensed subsidiaries and offer businesses HCM and HR outsourcing solutions.
We offer a full range of integrated HCM solutions covering the employee life cycle for businesses and their employees. Clients may choose from a breadth of solutions that also allow integration with some of the most popular HR, accounting, point-of-sale, and productivity applications on the market today.
We offer a full range of integrated HCM solutions covering the employee life cycle for businesses and their employees. Clients may choose from a breadth of solutions that also allow integration with some of the most popular HR, accounting, ERP, and point-of-sale applications on the market today.
(3) Percentage changes are calculated based on unrounded numbers. For further analysis of our results of operations for fiscal years 2024 and 2023, and our financial position as of May 31, 2024, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 7.
(3) Percentage changes are calculated based on unrounded numbers. For further analysis of our results of operations for fiscal years 2025 and 2024, and our financial position as of May 31, 2025, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 7.
Assuming a hypothetical decrease in longer-term interest rates of 25 basis points, the resulting potential increase in fair value for our portfolio of AFS securities as of May 31, 2024, would be in a range of approximately $20.0 million to $25.0 million. Conversely, a corresponding increase in interest rates would result in a comparable decrease in fair value.
Assuming a hypothetical decrease in longer-term interest rates of 25 basis points, the resulting potential increase in fair value for our portfolio of AFS securities as of May 31, 2025, would be in a range of approximately $20.0 million to $25.0 million. Conversely, a corresponding increase in interest rates would result in a comparable decrease in fair value.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2024.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2025.
As a result of our investing activities, we are exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our longer-term AFS securities.
As a result of our investing activities, we are exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our long-term AFS securities.
PricewaterhouseCoopers LLP has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and the effectiveness of the Company’s internal control over financial reporting as of May 31, 2024, and as a part of their integrated audit, has issued their report, included herein, on the effectiveness of the Company’s internal control over financial reporting. /s/ John B.
PricewaterhouseCoopers LLP has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and the effectiveness of the Company’s internal control over financial reporting as of May 31, 2025, and as a part of their integrated audit, has issued their report, included herein, on the effectiveness of the Company’s internal control over financial reporting. /s/ John B.
The Company currently self-insures the deductible portion of various insured exposures under certain corporate employee and PEO employee health and medical benefit plans. The Company’s estimated loss exposure under these insurance arrangements is recorded in other current liabilities on the Consolidated Balance Sheets.
The Company currently self-insures the deductible portion of various insured exposures under certain corporate employee and PEO employee health, medical, and workers' compensation benefit plans. The Company’s estimated loss exposure under these insurance arrangements is recorded in other current liabilities on the Consolidated Balance Sheets.
The members of the SGC are comprised of our executives and managers who understand our business operations, including but not limited to individuals 17 Table of Contents from the following departments: Operations, Information Technology, Finance, Internal Audit, Legal, Human Resources and Organizational Development, and Risk Management.
The 16 Table of Contents members of the SGC are comprised of our executives and managers who understand our business operations, including but not limited to individuals from the following departments: Operations, Information Technology, Finance, Internal Audit, Legal, Human Resources and Organizational Development, and Risk Management.
We regularly review our investment portfolios to determine if any investment is impaired due to increased credit risk or other valuation concerns and we believe that the investments we held as of May 31, 2024 were not impaired as a result of the previously discussed reasons.
We regularly review our investment portfolios to determine if any investment is impaired due to increased credit risk or other valuation concerns and we believe that the investments we held as of May 31, 2025 were not impaired as a result of the previously discussed reasons.
If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its estimated fair value. The Company has determined that there was no impairment of long-lived assets for fiscal 2024, fiscal 2023, or fiscal 2022 .
If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its estimated fair value. The Company has determined that there was no impairment of long-lived assets for fiscal 2025, fiscal 2024, or fiscal 2023 .
At contract inception, the Company determines if the new contractual arrangement is a lease or contains a leasing arrangement. If a contract contains a lease whose term is greater than one year, the Company evaluates whether it should be classified as an operating or a finance lease. Currently, all the Company’s leases have been classified as operating leases.
