Paychex (PAYX) 10-K risk factor changes: FY2021 vs FY2020

Our [removed: business and results] [added: business, results] of [removed: operations have been, and our] [added: operations, and] financial condition [removed: may be,] [added: may continue to be] impacted by the outbreak of COVID-19 and such impact could be materially adverse. [removed: The global spread of COVID-19 created significant volatility, uncertainty and economic disruption.]

[removed: These] [added: The] restrictions [removed: disrupted and may continue] [added: imposed] to [removed: disrupt] [added: prevent the spread of COVID-19 disrupted] economic activity, resulting in reduced commercial and consumer confidence and spending, increased unemployment, closure or restricted operating conditions for businesses, volatility in the global capital markets, instability in the credit and financial markets, labor shortages, regulatory [removed: recommendations to provide] relief for impacted consumers, disruption in supply chains, and restrictions on many hospitality and travel industry operations.

Our business is substantially dependent on our [removed: clients] [added: clients’] continued use of our solutions and services, and our results of operations will decline if our clients are no longer willing or able to use them.

[removed: If] [added: 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 [removed: disrupted] [added: disrupted,] and we could face significant penalties or liabilities.

[removed: There] [added: In addition, there] has been and may continue to be a significant number of new laws and regulations promulgated by federal, state, local, and foreign governments following the outbreak of the COVID-19 pandemic.

Our business, services, and financial condition may be adversely impacted by changes in government regulations and [removed: policies.][added: policies.]

Our business and reputation may be adversely impacted if we fail to comply with U.S. and foreign laws and [removed: regulations.][added: regulations.]

[removed: In addition, as] [added: As] a U.S. company, we are required to comply with the economic sanctions and embargo programs administered by the Office of Foreign Assets Control and similar multi-national bodies and governmental agencies worldwide, and the Foreign Corrupt Practices Act (“FCPA”).

We may not be able to keep pace with changes in technology or provide timely enhancements to our products and [removed: services.][added: services.]

The market for our products is characterized by rapid technological advancements, changes in customer requirements, frequent new product [removed: introductions,] [added: introductions] and [removed: enhancements] [added: enhancements,] and changing industry standards.

The failure to provide [added: a] more efficient and user-friendly customer-facing digital experience across internet and mobile platforms as well as in physical locations may adversely impact our business and operating results.

[removed: We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of cyberattacks, security vulnerabilities or Internet disruptions.] We rely upon information technology (“IT”) networks, cloud-based platforms, and systems to process, transmit, and store electronic information, and to support a variety of business processes, some of which are provided by third-party vendors.

In addition, cybercriminals may seek to exploit the [removed: disruption] [added: disruptions] caused by the COVID-19 pandemic by attempting to engage in payment-related fraud or by more frequently attempting to gain access to our systems through phishing or other means that may be more successful when [removed: most of our] employees are working remotely.

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 [removed: account numbers,] [added: account,] credit [removed: card numbers,] [added: 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.

At the same time, the continued occurrence of high-profile [removed: cyber-attacks] [added: cyber] and [added: ransomware attacks and] data breaches provides evidence of an external environment increasingly hostile to information security.

Our service platforms enable our clients to store and process personal data on [removed: premise] [added: premises] or, increasingly, in a cloud-based environment that we host.

[removed: Our reputation, results of operations, or financial condition may be adversely impacted if we fail to comply with data privacy laws and regulations.] Our services require the storage and transmission of proprietary and confidential information of our clients and their employees, including personal or identifying information, as well as their financial and payroll data.

In the U.S., we are subject to rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, federal and state labor and employment laws, and state data breach notification and data privacy laws, such as the California Consumer Protection [removed: Act, which became effective on January 1, 2020.][added: Act.]

[removed: In the event of a catastrophe, our business continuity plan may fail, which could result in the loss of client data and adversely interrupt operations.] Our operations are dependent on our ability to protect our infrastructure against damage from catastrophe or natural disaster, [removed: severe weather including events resulting from climate change,] unauthorized security breach, power loss, telecommunications failure, terrorist attack, public health emergency, [added: pandemic,] or other events that could have a significant disruptive effect on our operations.

