Payroll & Bookkeeping Services in The US Industry Report From IBIS World

Payroll & Bookkeeping Services in the USMarch 2016 1
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Base value: The improving labor market will

boost demand for industry services
This report was provided to
IBISWorld Staff Member (211573052)
by IBISWorld on 23 September 2016 in accordance with their licence agreement with IBISWorld
IBISWorld Industry Report 54121b
Payroll & Bookkeeping

Services in the US
March 2016
Gavan Blau
2 About this Industry
15 International Trade
31 Key Statistics
Industry Definition
16 Business Locations
31 Industry Data
Main Activities
Similar Industries
18 Competitive Landscape
Additional Resources
18 Market Share Concentration
31 Annual Change
18 Key Success Factors
3 Industry at a Glance
31 Key Ratios
32 Jargon & Glossary
18 Cost Structure Benchmarks

20 Basis of Competition
4 Industry Performance
21 Barriers to Entry
Executive Summary
22 Industry Globalization
Key External Drivers
Current Performance
23 Major Companies
Industry Outlook
23 ADP LLC
10 Industry Life Cycle
27 Operating Conditions
12 Products & Markets
27 Capital Intensity
12 Supply Chains
28 Technology & Systems
12 Products & Services
28 Revenue Volatility
14 Demand Determinants
29 Regulation & Policy
14 Major Markets
30 Industry Assistance
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
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About this Industry

Industry Definition
Operators in this industry provide

outsourced payroll services for clients
employees and basic bookkeeping services
Main Activities
The primary activities of this industry are
are also included. However, this industry

does not include tax preparation
companies or certified public accountants.
Payroll services
Billing services
Bookkeeping services
General accounting services
Tax services
The major products and services in this industry are

Billing services
Bookkeeping and compilation services
Full-service payroll services
Payroll services sold separately
Tax planning and consulting services
Tax preparation and representation services
Other services
Similar Industries
54121c Accounting Services in the US

This industry provides accounting, auditing and tax services.
54121d Tax Preparation Services in the US
This industry provides accounting, auditing and tax services.
56131 Employment & Recruiting Agencies in the US
This industry lists vacancies and hires employees that will then go on payrolls.
56133 Professional Employer Organizations in the US
This industry provides HR management and administration services through coemployment relationships.
Additional Resources
For additional information on this industry

www.americanpayroll.org
American Payroll Association
www.hroassociation.org
Human Resources Outsourcing Association
www.bls.gov
US Bureau of Labor Statistics
Provided to: IBISWorld Staff Member (211573052) | 23 September 2016
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Payroll & Bookkeeping Services in the US March 2016
Industry at a Glance
Payroll & Bookkeeping Services in 2016
Key Statistics
Snapshot
Revenue
Annual Growth 11-16
Annual Growth 16-21
Profit
Wages
Businesses
$81.1bn 7.8%
2.9%
$10.0bn $43.2bn 285,212
National unemployment rate
Revenue vs. employment growth
% change
ADP LLC
9.7%
15
10
10
9
8
Market Share
-5
-10
Year 08
5
10
12
14
Revenue
16
18
20
Year 07
22
09
11
13
15
17
19
21
Employment
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p. 23
Products and services segmentation (2016)
3.3%
Tax planning and

consulting services
Outsourcing to the
Business Services sector
5.0%
Bookkeeping and
compilation services
National
unemployment rate
3.9%
Tax preparation and

representation services
4.1%
6.0%
Number of businesses
Payroll services
sold separately
Corporate profit
6.3%
External competition for

the Payroll & Bookkeeping
Services industry
57.2%
Other services
14.2%
Billing services
p. 4
SOURCE:
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SOURCE:
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Industry Structure
Life Cycle Stage

Revenue Volatility
Mature
Medium
Regulation Level
Medium
Technology Change
Medium
Capital Intensity
Low
Barriers to Entry
Low
Industry Assistance
Low
Industry Globalization
Low
Concentration Level
Low
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
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Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
The Payroll and Bookkeeping Services

industry provides payroll and
bookkeeping services on an outsourced
basis. The industry has grown in the past
five years as clients increasingly
subcontracted back-office administrative
activities to focus efforts on core business
functions in order to take advantage of
strengthening economic conditions. By
outsourcing payroll and bookkeeping,
A
growing customer base and new

technological opportunities have boosted
industry performance
small businesses can save time and
money, freeing up resources for higherpriority pursuits. Additionally, the rising
complexity of payroll and benefits
payments and deductions has led
businesses to outsource these functions
to ensure compliance.
In the five years to 2016, the industry
performed very strongly, buoyed by
increased market penetration, increased
prices, a growing customer base and new
Outsourcing to the Business

Services sector
Outsourcing to the business services sector
includes the contracting of work to third
parties such as payroll and bookkeeping
service companies. Businesses in the United
States outsource services to focus on core
operations and reduce administrative costs.
An increase in the level of outsourcing to the
business services sector translates to higher
industry revenue because industry operators
receive an increased workload. Outsourcing
to the business services sector is expected to
increase in 2016.
The national unemployment rate
measures the proportion of Americans
technological opportunities. As a result,

industry revenue is projected to grow an
average annual rate of 7.8% to $81.1
billion over the five years to 2016.
Industry growth is expected to continue
to surge in 2016 due to an increased
customer base, as the national
unemployment rate continues its decline
from 2011, and the number of businesses
in the United States similarly continues
to grow since 2012. Consequently,
industry revenue is expected to expand
4.0% during the year.
In the five years to 2021, revenue is
forecast to increase at an annualized rate
of 2.8% to $93.3 billion. While growth
will slow down as employment stabilizes,
companies in the industry are expected to
attract customers to new cloud-based
products and services. Similarly,
operators will increase their reliance on
computer systems to improve
profitability and employee efficiency,
boosting profit margins. Industry
operators are also expected to experience
greater competition as human resources
service providers look to provide more
payroll and bookkeeping services.
aged 16 and older that are currently

unemployed and seeking work. Industry
operators often provide payroll services
on a per-employee-processed basis;
therefore, a higher unemployment rate
hurts industry demand, as fewer
employees are processed. The national
unemployment rate is expected to
decrease during 2016, representing a
potential opportunity for the industry.
The number of businesses refers to the
total number of companies in the United
States with one or more employees. Sole
proprietorships, also known as
nonemployers, typically do not require
payroll or bookkeeping services as all
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payments are made to themselves. As the

number of businesses in the United
States increases, the industry has a larger
group of clients to attract, which
precipitates an increase in industry
revenue. The number of businesses is
expected to increase in 2016.
Corporate profit
Corporate profit refers to the total profit
earned across all industries in the United
States, not just profit earned in the
Payroll and Bookkeeping Services
industry. Young companies with low
profit margins are less likely to hire
outside businesses to handle payroll and
bookkeeping services in an effort save
money. However, as corporate profit
rises, companies are increasingly likely to

outsource payroll services to focus on
core functions and reduce administrative
tasks. Corporate profit is expected to
increase in 2016.
External competition for the Payroll
& Bookkeeping Services industry
Potential clients occasionally opt for
industries that offer a wider variety of
services, such as the Human Resources
and Benefits Administration industry
(IBISWorld report 56111). Consequently,
an increase in external competition
typically harms industry revenue growth.
External competition is expected to
increase during 2016, representing a
potential threat for the industry.