At contract inception, the Company determines if the new contractual arrangement is a lease or contains a leasing arrangement. If a contract contains a lease with a term greater than one year, the Company evaluates whether it should be classified as an operating or a finance lease. Currently, all the Company’s leases have been classified as operating leases.
We believe that our investments in an unrealized loss position as of May 31, 2024 were not impaired due to increased credit risk or other valuation concerns, nor has any event occurred subsequent to that date to indicate any change in our assessment.
We believe that our investments in an unrealized loss position as of May 31, 2025 were not impaired due to increased credit risk or other valuation concerns, nor has any event occurred subsequent to that date to indicate any change in our assessment.
If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there is no impairment of long-lived assets for fiscal 2024 or as of May 31, 2024.
If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there is no impairment of long-lived assets for fiscal 2025 or as of May 31, 2025.
(2) The total amount available under these credit facilities as of May 31, 2024 was approximately $ 2.0 billion. Amounts borrowed under the PNC credit facility remain outstanding as of the date of this report. Upon the expiration date of any credit facility, any borrowings outstanding under that facility will mature and be payable.
(2) The total amount available under these credit facilities as of May 31, 2025 was approximately $ 2.0 billion. Amounts borrowed under the PNC credit facility remain outstanding as of the date of this report. Upon the expiration date of any credit facility, any borrowings outstanding under that facility will mature and be payable.
Based on such evaluation, there have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter ended May 31, 2024, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Based on such evaluation, there have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter ended May 31, 2025, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
A detailed review of our fiscal 2023 performance compared to our fiscal year ended May 31, 2022 performance and our financial condition as of May 31, 2023 is set forth in Part II, Item 7 of our Annual Report on Form 10-K (“Form 10-K”) for fiscal 2023.
A detailed review of our fiscal 2024 performance compared to our fiscal year ended May 31, 2023 performance and our financial condition as of May 31, 2024 is set forth in Part II, Item 7 of our Annual Report on Form 10-K (“Form 10-K”) for fiscal 2024.
Impairment of Long-Lived Assets: Long-lived assets, including intangible assets with finite lives and operating lease right-of-use (“ROU”) assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.
Impairment of Long-Lived Assets: Long-lived assets, including intangible assets with finite lives and operating lease right-of-use assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Such adjustments could be significant, reflecting any combination of new and adverse or favorable trends. Adjustments to previously established reserves were not material for fiscal 2024, fiscal 2023, or fiscal 2022 . Leases: The Company accounts for its leases under ASC Topic 842, "Leases".
Such adjustments could be significant, reflecting any combination of new and adverse or favorable trends. Adjustments to previously established reserves were not material for fiscal 2025, fiscal 2024, or fiscal 2023 . Leases: The Company accounts for its leases under ASC Topic 842, "Leases".
These collections from clients are typically remitted from one to 30 days after receipt, with some items extending to 90 days.
Collections from clients are typically remitted from one to 30 days after receipt, with some items extending to 90 days.
Based on the results of our testing, no impairment loss was recognized in the results of operations for fiscal 2024 or 2023. Subsequent to the latest review, there have been no events or circumstances that indicate any potential impairment of the Company’s goodwill balance.
Based on the results of the Company’s testing, no impairment loss was recognized in the results of operations for fiscal 2025, fiscal 2024, or fiscal 2023. Subsequent to the latest review, there have been no events or circumstances that indicate any potential impairment of the Company’s goodwill balance.
We perform our annual impairment testing in our fiscal fourth quarter. During fiscal 2024 and 2023, a qualitative analysis was performed for all reporting units. The qualitative assessment considered various financial, macroeconomic, industry, and reporting unit specific qualitative factors.
We perform our annual impairment testing in our fiscal fourth quarter. During fiscal 2025 and 2024, a qualitative analysis was performed for all reporting units. The qualitative assessment considered various financial, macroeconomic, industry, and reporting unit specific qualitative factors.