Our business continuity plan has been tested in the past by circumstances of severe weather, including hurricanes, floods, [removed: and] snowstorms, and [added: rain storms and] has been successful.

We may be adversely impacted by any failure of third-party service providers to perform their functions. [removed: As part of providing services to clients, we rely on a number of third-party service providers.]

These service providers include, but are not limited to, couriers used to deliver client payroll [removed: checks and] [added: checks,] banks used to electronically transfer funds from clients to their [removed: employees.][added: employees, and information technology vendors servicing cloud-based platforms we use.]

[removed: 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.

We may be adversely impacted by changes in health insurance and workers’ compensation rates and underlying claims trends. [removed: Within our PEO business, we maintain health and workers’ compensation insurance covering worksite employees.]

[removed: 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 service, we are authorized by our clients to transfer money from their accounts to fund amounts owed to their employees and various taxing authorities.

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. [removed: We receive interest income from investing client funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees.]

[removed: We may be adversely impacted by volatility in the political and economic environment.] Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and variability.

We invest our funds held for clients in high quality, investment-grade marketable [added: available-for-sale (“AFS”)] securities, money markets, and other cash equivalents.

[removed: However, these funds] [added: Funds] held for clients [added: and corporate investments] are subject to general market, interest rate, credit, and liquidity risks.

The interest we earn on funds held for clients [added: and corporate investments] may decrease as a result of a decline in funds available to invest and lower interest rates.

[removed: In addition, during periods] of volatility in the credit markets, certain types of investments may not be available to us or may become too risky for us to invest in, further reducing the interest we may earn on client funds.

If we sell [removed: available-for-sale] [added: AFS] securities to satisfy short-term funding requirements, we may recognize losses, which would [added: further] reduce the interest income earned on funds held for [removed: clients.][added: clients and corporate investments.]

[removed: 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.

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 [removed: condition.][added: condition.]

The Note Purchase and Guarantee Agreement (the “Agreement”) that we entered into in January 2019 in connection with our acquisition of [removed: Oasis,] [added: Oasis Outsourcing Group Holdings, L.P. (“Oasis”),] contains covenants which may restrict our flexibility to operate our business.

These covenants include restrictions regarding the incurrence of liens and indebtedness, substantial changes in the general nature of our business and our subsidiaries (taken as a whole), certain merger transactions, certain sales [removed: of assets and other matters, all subject to certain exceptions.]

The Agreement also contains financial covenants, which are reviewed for compliance on a quarterly basis, that require us not to exceed a maximum leverage ratio of [removed: 3.50:1.00] [added: 3.5:1.0] and a minimum interest coverage ratio of [removed: 2.00:1.00.][added: 2.0:1.0.]

[removed: 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 people at all levels, including management, technical, compliance, and sales personnel.

Failure to protect our intellectual property rights may harm our competitive position and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly. [removed: Despite our efforts to protect our intellectual property and proprietary information, we may be unable to do so effectively in all cases.]

[removed: Third-parties] [added: Third parties] may claim that we are infringing [added: on] their intellectual property rights.

Business and Operational Risks

We may experience software defects, undetected errors, and development delays, which could damage our relationship with clients, decrease our potential profitability and expose us to liability.

Our products rely on software and computing systems that can encounter development delays, and the underlying software may contain undetected errors, viruses or defects.

Defects in our products and errors or delays caused by our products could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential clients, harm to our reputation and exposure to liability.

In addition, we rely on technologies and software supplied by third parties that may also contain undetected errors, viruses or defects that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of cyberattacks, security vulnerabilities or Internet disruptions.

Furthermore, if any of our products contains a software vulnerability, the vulnerability may be exploited to obtain access to our data or our clients’ data.

In the event of a catastrophe, our business continuity plan may fail, which could result in the loss of client data and adversely interrupt operations.

Climate-related weather disasters, including hurricanes, flooding, snowstorms, and severe rainstorms, could also threaten the business continuity of our operations.

As part of providing services to clients, we rely on a number of third-party service providers.

We may be exposed to additional risks related to our co-employment relationship within our PEO business.