10
% change

continued
7
6
-1
-2
Year 07
09
11
13
15
17
19
21
-3
Year
08
10
12
14
16
18
20
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Current
Performance

industry offers time-crunched managers
and small business operators the
opportunity to outsource administrative
tasks such as payroll and bookkeeping, in
order to better spend time growing their
core businesses. As a result, the industry
benefits from strong economic
conditions, when businesses prefer to
spend their time and money focusing on
core business growth and prefer to
outsource services. Similarly, the
industry benefits in times of low
unemployment and increased business
activity, as new and existing businesses
engage industry operators to manage
their increasingly sizable workforces.
In the five years to 2016, the industry
has performed very strongly, and is
projected to grow at an average annual
Outsourcing growth
leads to product
penetration
Many industry players focus on servicing

small businesses that are owner
operated or have just a few employees.
Small business operators are specialists
in their particular field, but not
necessarily experts in business
administrative tasks, such as
bookkeeping and payroll. Many of these
small business managers consider their
time better spent performing core
business functions and growing the
business, rather than handling
administrative tasks. This factor is the
primary motivation for small businesses
to outsource payroll and bookkeeping.
The outsourcing of payroll and
bookkeeping also ensures businesses
that they will not face action from the
Internal Revenue Service or other
regulatory bodies for incorrect payments
and withholdings.
rate of 7.8% to $81.1 billion. A large

reduction in unemployment boosted
industry revenue, as well as strong
business conditions. In addition, the
industry has benefited from the
advancement of online and computer
payroll and bookkeeping services, with
new cloud-based offerings providing a
new revenue stream for operators, and
attracting new customers. Large
industry companies in particular, now
offer automated payroll platforms in
order to provide businesses with
efficient payroll solutions and increased
access to business data and analytics.
This trend is expected to continue in
2016, with industry revenue expected to
expand 4.0% in 2016 as a stronger
labor market creates new demand for
industry services.
Midsize
and large
businesses have trended
toward streamlining
operations
In the past decade, midsize and large
businesses have trended toward
streamlining operations in order to focus
on core business activities and outsource
noncore functions, including payroll and
bookkeeping. A major motivation for this
practice is to reduce overhead and
increase flexibility. When the need for a
service increases or decreases, it is
relatively easy for a business to alter its
use of outsourced services. By contrast,
performing these tasks in-house often
requires additional staff and resources.
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New employment
drives growth
In the five years to 2016, the US economy

enjoyed a strong phase of recovery, as the
business cycle moved on from a period of
downturn. The national unemployment
rate decreased from 9.0% in 2011 to an
expected 4.9% in 2016, as a swathe of new
jobs were created. Many of these jobs
came from new businesses entering the
market as conditions solidified, with the
number of businesses increasing at an
annualized rate of 0.7%. The number of
businesses in the United States has
increased since 2012 and provided a larger
pool of clients for industry operators. With
more businesses and larger workforces,
the need to engage payroll operators and
bookkeepers grew, helping to provide
strong demand for industry services.
As industry demand grew, operators

were able to raise prices, expanding
profit margins after a period of price
competition. Profit margins are
estimated to account for 12.3% of
industry revenue in 2016, as
macroeconomic recovery continues to
surge industry growth forward and
companies are able to charge a higher
premium for services.
Technological
opportunities
Profit margins have also been on the rise

as industry players with a focus on
technology become increasingly
prominent. Companies such as Automatic
Data Processing (ADP) and Intuit focus on
providing services to customers through
online solutions. This includes ADPs
self-servicing software, which allows
different levels of access for employers
and employees so they can manage certain
elements of their own payroll and
bookkeeping. Meanwhile, Intuit provides
online subscriptions and computer

software of its QuickBooks product, which
allows businesses to handle financial and
employment management. These
companies have been the most successful
over the past five years and also post the
highest industry profit margins, as
capital-intensity reduces the need for
labor. Increased automation has limited
employment growth for the industry in the
five years to 2016, growing only 0.2% per
year on average to 929,849 people.
Changing industry
structure
The majority of companies in the

industry are sole proprietors or partners
in a nonemployer business. These
companies, which generate about
one-tenth of revenue, largely serve the
small business community. Many of
these small business clients prefer to
deal with small, local-service providers
that provide personalized services and
have extensive knowledge of their
business and operating environment. As
a result, this industry primarily
comprises small players and is highly
fragmented. Accordingly, it is easy for

small operators to enter the industry as
demand increases.
Although there have been a number of
new small businesses entering the
industry, the largest players have
continued to consolidate their positions.
Major players such as ADP and Ceridian
have continued to acquire smaller
companies in an effort to increase market
share, achieve economies of scale and
access target market segments and
geographic areas. Over the past five
As
industry demand grew,

operators were able to raise
prices, expanding profit
margins
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Changing industry
structure continued
years, acquisitions have focused on

technologically savvy businesses,
particularly those that are able to
improve client platforms. For example, in
2012, Ceridian acquired cloud software
and human capital management services
company, Dayforce. This acquisition
Industry
Outlook
Industry growth will be driven by

increasing product penetration and an
expanding customer base in the five years
to 2021. In a climate of improving
economic conditions, managers and small
business operators will focus their time
strategizing business activity and
expansion plans, decreasing their focus on
administrative tasks such as payroll and
bookkeeping. Many businesses will prefer
to outsource payroll services in order to
focus on core competencies. Furthermore,
an improving labor market will provide the
Payroll and Bookkeeping Services industry
with a platform for growth, given the rising
number of businesses and employees. Over
the five years through 2021, the number of
businesses in the United States is expected
to grow at an annualized rate of 0.7%,
which will drive down the national
unemployment rate. Consequently, in the

five years to 2021, IBISWorld projects that
revenue will increase at an annualized rate
of 2.8% to $93.3 billion.
The national unemployment rate is

expected to continue to remain at low
levels over the next five years, which will
create demand for industry services.
IBISWorld expects the national
unemployment rate to remain at 4.9% in
2021, a figure much lower than the 9.0%
recorded in 2011. This increased level of
hiring will precipitate a number of new
businesses that will require payroll and
bookkeeping services. Furthermore,
companies are expected to focus on
maximizing profitable business activities
amid a strengthening economy. These
businesses are expected to outsource
payroll and bookkeeping services to
specialized companies. As a result, the

industry is expected to grow 3.9% in 2017.
In addition, companies are expected to
increase demand for technologically
advanced payroll platforms, which allow
them to take full advantage of the
sophisticated business analytics and data
processing tools provided by cloud-based
information technology and data
recording. Such offerings will allow
business managers to analyze payroll data
with greater speed and effectiveness, in
order to achieve deeper managerial
insight. This will include more emphasis
on reporting and transparency, which will
create demand for bookkeeping services.
Growing customer
base
enabled the company to improve its

InView platform, which is used to assist
businesses with managing human
resources and payroll. With the level of
acquisition high over the past five years,
enterprise growth has been limited to an
annualized 1.0% to 285,212 operators.
Industry revenue
15
% change
10
5
0
-5
Year 08
10
12
14
16
18
20
22
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Large companies to
increase profit
Rising competition
Businesses are expected to increase

investments in technology to reduce
labor costs. The industry is currently
highly labor intensive, with labor costs
making up 53.2% of industry revenue,
meaning that labor cost savings can
significantly boost profit margins.
Industry operators are thus expected to
leverage technology such as employee
self-service technology, which will enable
employees to enter personal details and
request services without assistance. The
provision of online and computer
software can be highly profitable and
also appeals to businesses that are
looking to save time and reduce costs
through more efficient systems. Greater
corporate profit over the next five years
will also lead to increased corporate
investment in new products; therefore,
the most innovative companies will
experience the strongest growth.
In recent years, the largest players in
the industry have aggressively pursued
new platforms and interfaces, and are

expected to differentiate themselves by
providing more self-service processes and
new technologies to attract business. As a
result, larger industry companies such as
Automatic Data Processing (ADP),
Paychex, Intuit and Ceridian are expected
to sustain higher than average profit
margins, as they offer integrated services
such as tax preparation and human
capital management. These large
companies are likely to be the most
successful businesses over the next five
years as they increasingly focus on the
online and computer software aspects of
their businesses.
Competition is expected to rise over the