Financial Statements and Supplementary Data TABLE OF CONTENTS Description Page Report on Management’s Assessment of Internal Control Over Financial Reporting 38 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 39 Consolidated Statements of Income and Comprehensive Income for the Years Ended May 31, 2024, 2023, and 2022 42 Consolidated Balance Sheets as of May 31, 2024 and 2023 43 Consolidated Statements of Stockholders’ Equity for the Years Ended May 31, 2024, 2023, and 2022 44 Consolidated Statements of Cash Flows for the Years Ended May 31, 2024, 2023, and 2022 45 Notes to Consolidated Financial Statements 46 Schedule II — Valuation and Qualifying Accounts for the Years Ended May 31, 2024, 2023, and 2022 72 37 Table of Contents REPO RT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Paychex, Inc.
Financial Statements and Supplementary Data TABLE OF CONTENTS Description Page Report on Management’s Assessment of Internal Control Over Financial Reporting 38 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 39 Consolidated Statements of Income and Comprehensive Income for the Years Ended May 31, 2025, 2024, and 2023 42 Consolidated Balance Sheets as of May 31, 2025 and 2024 43 Consolidated Statements of Stockholders’ Equity for the Years Ended May 31, 2025, 2024, and 2023 44 Consolidated Statements of Cash Flows for the Years Ended May 31, 2025, 2024, and 2023 45 Notes to Consolidated Financial Statements 46 Schedule II — Valuation and Qualifying Accounts for the Years Ended May 31, 2025, 2024, and 2023 78 37 Table of Contents REPO RT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Paychex, Inc.
Interest rates, market conditions, and our volatile cash flows are among several factors influencing our investment strategy directing the mix between long-term and VRDN AFS securities vs. short-term restricted cash and cash equivalents held in the portfolio.
Interest rates, market conditions, and our variable cash flows are among several factors influencing our investment strategy directing the mix between long-term and VRDN AFS securities vs. short-term restricted cash and cash equivalents held in the portfolio.
We also have audited the Company's internal control over financial reporting as of May 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited the Company's internal control over financial reporting as of May 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Treasury notes maturing approximately at the end of the expected option life. The estimated volatility factor is based on a combination of historical volatility, using stock prices over a period equal to the expected option life, and implied market volatility.
Treasury notes maturing approximately at the end of the expected option life. The estimated volatility factor is based on a combination of historical volatility, using stock prices over a period equal to the expected option life, and implied market volatility. The expected option life is based on historical exercise behavior.
Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that as of May 31, 2024, the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.
Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that as of May 31, 2025, the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.
A portfolio strategy that favors larger balances held in restricted cash and cash equivalents will impact our investing activities due to the offsetting activity in the purchases and sales/maturities of AFS investments.
A portfolio strategy that favors larger balances held in restricted cash and cash equivalents may impact our investing activities due to the offsetting activity in the purchases and sales/maturities of AFS investments.
During fiscal 2022 , a qualitative assessment was performed for the Company's Paychex, Inc., excluding Purchased Receivables, reporting unit, and a quantitative assessment was performed on the Purchased Receivable reporting unit. The qualitative assessment considered various financial, macroeconomic, industry, and reporting unit specific qualitative factors.
During fiscal 2023 , a qualitative assessment was performed for the Company's Paychex, Inc., excluding Purchased Receivables, reporting unit, and a quantitative assessment was performed on the Purchased Receivable reporting unit. The qualitative assessment considered various financial, macroeconomic, industry, and reporting unit specific qualitative factors.
Income taxes: We account for deferred taxes by recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.
Income taxes: We account for deferred taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.
We limit the amounts that can be invested in any single issuer and invest primarily in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. We manage the AFS securities to a benchmark duration of two and one-half to three and three-quarters years.
We limit the amounts that can be invested in any single issuer and invest primarily in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. We manage the AFS securities to a benchmark duration of two to three and one-quarter years.
Such adjustments could possibly be significant, reflecting any combination of new and adverse or favorable trends. Adjustments to previously established reserves were not material for fiscal 2024 or 2023.