next five years, particularly for smaller
players, as low barriers to entry ensure
that there is always the potential for new
operators to enter the market. Sole
operators will continue to enter the
industry as demand increases and high
profit margins make industry activities
increasingly attractive. This trend is
expected to boost the number of
industry operators, which are projected
to rise at an annualized rate of 0.4% to
291,468 companies. Nevertheless,
acquisitions will keep the number of
industry operators in check, and as a
result industry employment is expected
to rise at an average annual rate of 0.2%
to 938,008 workers over the five years
to 2021.
Small industry operators that focus on

payroll or bookkeeping will also
increasingly face competition from larger
businesses that offer a full suite of human
resource and business administration
outsourcing services. Large recruiting
agencies, temp agencies and professional
employer organizations are expanding into
this industry by acquiring businesses in
fields that complement their services.
These businesses aim to create one-stop
shops for the outsourcing of human
resources and business administration
tasks. Competition from companies in the
Human Resources and Benefits
Administration industry (IBISWorld report
56111) is expected to increase in the five
years to 2021, potentially hurting the
Payroll and Bookkeeping Services industry.
Businesses
are expected
to increase investments
in technology to reduce
labor costs
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Life Cycle Stage
The acceptance of business

outsourcing has increased
Larger players in the industry are
consolidating their position
% Growth in share of economy
The industry is expected to grow in

line with the overall economy
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic

importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Mature Industry

Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands
10
Quantity Growth
Many new companies;

minor growth in economic
importance; substantial
technology change
Payroll &
Bookkeeping
Services
Computer Stores
Accounting Services
Employment & Recruiting Agencies
Tax Preparation Services
Decline
-5
Shrinking economic
importance
Office Supply Stores

-10
-10
-5
10
15
20
% Growth in number of establishments

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Industry Life Cycle

This
industry
is M
ature

industry is in the mature stage of its
economic life cycle. The industry is
characterized by growth in line with the
overall economy, consolidation from
the largest players in the industry and
wholehearted market acceptance of
industry products and services. Payroll
and bookkeeping will continue to be
demanded by firms in the United
States, particularly as the number of
businesses and employees increases.
Businesses are also expected to
continue to outsource human resource
functions such as payroll to focus their
attention on core operations.
Industry value added, used to measure
an industrys contribution to the overall
economy, is expected to rise by an
average annual rate of 3.3% over the 10
years through 2021. This is slightly
higher than the overall economy, which is

forecast to rise by an annualized 2.3%
over the same 10-year period. Growth in
IVA will primarily be driven by improving
revenue in the five years through 2016, a
period in which the national
unemployment rate fell significantly.
The industry is also experiencing
consolidation from the largest players.
Firms such as Automatic Data Processing
(ADP), Paychex and Ceridian have all
acquired businesses over the past five
years to improve their position in the
market. These companies have focused
on acquisitions that have improved their
technological standing in the industry.
This includes new online interfaces and
management solutions. Furthermore,
these firms increasingly leveraging
technology to become more efficient and
reduce costs.
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Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

31-33
Manufacturing in the US
Manufacturing companies use this industry to simplify payroll activities.
44-45
Retail Trade in the US

Retailers use payroll and bookkeeping services to help manage payroll and accounting
activities.
52
Finance and Insurance in the US

Financial services providers constitute a significant share of the industrys client base.
54
Professional, Scientific and Technical Services in the US

A significant share of industry revenue comes from the Professional, Scientific and Technical
Service sector.
62
Healthcare and Social Assistance in the US

Industry firms provide payroll and bookkeeping services to healthcare and social assistance
industries so they can focus on core functions.
71
Arts, Entertainment and Recreation in the US

Arts, Entertainment and Recreation industries use outsource industry services to save money
and focus on core operations.
KEY SELLING INDUSTRIES
Products & Services
44312
Computer Stores in the US

Computer stores supply computing equipment and related software to industry operators.
45321
Office Supply Stores in the US

Office supply stores provide stationery and office supplies to the industry.
51711c
Wired Telecommunications Carriers in the US

Wired telecommunications carriers provide telecommunications services, including phones, to
the industry.
53112
Commercial Leasing in the US

Industry operators rent office space through the Commercial Leasing industry.
Payroll services
Payroll services account for the largest
proportion of industry revenue, with an
estimated 61.3% of industry revenue. The
vast majority of these services are offered
as full-service payroll services, with an
estimated 56.1% of revenue, while services
sold separately account for an estimated
4.1% of revenue. This segment includes
collecting payroll information and
processing paychecks and paying deposits,
withholding amounts from employees pay
for government-mandated and other
deductions as well as remitting the
amounts withheld to the appropriate
authorities and plan administrators.
Additionally, this segment includes filling
regulatory and tax reports with regard to
deductions and preparing special payroll

reports at clients requests.
Over the past five years, payroll
services have grown as a proportion of
industry revenue, as stronger economic
conditions support job creation and
increase the demand for payroll services.
Full-service payroll services have also
increased as a proportion of revenue as
companies seek to outsource all
administrative functions rather than only
a few, particularly as new online
operators enter the market place and
simplify payroll services.
Billing services
Billing services are expected to represent
14.2% of revenue. This includes sending
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Products & Markets
Products & Services

continued
Products and services segmentation (2016)
3.3%
5.0%
3.9%
Tax planning and

consulting services
Tax preparation and

representation services
Bookkeeping and
compilation services
4.1%
6.0%
6.3%
Other services
Payroll services
sold separately
57.2%
14.2%
Billing services
Total $81.1bn
bills and collecting accounts receivable
and processing accounts payable,
inclusive of medical bills. Furthermore,
industry operators may work to reconcile
bank statements and other items. Over
the past five years, this segment has
grown as a proportion of revenue as a
greater number of Americans receive
private healthcare and, therefore, use
available medical facilities and require
billing services.
General accounting and
bookkeeping services
General accounting services and
bookkeeping and compilation services
are estimated to account for 6.0% and
5.0% of revenue, respectively. General
accounting services includes revising and
registering notes, receipts and invoices as
well as reconciling bank statements and
preparing financial statements.
Bookkeeping and compilation services
includes providing bundled bookkeeping
services such as maintaining journals and
ledgers, preparing trial balances and
bank reconciliations and arranging client
information into the form of a financial

statement. Over the past five years, this
segment has shrunk as a proportion of
revenue as more firms and individuals
are able to complete services without the
assistance of professionals through
online software.
Tax services
A small proportion of revenue is
generated through tax preparation and
representation as well as planning and
consulting services in this industry. The
majority of tax preparation services are
provided through the Tax Preparation
Services industry (IBISWorld report
54121d); however, some industry players
also provide assistance when coupled
with payroll, bookkeeping and
compilation services. This primarily
includes preparation, review or filing of
tax returns or supplementary
documents. Over the past five years, this
segment has shrunk as a proportion of
revenue as online tax preparation and
bookkeeping services reduce the need
for industry professionals.
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Products & Markets
Demand
Determinants
Factors that determine demand in the