Such adjustments could possibly be significant, reflecting any combination of new and adverse or favorable trends. Adjustments to previously established reserves were not material for fiscal 2025 or 2024.
If the recipient does not vest in the shares due to leaving Paychex, all shares or units of RSUs, and any dividends accrued thereon, when applicable, will be forfeited and returned to the Company. Time-based RSUs: Time-based RSUs granted to executives vest one-third per annum over three years .
If the recipient does not vest in the awards, due to leaving Paychex, all shares or units, and any dividends accrued thereon, when applicable, will be forfeited and returned to the Company. Time-Based RSUs and RSAs: Time-based RSUs and RSAs granted to executives vest one-third per annum over three years .
Details of the Company’s credit facilities as of May 31, 2024 are as follows: Maximum Amount Outstanding Amount May 31, $ in millions Expiration Date Available 2024 2023 Credit facilities: JP Morgan Chase Bank, N.A.
Details of the Company’s credit facilities as of May 31, 2025 are as follows: Maximum Amount Outstanding Amount May 31, $ in millions Expiration Date Available 2025 2024 Credit facilities: JP Morgan Chase Bank, N.A.
Changes in Internal Control Over Financial Reporting: The Company also carried out an evaluation of the internal control over financial reporting to determine whether any changes occurred during the fiscal quarter ended May 31, 2024.
Changes in Internal Control Over Financial Reporting: The Company also carried out an evaluation of the internal control over financial reporting to determine whether any changes occurred during the fiscal quarter ended May 31, 2025.
In establishing the workers' compensation insurance reserves, management uses an independent actuarial estimate of undiscounted future cash payments that would be made to settle the claims. The determination of estimated ultimate losses by the Company’s actuary is based on accepted actuarial methods and assumptions.
In establishing the PEO workers' compensation insurance reserves, management uses an independent actuarial estimate of undiscounted future cash payments that would be made to settle the claims. The determination of estimated ultimate losses by the Company’s independent actuary are based on accepted actuarial methods and assumptions.
Cash equivalents also include U.S. government agency and treasury securities with original maturities of 90 days or less which are considered Level 2 investments as they are valued based on similar, but not identical, instruments in active markets.
Cash equivalents also include corporate bonds, municipal bonds, and U.S. government agency and treasury securities with original maturities of 90 days or less which are considered Level 2 investments as they are valued based on similar, but not identical, instruments in active markets.
In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction.
Recently issued accounting pronouncements: In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction.
We currently self-insure the deductible portion of various insured exposures under certain corporate and PEO employee health and medical benefit plans. Our estimated loss exposure under these insurance arrangements is recorded in other current liabilities on our Consolidated Balance Sheets. Historically, the amounts accrued have not been material and were not material as of May 31, 2024.
We currently self-insure the deductible portion of various insured exposures under certain corporate and PEO employee health, medical, and workers' compensation benefit plans. Our estimated loss exposure under these insurance arrangements is recorded in other current liabilities on our Consolidated Balance Sheets. Historically, the amounts accrued have not been material and were not material as of May 31, 2025.
While $3.2 billion of our AFS securities had fair values that were below amortized cost, we believe that it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the gross unrealized losses of $164.2 million were due to changes in interest rates and were not due to increased credit risk or other valuation concerns.
While $2.0 billion of our AFS securities had fair values that were below amortized cost, we believe that it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the gross unrealized losses of $68.0 million were due to changes in interest rates and were not due to increased credit risk or other valuation concerns.
No single client had a material impact on service revenue or results of operations for the fiscal years ended May 31, 2024, 2023 and 2022 .
No single client had a material impact on service revenue or results of operations for the fiscal years ended May 31, 2025, 2024 and 2023 .
The Company also enters into various purchase commitments with vendors in the ordinary course of business and had outstanding commitments to purchase approximately $ 2.9 million of capital assets.