Payroll and Bookkeeping Services
industry are generally related to changes
in economic and business related
conditions. Businesses are increasingly
outsourcing back-office and routine
administrative functions, dedicating
more resources to their core strengths. In
the payroll segment, this trend has been
reinforced by the increasing complexity
of employee legislation and regulation,
particularly in the areas of deduction and
benefits payments. The complexity can be
multiplied if the client operates many
work sites across a number of states.
The demand for industry services also
relates to changes to economic and
employment growth. The number of
small businesses affects the pool of
possible clients and the number of
employees that are paid through industry
providers. The recession brought about a

sharp rise in unemployment and many
businesses went bankrupt. As a result,
client payrolls shrunk, reducing demand
for the Payroll and Bookkeeping Services
industry. Some clients moved their
payroll and bookkeeping in-house after
reducing employee headcount. This
practice became increasingly prevalent
because slower business activity freed up
managerial time for administrative tasks.
Demand is also affected by competition
from other industries, such as the Human
Resources and Benefits Administration
industry (IBISWorld report 56111) and
the Office Services industry (IBISWorld
report 56133). As these industries grow,
the Payroll and Bookkeeping Services
industry will have increased competition
as firms in other industries increasingly
offer similar services.
Major Markets
Payroll and bookkeeping services are

offered to all businesses and
organizations in the economy. Private
businesses, individuals, government
organizations and individuals all demand
payroll and bookkeeping services to
better organize administrative activity.
Private businesses account for the
majority of industry revenue, while
government and nonprofit organizations
make up a marginal proportion.
prominent are manufacturing firms,

healthcare providers and financial
institutions. These industries are
estimated to account for 12.4%, 11.5%
and 9.8% of industry demand,
respectively. Firms in these industries are
often highly specialized and prefer to
outsource human resources such as
payroll and bookkeeping services. The
remaining industries are estimated to
account for 54.9% of industry demand.
Over the past five years, private
businesses have grown as a proportion
of industry revenue. Private businesses
have increasingly outsourced payroll
services to specialized companies so
they are able to focus on core
operations. Furthermore, businesses
have placed increased importance on
bookkeeping services to monitor
financial transactions while profit
margins were low during the heights of
the recession. Demand from private
businesses fell during the recession;
however, were quick to rebound as
Private businesses
Private businesses account for the vast
majority of industry revenue, estimated
to collectively contribute 88.6% of
industry revenue. Private businesses
require payroll and bookkeeping services
to track employee activity and ensure
that payments meet regulation and tax
requirements. Businesses also use
bookkeeping services to track the volume
and detail of financial transactions.
Of the businesses in the US economy
using payroll services, the most
WWW.IBISWORLD.COM
Products & Markets
Major Markets
continued
Major market segmentation (2016)
9.6%
Individuals
0.5%
State and local

governments
0.6%
Federal government
9.8%
0.7%
Financial institutions
11.5%
Healthcare providers
Nonprofit organizations
54.9%
Other private businesses
12.4%
Manufacturing firms
Total $81.1bn
Individuals
Individuals are estimated to contribute
9.6% of industry revenue. Individuals
primarily use bookkeeping services,
however, also request assistance from
payroll specialists such as specialized
reports and tax assistance. Over the past
five years, individuals have declined as a
proportion of industry revenue. More
individuals are using online systems to
organize payroll and bookkeeping services
rather than paying specialized firms. New
technology with the power of simplifying
payroll services and bookkeeping is
expected to continue to reduce the
significance of individuals in this industry.
Government and nonprofit organizations

Government and nonprofit organizations
account for only a small proportion of
industry revenue, as these segments are
expected to account for only 1.8% of
industry demand. Government
organizations and nonprofit
organizations use some payroll and
bookkeeping services, however,
generally hire internal staff. Federal,
state and local governments have
increased marginally as a proportion of
revenue over the past five years, while
nonprofit organizations have remained
stagnant. Nonprofit organizations are
less likely to use payroll and
bookkeeping services because they often
rely on volunteers and do not have the
funding to pay for specialized services.
Most operators in this industry only

serve the domestic market because
most firms do not have adequate staff
or capacity to operate on an
international basis. Furthermore, this
industry requires knowledge of
domestic business environments,
legislation, regulation and procedures,

such as tax and benefits laws. While
major player Automatic Data
Processing Inc. has offices in
international markets, about 80.0% of
its employer-related service revenue is
generated in the United States.
consumer spending and business

confidence improved.
International Trade
WWW.IBISWORLD.COM
Products & Markets

Business Locations 2016
West
New
England
AK
0.2
Great
Lakes
WA
ND
MT
2.3
Rocky
Mountains
ID
OR
1.6
West NV
0.9
1.7
SD
0.2
WY
0.6
MN
0.2
0.5
Plains
CO
1.0
KY
1.0
OK
1.4
NC
2.8
TN
AZ
NM
2.2
0.6
Southwest
TX
7.3
HI
0.5
Additional States (as marked on map)

1 VT
2 NH
3 MA
4 RI
5 CT
6 NJ
7 DE
8 MD
0.2
1.0
0.4
3.0
2.1
0.2
SC
Southeast
0.9
MS
AL
1.3
1.3
GA
3.2
0.7
LA
1.4
FL
7.9
Establishments (%)
0.4
2.0
AR
0.4
1.5
12.7
WV VA
2.5
1.2
1.8
CA
West
3.2
MO
KS
2.6
OH
1.7
4.3
3.3
IN
IL
0.6
UT
PA
3.2
0.9
0.4
1 2
3
NY
6.6
5 4
MI
1.5
IA
NE
0.2
WI
ME
MidAtlantic
9 DC
0.1
Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
WWW.IBISWORLD.COM
Products & Markets
West
A total of 18.3% of industry
establishments are located in the West.
This is a slightly higher proportion of
establishments compared to the 17.1% of
the population that resides in the area.
California represents the largest number
of establishments in the United States,
accounting for 12.7% of total
establishments. California represents
12.1% of the total population and payroll
and bookkeeping firms service some of
30
20
10
Southwest
Southeast
Plains
New England
Rocky Mountains
Establishments
Mid-Atlantic
0
Great Lakes
Southeast
The Southeast region represents the
highest number of establishments, with
25.1% of industry establishments are
located in the region, in line 25.4% of the
US population. The Southeasts large
share of the US population drives demand
for businesses in the area to satisfy the
large working force. The most
concentrated states in the Southeast
include Florida and Georgia, which
account for 7.9% and 3.2% of industry
establishments, respectively. Over the past
five years, Florida has grown as a
proportion of total establishments. Payroll
and bookkeeping firms primarily provide
services to tourism, construction, banking
and healthcare industries in the state.
Distribution of establishments vs. population
West
The geographic distribution of

establishments in the Payroll and
Bookkeeping Services industry is highly
correlated with the distribution of the US
population. There are a large number of
small businesses in the industry that cater
to small clients. These businesses are
located close to large workforces, which
typically are located in urban centers.
Accordingly, the percentage of industry
establishments is similar to the proportion
of the US population in each state.
Business Locations
Population
Californias largest industries such as

healthcare, education, real estate and
finance. California is expected to remain
the largest state in terms of both
establishments and revenue over the next
five years because of its immense
population and large economy.
Mid-Atlantic
The Mid-Atlantic contains 15.3% of
establishments, in line with the 15.5% of
the population in the region. The most
populous regions; New York,
Pennsylvania and New Jersey account for
6.6%, 3.3% and 3.0% of total
establishments. There are a large number
of financial institutions based in these
areas that outsource their payroll and
bookkeeping activities to focus on
providing core services. Over the next five
years, the Mid-Atlantic is expected to
make up a greater proportion of total
establishments as large businesses
outsource industry services.
WWW.IBISWORLD.COM
18
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration
in
this industry is L ow
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Cost Structure
Benchmarks
The Payroll and Bookkeeping industry is

characterized by a low level of market
share concentration. There are a large
number of small companies in the
industry that provide payroll and
bookkeeping services for small firms. This
includes a large number of nonemploying
businesses that operate as sole proprietors
or partnerships, estimated at close to
85.0% of enterprises. Yet these sole
operators only account for less than 10.0%
of industry revenue.
In 2016, IBISWorld estimates that the
four largest companies in the industry
account for close to 15.0% of total
industry revenue. Automatic Data
Processing Inc. (ADP) is by far the
largest player in the industry, accounting
for close to 10.0% of industry revenue
alone. ADP has enjoyed considerable
success over the past five years because
of its large market position, which has
been consolidated over the past five

years through a number of acquisitions.
However, smaller player such as Intuit
Inc. have grown rapidly over the past
five years through their online solutions
and products that improve business
payroll efficiency.
Over the next five years, market share
concentration is expected to increase. A
number of small new players are
expected to enter the industry; however,
the largest players such as ADP, Paychex
and Intuit are expected to purchase
smaller companies to increase market
share. Companies are expected to use
new technologies such as cloud software
to win market share. Intuit is also
expected to become a major player over
the next five years as it increases the size
of its financial and employee
management solutions segments through
new customers and subscriptions.
Access to quality personnel

management
In order to stay competitive, service
providers need to have access to highquality personnel management.
interface, mostly provided through the

use of web-based technology.
Ability to quickly adopt new technology

Service providers need to constantly find
new and better ways to apply the
increased functionality and flexibility of
technology to improve services. Then,
this technology needs to be made
available to clients.
Economies of scale
The high degree of assimilation in
services implies that service providers
should be able to achieve significant
economies of scale. These can be
transformed into improved earnings and
used for competitive pricing when the
industry matures.
Accessibility to consumers/users
Successful service providers offer
products with an accessible client user
Ability to manage external

(outsourcing) contracts
Third-party providers need solid contract
management skills to secure professional,
ongoing relationships with clients.
Cost structures in the Payroll and

Bookkeeping industry vary depending on
the size of the business. For example,
small players tend to have fewer
marketing costs because they rely on

word-of-mouth recommendations.
Larger firms in the industry also tend to
have lower wages as a proportion of
WWW.IBISWORLD.COM
19
revenue because economies of scale allow

for specialization of specific tasks.
Profit
In 2016, IBISWorld estimates that profit,
measured as earnings before interest and
tax, will represent 12.3% of industry
revenue, up from 11.4% in 2011.
Profit margin growth has been driven
by increased sales prices, reduced labor
costs and new revenue streams. Firstly,
increased demand for industry services
over the period marked an end to a
period of price competition, allowing
operators to increase sales prices for
industry services. Similarly, as new
businesses entered the economy and
unemployment fell, businesses increased
investment in efficient bookkeeping and
payroll solutions, and increased
opportunities for operators to sell new
value-add services. Increasing use of
computer software and online
subscriptions are reducing the need for

labor, reducing costs through the
reduction of departments that previously
handled bookkeeping and payroll.
Wages
Industry operators offer their services to
organizations that seek to cut costs or
reduce the amount of capital and
management time invested in
administrative tasks. These tasks are
labor intensive and require firms to hire a
significant pool of skilled labor to meet
service agreements. Consequently, wages
and salaries constitute the largest
expense for this industry. In 2016, wages
are expected to account for 53.2% of
industry revenue.
Wages have fallen over the five-year
period as computer products and online
software assist operators and reduce the
need for large workforces as processes
become automated. Typically, wages are
Sector vs. Industry Costs

Average Costs of
all Industries in
sector (2016)
Industry Costs
(2016)
10.8
12.3
100
n Profit
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other
80
Percentage of revenue
Cost Structure
Benchmarks
continued
43.7
53.2
60
14.4
40
1.3
20
5.1
22.9
1.8
1.3
4.1
4.8
0.9
23.4
0
WWW.IBISWORLD.COM
20
Cost Structure
Benchmarks
continued
higher in small firms because businesses

are less likely to reinvest money into the
business and instead focus on hiring
employees to complete work.
Furthermore, operators have less ability
to become efficient through greater
specialization in small workforces.
In the next five years, wages are
expected to decline as a percentage of
revenue. The increase in the number and
quality of computer products and online
services will continue to reduce the need
for skilled individuals and firms will be
able to complete more work with a higher
level of capital intensity. Though, smaller
firms will attempt to compete with online
providers by differentiating themselves
through superior customer service skills,
which will help offset the decline in wages.
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Highand the trend
is I ncreasing
Depreciation has nevertheless

remained steady over the past five years
and is estimated to account for 0.9% of
industry revenue. Depreciation rates are
typically low for firms in the industry as
labor is the key input in payroll services.
However, due to the increasing
prevalence of computer systems and
efforts by companies to reduce labor
costs, businesses are becoming
increasingly reliant on computer systems.
These systems then need to be
maintained and upgraded to stay
competitive in the market.
Purchases and depreciation

Purchases are estimated to account for
only 4.1% of industry revenue. Operators
in the Payroll and Bookkeeping Services
industry typically only are required to
purchase basic capital equipment that
requires relatively infrequent
replacement. In addition, firms purchase
basic software to help them organize
payroll and bookkeeping transactions.
Purchases have increased as a proportion
of revenue over the past five years
because of increasing reliance on
computer systems.
Other
Industry firms also incur a variety of
other expenses as a result of running a
business on a daily basis. These include
general office and administrative
expenses, interest, insurance and
professional services, such as legal fees.
These costs are estimated to represent
about 12.9%% of industry revenue.
Meanwhile, rent and utilities are
expected to account for 4.8% of revenue,
including telecommunications expenses.
Industry operators also pay for
marketing their services to possible
clients. These expenses include general
marketing costs, such as sales materials,
advertising and maintaining a website.
Marketing is estimated to represent
about 1.3% of industry revenue.
Internal competition
Competition mainly runs along three
parallels: the relative price and cost of
service; the range and quality of services;
and the qualifications and expertise of
people offering the service. Industry
participants generally charge a fee per unit
supplied (i.e. for payroll services clients are
charged a fee based on the number of
transactions performed), or on a contracted
hourly basis. Consequently, firms compete
against significant economies of scale

because services are relatively standardized.
Small players are at a competitive
disadvantage in this regard because they
do not have the capacity to service large
clients. Furthermore, large players
generate significant revenue from small
businesses, reducing the overall pool of
clients that are available to small players.
Major players also have sales teams
devoted to increasing client numbers,
WWW.IBISWORLD.COM
21
Basis of Competition
continued
while smaller firms often rely on word-ofmouth between small business owners.
Competition also occurs based upon
the range of services that a firm provides.
Some companies need services beyond
payroll and accounting, such as human
resources and benefits administration,
and industry operators that offer a wider
variety of services are at a competitive
advantage, even if the revenue generated
through those activities is not reflected in
the companys industry-related revenue.
External competition
External competition arises from
operators in other industries that offer
Barriers to Entry
Level & Trend
arriers to Entry
B
in this industry are

Lowand S
teady
Barriers to entry are low for the Payroll

and Bookkeeping Services industry. It is
relatively easy for small players to enter
the industry and set up operations
providing payroll, bookkeeping and
certain employee benefits administration
services. There are few capital
requirements needed to begin operations
and many small firms exist that service
only local markets. Regulatory
requirements provide the single largest
barrier to entry as firms are required to
have extensive understanding of taxation
and employee relation laws to operate.
Furthermore, industry operators are
subject to privacy, data-security and
anti-money laundering laws.
Barriers to success
There are a large number of small,
nonemploying enterprises in the industry
that service local firms because of the
relatively low capital investment needed.
However, the large number of operators
creates high levels of competition for
industry participants. Furthermore, large
industry operators such as Automatic
Data Processing, commonly known as
ADP, are able to push smaller players out
of the market through their provision of
similar services. Competitors include

firms in the Accounting Services
(IBISWorld report 54121c), Tax
Preparation Services (54121d), Office
Services (56133) and Human
Resources and Benefits
Administration (56111) industries.
However, these companies are more
likely to service medium- and largersized firms rather than small
businesses, due to their relatively
higher cost for services. Consequently,
industry players face increasing
competition when a clients employee
headcount grows or as transactions
become more complex.
Barriers to Entry checklist

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
High
Low
Mature
Low
Medium
Medium
Low
services. ADP has also developed a

number of online networks and systems
that allow employee self-service.
Furthermore, ADP provides the most
convenient and sophisticated systems
through its adoption of online networks
and the cloud. As a result, new entrants
may find it difficult to compete with large
players with advanced computer systems
and more efficient cost structures that
allow lower prices. ADP is the only
dominant industry player and its national
presence makes it attractive to a variety
of different businesses.
Smaller industry players may also find
it difficult to compete during cyclical
downturns in the economy. Although
payroll and bookkeeping services provide
WWW.IBISWORLD.COM
22
Barriers to Entry
continued
greater business efficiency through

outsourcing noncore functions, price
competition typically becomes more
intense during these times. As a result,
small firms with relatively low profit

margins may not be able to compete with
larger firms that have more flexibility in
pricing schemes.
Industry
Globalization

industry is highly fragmented as many
small, nonemploying firms exist that
solely service small, local markets. These
operators are able to provide payroll and
bookkeeping services to small businesses
and are unable to capture significant
market share outside of narrow
geographic areas. The only major
company in the industry is Automatic
Data Processing (ADP), who offers
services to about 630,000 clients in more
than 100 countries including those in
North America, Europe and Asia.
However, the company is based in