The Company also enters into various purchase commitments with vendors in the ordinary course of business and had outstanding commitments to purchase approximately $ 4.9 million of capital assets.
The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in service revenue, and the costs for the delivery are included in cost of service revenue on the Consolidated Statements of Income and Comprehensive Income. 48 Table of Contents The Company receives advance payments for set-up fees from its clients.
The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in service revenue, and the costs for the delivery are included in cost of service revenue on the Consolidated Statements of Income and Comprehensive Income. The Company receives advance payments for set-up fees from its clients.
GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. Liquidity and Capital Resources Our financial position as of May 31, 2024 remained strong with cash, restricted cash, and total corporate investments of $1.6 billion. Short-term borrowings of $18.7 million and long-term borrowings of $800.0 million were outstanding as of May 31, 2024.
GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. Liquidity and Capital Resources Our financial position as of May 31, 2025 remained strong with cash, restricted cash, and total corporate investments of $1.7 billion. Short-term borrowings of $18.6 million and long-term borrowings of $5.0 billion were outstanding as of May 31, 2025.
Earnings from the AFS securities, which as of May 31, 2024 had an average duration of 2.7 years, would not reflect decreases in interest rates until the investments are sold or mature and the proceeds are reinvested at lower rates.
Earnings from the AFS securities, which as of May 31, 2025 had an average duration of 2.2 years, would not reflect decreases in interest rates until the investments are sold or mature and the proceeds are reinvested at lower rates.
These amounts are included in other current liabilities on the Consolidated Balance Sheets. Estimating the ultimate cost of future claims is an uncertain and complex process based upon historical loss experience and accepted actuarial methods and assumptions.
These amounts are included in other current liabilities on the Consolidated Balance Sheets. 50 Table of Contents Estimating the ultimate cost of future claims is an uncertain and complex process based upon historical loss experience and accepted actuarial methods and assumptions.
Fees earned for the purchase of client's accounts receivable under non-recourse arrangements are based on a percentage of funding amounts as specified in the client contract. These fees are then recognized over the average collection period of 40 to 60 days for clients in the temporary staffing agency market and approximately 5 to 15 days for other clients.
Fees earned for the purchase of client's accounts receivable under non-recourse arrangements are based on a percentage of funding amounts as specified in the client contract. These fees are then recognized over the average collection period of 35 to 50 days for clients in the temporary staffing agency market and approximately 5 to 15 days for other clients.
Fees earned for the purchase of client's accounts receivable under non-recourse arrangements are based on a percentage of funding amounts as specified in the client contract. These fees are then recognized over the average collection period of 40 to 60 days for clients in the temporary staffing agency market and approximately 5 to 15 days for other clients.
Fees earned for the purchase of client's accounts receivable under non-recourse arrangements are based on a percentage of funding amounts as specified in the client contract. These fees are then recognized over the average collection period of 35 to 50 days for clients in the temporary staffing agency market and approximately 5 to 15 days for other clients.
The Company regularly reviews its deferred costs for potential impairment and did no t recognize an impairment loss during fiscal 2024, fiscal 2023, or fiscal 2022.
The Company regularly reviews its deferred costs for potential impairment and did no t recognize an impairment loss during fiscal 2025, fiscal 2024, or fiscal 2023.
The Company did no t recognize an impairment loss as it relates to its goodwill or intangible assets during fiscal 2024, 2023, or 2022.
The Company did no t recognize an impairment loss as it relates to its goodwill or intangible assets during fiscal 2025, 2024, or 2023.
Non-deliverable securities are primarily time deposits and money market funds. Property and equipment, net of accumulated depreciation: Property and equipment is stated at cost, less accumulated depreciation. Depreciation is based on the estimated useful lives of property and equipment using the straight-line method.
Non-deliverable securities are primarily time deposits and money market funds. 47 Table of Contents Property and equipment, net of accumulated depreciation: Property and equipment is stated at cost, less accumulated depreciation. Depreciation is based on the estimated useful lives of property and equipment using the straight-line method.
A substantial portion of the securities in an unrealized loss position as of May 31, 2024 and 2023 held an AA rating or better.
A substantial portion of the securities in an unrealized loss position as of May 31, 2025 and 2024 held an AA rating or better.
A reconciliation of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, not including interest or other potential offsetting effec ts, is as follows: Year ended May 31, In millions 2024 2023 2022 Balance as of beginning of fiscal year $ 72.0 $ 50.2 $ 22.4 Additions for tax positions of the current year 20.6 20.6 11.1 Additions for tax positions of prior years 0.8 4.6 20.6 Reductions for tax positions of prior years ( 3.8 ) ( 2.1 ) ( 1.8 ) Settlements with tax authorities ( 0.3 ) ( 0.4 ) ( 0.4 ) Expiration of the statute of limitations ( 2.1 ) ( 0.9 ) ( 1.7 ) Balance as of end of fiscal year $ 87.2 $ 72.0 $ 50.2 The reserve as of May 31, 2024 substantially relates to the Company’s uncertain tax positions for certain U.S. federal and state income tax matters.
A reconciliation of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, not including interest or other potential offsetting effec ts, is as follows: Year ended May 31, In millions 2025 2024 2023 Balance as of beginning of fiscal year $ 87.2 $ 72.0 $ 50.2 Additions for tax positions of the current year 20.1 20.6 20.6 Additions for tax positions of prior years 9.8 0.8 4.6 Reductions for tax positions of prior years ( 5.5 ) ( 3.8 ) ( 2.1 ) Settlements with tax authorities ( 0.0 ) ( 0.3 ) ( 0.4 ) Expiration of the statute of limitations ( 5.6 ) ( 2.1 ) ( 0.9 ) Balance as of end of fiscal year $ 106.0 $ 87.2 $ 72.0 The reserve as of May 31, 2025 substantially relates to the Company’s uncertain tax positions for certain U.S. federal and state income tax matters.
Our anticipated allocation is approximately 45% invested in short-term securities and VRDNs with an average duration of less than 30 days, and 55% invested in available-for-sale securities with an average duration of two and one-half to three and three-quarters years.
Our anticipated allocation is approximately 45% invested in short-term securities and VRDNs with an average duration of less than 30 days, and 55% invested in available-for-sale securities with an average duration of two to three and one-quarter years.
Gibson John B. Gibson President and Chief Executive Officer /s/ Robert L. Schrader Robert L. Schrader Senior Vice President and Chief Financial Officer 38 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Paychex, Inc.
Gibson John B. Gibson President and Chief Executive Officer /s/ Robert L. Schrader Robert L. Schrader Senior Vice President and Chief Financial Officer 38 Table of Contents Report of Independent Registered Public Accounting F irm To the Board of Directors and Stockholders of Paychex, Inc.
As of May 31, 2024 and 2023, the total reserve for uncertain tax positions, including interest and net of federal benefits, was $ 86.4 million and $ 69.4 million , respectively, and was included in long-term liabilities on the Consolidated Balance Sheets.
As of May 31, 2024, the total reserve for uncertain tax positions, including interest and net of federal benefits, was $ 86.4 million and was included in long-term liabilities on the Consolidated Balance Sheets.
In accordance with Securities and Exchange Commission Staff guidance, permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, we have excluded Alterna from our assessment of the effectiveness of internal control over financial reporting as of May 31, 2024.
In accordance with Securities and Exchange Commission Staff guidance, permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, we have excluded Paycor from our assessment of the effectiveness of internal control over financial reporting as of May 31, 2025.
Paychex’s medium-sized clients generally have more complex payroll and employee benefit needs and can opt for an integrated suite of HCM solutions, which allows them to choose the services and software that will meet the needs of their businesses. Total revenue is comprised of service revenue and interest on funds held for clients.
Paychex’s larger clients generally have more complex payroll and employee benefit needs and can opt for an integrated suite of HCM solutions, which allows them to choose the service and software solutions that will meet the needs of their businesses. Total revenue is comprised of service revenue and interest on funds held for clients.

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