Roseland, NJ, and international services
are not included in this industry.
There is no international trade in this
industry because services cannot be
processed internationally due to federal
and state taxation laws. Furthermore,
industry operators require an extensive
understanding of domestic and local
regulations, which discourages operating
internationally without setting up local
operations. Globalization has remained
steady over the past five years and no
change is expected moving forward.
Level & Trend

lobalization
G
in
this industry is
Lowand the trend
is I ncreasing
WWW.IBISWORLD.COM
Major Companies
ADP LLC | Other Companies
Major players
(Market share)
90.3%
Other
ADP LLC 9.7%
Player Performance
ADP LLC
Market share: 9.7%
Automatic Data Processing Inc. (ADP) is

one of the largest providers of business
outsourcing, specifically in the
management of human capital. The
company was founded in 1949 to help
business owners focus their efforts on
core business segments rather than
administrative tasks, such as payroll.
ADP was incorporated in 1961 and has
grown to provide a number of human
capital solutions to businesses. The
company currently services more than
630,000 clients in over 100 countries. In
fiscal 2014-15, ADP earned $10.9 billion
in revenue and employed more than
55,000 staff members.
ADP operates through three business
segments: employer services,
professional employer organization
(PEO) services and dealer services. The
company is active in the Payroll and
Bookkeeping Services industry through
its employer services segment. This

segment includes payroll services,
benefits administration services, time
and attendance management solutions
and compliance and payment solutions.
ADP provides these services to both small
businesses and multinational
corporations. ADPs employer services
segment helps close to 590,000
businesses with more than 681,000
payrolls. The companys PEO services
provides clients with employment
administration outsourcing solutions,
while the dealer services segment
provides digital marketing solutions and
dealer management systems.
ADP has also been active in purchasing
other companies over the past five years.
The company acquired nine businesses in
fiscal 2011-12, totaling $776.1 million.
This includes the purchase of recruitment
process outsourcing provider The Right
Automatic Data Processing Inc. (US employer services segment) financial performance*
Revenue
($ million)
(% change)
2011-12
5,911.1
N/C
1,559.5
N/C
2012-13
6,441.3
9.0
1,806.8
15.9
2013-14
6,948.8
7.9
2,056.4
13.8
2014-15
7,403.3
6.5
2,241.8
9.0
2015-16
7,631.6
3.1
2,278.9
1.7
2016-17
8,145.3
6.7
2,490.9
9.3
Year**
*Estimates; Year-end June
Operating Income
($ million)
(% change)
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
Thing and tax credit company Wallace. In

2012-13, ADP made seven acquisitions
that totaled $292.4 million. ADP
acquired two businesses in fiscal 2013-14,
which included PayRoll SA, a Latin
American provider of payroll and human
resource services. The purchase indicated
ADPs interest to expand the companys
international offerings, particularly in the
growing Latin American region.
Financial performance
Over the past five years, ADP has
increased its revenue through both
organic growth and numerous
acquisitions. The company is expected
to grow at an average annual rate of
6.6% over the five years to fiscal 2016-
Other Companies
The majority of industry operators are

small companies that serve a local client
base of small businesses. Of all industry
operators, close to 85.0% are
nonemployers; however, these players
only account for one-tenth of the
industrys available market share (see
Market Share Concentration section).
While ADP is the most dominant player
industry, other players in the industry are
still expanding and gaining a larger
portion of market share.
Paychex Inc.
Estimated market share: 2.4%

Paychex Inc. was formed in Rochester,
NY, in 1971 as Paymaster. The company
services more than 500,000 clients.
Paychexs clients are mainly small to
midsize businesses, which are served
from more than 100 offices throughout
the United States. Paychex offers payroll
and taxpaying services, regulatory
compliance services and comprehensive
administrative services, including
retirement funds, workers compensation
and health plans. The company also
17, with industry relevant revenue

projected to expand to $8.1 billion.
Over the five-year period, ADP fared
well due to its dominant position in the
market. The company continues to be
successful through high levels of client
retention and the large market ranging
from small to large businesses the
company services. Additionally, ADP
provides payroll and bookkeeping
services to a broad array of US
geographic regions, thereby protecting
it from any localized downturns. The
company reports that in fiscal 2014-15,
segment growth was driven by new
business bookings growth, an increase
in the number of employees on client
payrolls, and price increases.
provides business insurance management

and other human resources products,
such as on-site HR personnel, employee
handbooks, management manuals and
personnel forms. Over the five years to
fiscal 2016, Paychex industry specific
revenue is expected to grow at an average
annual rate of 5.5% to $2.0 billion.
Acquisitions have contributed to
Paychexs growth. The companys most
recent acquisition was Advanced
Partners, which provided payroll and
outsourcing services for temporary
staffing to over 7,500 businesses. Earlier
acquisitions include SurePayroll, a
provider of software-as-a-service payroll
processing for small businesses, in
February 2011 for $115.3 million.
Previously, the company acquired
Hawthorne Benefit Technologies, a
provider of online business management
services through its BeneTrac system.
Intuit Inc.

Intuit Inc. is a US software company that
focuses on the development of financial
and tax preparation software. The
WWW.IBISWORLD.COM
Major Companies
Other Companies
continued
company provides products like

QuickBooks, TurboTax and Quicken to
help customers with business and
financial management problems. The
company has recorded strong growth
over the past five years as its online
solutions become increasingly popular
with companies seeking to improve
efficiency. In fiscal 2014-15, Intuit
generated $4.1 billion in revenue with
7,700 employees in offices across the
United States, Canada, India and the
United Kingdom.
The company has restructured its
business segments over recent years to
now consist of small business, consumer
and professional tax segments. Intuit is
primarily active in the Payroll and
Bookkeeping Services industry through
its small business segment, which
consists of QuickBooks and QuickBooks
accountancy software related income
streams, Demandforce online marketing
solutions, payment processing services
for small businesses and small business
payroll products and services. Small
business payroll products and services
include online payroll offerings, such as
Quickbooks Online Payroll and Intuit
Online Payroll; desktop payroll offerings,
such as QuickBooks Basic Payroll and
QuickBooks Enhanced Payroll; and full
service payroll offerings, such as Intuit
Full Service Payroll and QuickBooks
Assisted Payroll.
Over the five years to fiscal 2016,

Intuits revenue is estimated to grow at
an average annual rate of 7.7% to $1.5
billion. Company revenue has expanded
due to the acquisition of Demandforce in
May 2012, as well as an increase in US
customers and online subscriptions. The
company is expected to grow 5.2% in
fiscal 2016 as online solutions become
increasingly popular with businesses
seeking to improve existing processes.
Ceridian Inc.

Formerly a publicly listed company,
human resources and electronic
payment processing company Ceridian
Inc. is now owned by private equity firm
Thomas H Lee Partners and Fidelity
National Financial, after it was acquired
in 2007 for $5.3 billion. Founded in
1957, Ceridian was originally known as
Control Data Corporation before
aggressively expanding and acquiring
numerous companies. Over time, the
company evolved and narrowed its focus
to human resources services, such as
payroll processing, tax filing and
benefits administration and electronic
payment processing. In 2012, Ceridian
acquired Dayforce, a provider of cloud
software, human capital management
services and time and labor planning
solutions. The acquisition was made in
light of difficulty in deploying its InView
Paychex Inc. (US payroll service segment) - financial performance

Year*
2011-12
2012-13
2013-14
2014-15
2015-16**
2016-17**
*Year-end May; **Estimates
Revenue
($ million)
(% change)
Operating Income
($ million)
(% change)
1,510.0
1,539.0
1,599.3
1,656.8
1,872.1
1,977.1
N/C
1.9
3.9
3.6
13.0
5.6
578.3
598.6
623.9
637.2
678.3
706.0
N/C
3.5
4.2
2.1
6.5
4.1
WWW.IBISWORLD.COM
Major Companies
Other Companies
continued
platform, which is an application

designed to manage human resources
and payroll. Ceridian operates in the US,
Canada, UK and Mauritius, with an
estimated 65.0% of revenue sourced

from the US. In 2016, Ceridian is
expected to generate $691.3 million in
US industry-relevant revenue.
Intuit Inc. (US industry-relevant Small Business segment) - financial

performance*
Year*
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
*Estimates; Year-end July
Revenue
($ million)
(% change)
Operating Income
($ million)
(% change)
1,025.1
1,074.5
1,330.0
1,443.7
1,410.3
1,483.6
N/C
4.8
23.8
8.5
-2.3
5.2
335.0
348.3
539.2
570.0
465.6
522.6
N/C
4.0
54.8
5.7
-18.3
12.2
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
The Payroll & Bookkeeping Services

industry is labor intensive with a high
degree of manual processes involved in
most activities. In 2016, IBISWorld
estimates that for every dollar spent
on labor, the industry invests $0.02
in capital.
The level of capital intensity is
calculated with reference to industry
wages and depreciation, representing
53.2% and 0.9% of industry revenue,
respectively. Industry wages has been
consistently decreasing as a portion of
industry revenue, as computer
automation grows. Firms are investing in
a greater amount of software and other
computer systems to reduce labor costs
and provide direct solutions to
customers. While there is still a degree of
Level
The level
of capital
intensity is L ow
Capital intensity
Capital units per labor unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Professional,
Payroll &
Scientific and
Bookkeeping
Technical Services
Services
Dotted line shows a high level of capital intensity

client interaction, the industry has

evolved to provide more services online.
Many operators now give clients the
Tools of the Trade: Growth Strategies for Success

Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Payroll &
Bookkeeping
Services
Accounting Services
Traditional Service Economy

Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Computer
Stores
Tax Preparation Services
Office Supply Stores
Wired
Telecommunications
Carriers
Old Economy
Capital Intensive
Labor Intensive
New Age Economy
Agriculture and Manufacturing.

Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
Change in Share of the Economy
WWW.IBISWORLD.COM
Capital Intensity
continued
ability to submit payroll forms, taxation

and other returns over the internet. As a
result, capital intensity has increased
over the five years to 2016.
Over the next five years, capital
intensity is forecast to continue to rise.
The industry is expected to become
industry exhibits a medium level of

technological change. Most notably,
industry participants develop proprietary
or packaged software to service client
payroll needs. Programs are used to collect,
collate and analyze employee and financial
data on client operations. Payments are
then able to be made electronically and
reduce the need for manual labor in the
industry. As a result, as industry operators
develop more sophisticated and convenient
proprietary software, they are able to
increase profitability as wage costs fall.
Technological change is mostly expected
to be based on improving business
efficiency. This will include other technology
such as specialized payroll and bookkeeping
compliance technology that will be broken
down into modules for users. Modules will
allow users to quickly go through mandatory
requirements before starting work at a
company or when changing their details.
This includes the use of extensible markup
language (XML), a coding system that
allows automatic searching and storage of
data from websites and, therefore, improves
the speed of compliance.
Networks and the cloud

Network solutions include the
development of proprietary systems and
data that allow communications between
a number of different users with varying
access levels. Industry operators, clients
and their employees are all able to access
information through online systems. In
this way, industry operators can maintain
systems and complete some
administrative tasks, while the majority
of information is processed by businesses
and their employees.
Most recently, this information has
continuously being stored through the
cloud, which allows customers to access
information from any computer and at
any time. This has resulted in many
technological changes focused on cyber
security and privacy, because if any
companys information were accessed by
illegitimate third parties, it would hurt
industry operator reputation and result
in higher costs. Additionally, the use of
the cloud and networks to automate
industry services has resulted in a
paperless payroll system, which serves to
reduce business purchases.

industry tends to follow the broad
economic cycle and moves inversely with
changes in the unemployment rate.
However, the industry is more volatile
than the overall economy. One reason for
this factor is that when the economy
slows and unemployment rises, operators
suffer a two-fold loss. Not only do

payrolls diminish and client businesses
go bankrupt but some clients bring their
payroll and bookkeeping in-house. This
practice occurs when firms reduce their
work forces to a level where payroll can
be managed in-house, or when a clients
workload volume is reduced, giving
Technology & Systems The Payroll and Bookkeeping Services

Level
The level
of
Technology Change
is M
edium
Revenue Volatility
Level
The level
of
Volatility is M
edium
increasingly reliant on new software

systems and provide greater solutions to
clients. This includes cloud computing
software and the ability for businesses
and employees to use payroll and
bookkeeping software on new devices
such as smartphones and tablets.
WWW.IBISWORLD.COM
managers more spare time to spend on

payroll and bookkeeping tasks. The
opposite trend occurs when the economy
is strong. Existing client payrolls
increase, and new clients emerge as small
businesses expand and managers time is
spent on growth opportunities rather
than administrative tasks.
Over the five-year period, consistent job
creation and economic growth has helped
A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
industry revenue growth accelerate,

providing a moderate level of industry
volatility. Widespread economic recovery
spurred on new business and job creation
resulting in increasing demand for payroll
services. Industry revenue is calculated to
fluctuate at an average annual rate of 5.5%
over the five years to 2016, and is expected
to fall in coming years as unemployment
levels plateau.
Volatility vs Growth
1000
Revenue volatility* (%)
Revenue Volatility
continued
Hazardous
Rollercoaster
100
10
Payroll &
Bookkeeping
Services
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
Regulation & Policy

Level & Trend
he level of
T
Regulation is
Mediumand the
trend is S
teady
There is a moderate degree of regulation

industry. The industry handles a large
amount of sensitive data through digital
systems, therefore, regulation regarding
privacy and data security affects the
industry. Furthermore, the industrys
transfer of funds electronically means
that it is subject to US money
transmission activities regulations.
Additionally, industry participants need
to be aware of regulation regarding
taxation and other benefits. Industry
operators assist businesses by handling
payroll and bookkeeping services and,
therefore, must understand laws regarding
these issues to attract customers.
Privacy regulations
Industry operators are subject to
regulation regarding the data they
hold that pertains to client employees.
This includes laws regarding state
and federal privacy and data-security
related laws. Additionally, the
industry is subject to privacy laws
and regulation regarding
information provided for health
insurance, which is covered under
The Health Insurance Portability
and Accountability Act of 1996. Any
sort of credit information that is held
by industry operators is also
protected under the Fair Credit
Reporting Act.
WWW.IBISWORLD.COM
Regulation & Policy

continued
Anti-laundering and
reporting regulations
Industry operators are subject to
regulations regarding the transmission of
money electronically. Firstly the Bank
Secrecy Act of 1970 requires financial
institutions to assist US government
agencies to detect and prevent money
laundering. Financial institutions must
keep records of cash purchases, negotiable
instruments such as securities and file

reports of cash purchases. Operators are
also subject to laws where payments are
made to financial institutions that can be
considered suspicious activity. In the
event of dubious payments being made,
industry operators would be required to
assist in the filing of a suspicious activity
report to the Financial Crimes
Enforcement Network.
Industry Assistance

industry does not receive any direct
assistance. The industry is not involved in
international trade; therefore, there are no
tariffs applicable. In addition, the industry
does not receive any subsidies or grants.
However, industry operators have benefited
from government assistance provided to
businesses over the past five years. The
industry provides payroll and bookkeeping
services to a diverse range of businesses and

benefits from higher levels of employment
and business accountability.
In addition, industry associations such
as the American Payroll Association (APA),
provide networking, education and
resources to firms in the industry. Other
associations that assist the industry include
the Electronic Payments Association and
the American Institute of CPAs.
Level & Trend

he level of
T
Industry Assistance
is L owand the
trend is S
teady
Key Statistics
Industry Data
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank
Revenue
($m)
53,492.7
55,933.8
53,526.0
53,557.5
55,666.6
60,702.3
62,785.5
69,524.6
77,961.9
81,064.3
84,255.7
86,054.2
88,009.0
90,324.0
93,284.0
7/35
160/1370
Annual Change
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank
Revenue
(%)
4.6
-4.3
0.1
3.9
9.0
3.4
10.7
12.1
4.0
3.9
2.1
2.3
2.6
3.3
14/35
445/1370
Key Ratios
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank
IVA/Revenue
(%)
77.10
69.93
74.16
74.10
74.45
74.29
72.38
69.70
67.71
66.45
65.07
64.08
63.17
62.42
61.73
1/35
21/1370
Industry
Value Added
($m)
41,242.9
39,113.1
39,695.9
39,686.7
41,443.4
45,095.0
45,444.1
48,456.0
52,785.3
53,869.2
54,824.0
55,147.7
55,595.7
56,376.9
57,579.7
7/35
68/1370
Establishments
273,298
270,524
271,319
272,961
273,612
276,826
276,091
281,494
286,828
287,920
289,851
286,897
286,235
289,235
294,842
5/35
30/1370
Enterprises Employment
271,431
938,345
268,715
893,664
269,473
859,135
271,179
898,058
271,633
922,238
274,578
898,852
273,855
874,164
279,067
909,095
284,223
926,324
285,212
929,849
286,999
933,278
283,957
920,995
283,191
916,113
286,041
922,939
291,468
938,008
5/35
5/35
28/1370
41/1370
Exports
---------------N/A
N/A
Industry
Value Added
(%)
-5.2
1.5
0.0
4.4
8.8
0.8
6.6
8.9
2.1
1.8
0.6
0.8
1.4
2.1
14/35
470/1370
Establishments
(%)
-1.0
0.3
0.6
0.2
1.2
-0.3
2.0
1.9
0.4
0.7
-1.0
-0.2
1.0
1.9
22/35
536/1370
Enterprises Employment
(%)
(%)
-1.0
-4.8
0.3
-3.9
0.6
4.5
0.2
2.7
1.1
-2.5
-0.3
-2.7
1.9
4.0
1.8
1.9
0.3
0.4
0.6
0.4
-1.1
-1.3
-0.3
-0.5
1.0
0.7
1.9
1.6
22/35
23/35
522/1370
648/1370
Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Revenue per
Employee
($000)
57.01
62.59
62.30
59.64
60.36
67.53
71.82
76.48
84.16
87.18
90.28
93.44
96.07
97.87
99.45
31/35
1233/1370
Wages/Revenue
(%)
67.27
62.72
64.03
64.44
61.63
62.07
58.02
56.49
54.50
53.25
51.71
50.59
49.53
48.63
47.79
1/35
23/1370
Imports
---------------N/A
N/A
Wages
($m)
35,985.3
35,080.0
34,274.3
34,513.9
34,307.3
37,677.1
36,425.1
39,276.2
42,491.4
43,165.6
43,572.7
43,533.3
43,590.4
43,923.8
44,580.7
6/35
43/1370
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Unemployment
(%)
4.6
5.8
9.3
9.6
9.0
8.1
7.4
6.2
5.3
4.9
4.8
4.9
4.9
4.9
4.9
N/A
N/A
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages
(%)
-2.5
-2.3
0.7
-0.6
9.8
-3.3
7.8
8.2
1.6
0.9
-0.1
0.1
0.8
1.5
14/35
410/1370
Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Unemployment
(%)
26.1
60.3
3.2
-6.3
-10.0
-8.6
-16.2
-14.5
-7.5
-2.0
2.1
0.0
0.0
0.0
N/A
N/A
Employees
per Est.
3.43
3.30
3.17
3.29
3.37
3.25
3.17
3.23
3.23
3.23
3.22
3.21
3.20
3.19
3.18
16/35
1118/1370
Average Wage
($)
38,349.75
39,254.13
39,893.96
38,431.70
37,200.05
41,916.91
41,668.50
43,203.63
45,870.99
46,422.16
46,687.80
47,267.68
47,581.90
47,591.23
47,526.99
24/35
856/1370
Figures are in inflation-adjusted 2016 dollars. Rank refers to 2016 data.
Share of the
Economy
(%)
0.28
0.26
0.28
0.27
0.28
0.29
0.29
0.30
0.32
0.32
0.32
0.31
0.31
0.31
0.31
7/35
68/1370
WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon
BOOKKEEPINGKeeping record of a business financial

transactions.
OUTSOURCINGTo procure goods or services under

contract with an outside supplier.
IN-HOUSINGWhen businesses bring outsourced

functions in-house to save money or improve service
quality.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
INDUSTRY REVENUEThe total sales of industry goods

and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
EMPLOYMENTThe number of permanent, part-time,

temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
LIFE CYCLEAll industries go through periods of growth,

maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISE A division that is separately managed

and keeps management accounts. Each enterprise
consists of one or more establishments that are under
common ownership or control.
NONEMPLOYING ESTABLISHMENT Businesses with

no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit

within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
DOMESTIC DEMANDSpending on industry goods and

services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EXPORTSTotal value of industry goods and services sold

by US companies to customers abroad.
IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the
United States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
VOLATILITYThe level of volatility is determined by

averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.
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Payroll & Bookkeeping Services in the USMarch 2016 1

Base value: The improving labor market will

IBISWorld Industry Report 54121b

Payroll & Bookkeeping

2 About this Industry

18 Market Share Concentration

18 Key Success Factors

32 Jargon & Glossary

18 Cost Structure Benchmarks

Key External Drivers

10 Industry Life Cycle

28 Technology & Systems

12 Products & Services

29 Regulation & Policy

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Payroll & Bookkeeping Services in the USMarch 2016 2

About this Industry

Operators in this industry provide

The primary activities of this industry are

are also included. However, this industry

The major products and services in this industry are

54121c Accounting Services in the US

For additional information on this industry

Provided to: IBISWorld Staff Member (211573052) | 23 September 2016

Payroll & Bookkeeping Services in the US March 2016

Annual Growth 11-16

Annual Growth 16-21

Revenue vs. employment growth

Products and services segmentation (2016)

Key External Drivers

Tax planning and

Tax preparation and

General accounting services

External competition for

Full-service payroll services

Life Cycle Stage

Provided to: IBISWorld Staff Member (211573052) | 23 September 2016

Payroll & Bookkeeping Services in the USMarch 2016 4

Executive Summary | Key External Drivers | Current Performance

The Payroll and Bookkeeping Services

growing customer base and new

Key External Drivers

Outsourcing to the Business

technological opportunities. As a result,

aged 16 and older that are currently

Provided to: IBISWorld Staff Member (211573052) | 23 September 2016

Payroll & Bookkeeping Services in the USMarch 2016 5

payments are made to themselves. As the

rises, companies are increasingly likely to

National unemployment rate

Key External Drivers

Provided to: IBISWorld Staff Member (211573052) | 23 September 2016

Payroll & Bookkeeping Services in the USMarch 2016 6

The Payroll and Bookkeeping Services

Many industry players focus on servicing

rate of 7.8% to $81.1 billion. A large

Provided to: IBISWorld Staff Member (211573052) | 23 September 2016

Payroll & Bookkeeping Services in the USMarch 2016 7

In the five years to 2016, the US economy

As industry demand grew, operators

Profit margins have also been on the rise

online subscriptions and computer

The majority of companies in the