Within our PEO business, we maintain health and workers’ compensation insurance covering worksite employees.

We made and may continue to make acquisitions that involve numerous risks and uncertainties.

Financial Risks

Our clients could have insufficient funds to cover payments we made on their behalf, resulting in financial loss to us.

We receive interest income from investing client funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees.

of assets and other matters, all subject to certain exceptions.

Legal, Regulatory and Political Risks

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.

Our reputation, results of operations, or financial condition may be adversely impacted if we fail to comply with data privacy laws and regulations.

In the European Union, we are subject to the European Union’s General Data Privacy Regulation.

We could be subject to litigation or reputational risk if we or our third-party providers fail to utilize data practices sufficient to safeguard proprietary, confidential, or personal or identifying information.

Despite our efforts to protect our intellectual property and proprietary information, we may be unable to do so effectively in all cases.

We are sometimes the subject of complaints or litigation from customers, employees, or other third-parties for various actions.

General Risk Factors

The global spread of COVID-19 created significant volatility, uncertainty and economic disruption.

While economic conditions have begun improving as vaccine distribution has accelerated in the United States, there can be no assurance that the economic recovery will occur or offset the uncertainty and instability triggered by the pandemic.

We are subject to the impacts related to the COVID-19 pandemic for so long as our clients are exposed to those heightened risks and uncertainties.

We may be adversely impacted by volatility in the political and economic environment.

We also invest our corporate funds in short- to intermediate-term instruments.

In addition, during periods

If we are unable to reinvest our AFS securities when they mature, our interest income earned and investment portfolio would be reduced.

We may not be able to attract and retain qualified people, which could impact the quality of our services and customer satisfaction.

Negative publicity relating to events or activities attributed to us, our corporate employees, or others associated with us, whether or not justified, may tarnish our reputation and reduce the value of our brand.

In the United States and globally, governmental authorities instituted certain preventative measures, including border closures, travel restrictions, operational restrictions on certain businesses, shelter-in-place orders, quarantines and recommendations to practice social distancing.

The extent to which the coronavirus pandemic impacts our business, operations, and financial results is uncertain and will depend on future developments, including the duration or recurrence, of the pandemic, the related length and severity of its impact on the U.S. and global economy, and the continued governmental, business and individual actions taken in response to the pandemic and economic disruption.

Impacts related to the COVID-19 pandemic are expected to continue to pose risks to our business for the foreseeable future, heightened many of the risks and uncertainties identified below, and could have a materially adverse impact on our business, financial condition, and results of operations.

Our operational risk, including data security risk, has increased during the pandemic as a majority of our employees are working remotely and cybercriminal activity increases in an attempt to profit from the disruption to typical operations.

The failure to comply with these new laws and regulations could result in financial penalties, legal proceedings, and reputational harm.

In addition, the European Union’s General Data Privacy Regulation became fully effective in May 2018.

Quantitative and qualitative disclosures about market risk: Refer to the “Market Risk Factors” section contained in Item 7A of this Form 10-K for a discussion on this type of risk, which could have a material adverse effect on our business and results of operations.

We are a leading [removed: provider of integrated] human [removed: capital management (“HCM”) solutions for human resources (“HR”),] [added: resource (“HR”) software and services company, offering HR,] payroll, benefits, and insurance services for small- to medium-sized businesses.

As of May 31, [removed: 2020,] [added: 2021,] we served greater than [removed: 680,000] [added: 710,000] payroll and PEO clients.

For any organization, a key function is [removed: the] effective [removed: management of] human capital [added: management (“HCM”),] which requires both resources and expertise.

Organizations are faced with complex and ever-changing requirements, including diverse [added: and complicated] federal, [removed: state] [added: state,] and local regulations across multiple jurisdictions.

Paychex offers a wide range of services [added: and products] – including a fully outsourced HR solution, payroll processing, retirement services, and insurance – allowing us to customize our offering to the client's business, whether it is small or large, [removed: simple] [added: simple,] or complex.

·Comprehensive cloud-based platform optimized to meet the payroll and [removed: HCM] [added: HR] needs of [removed: small] [added: small-] and medium-sized organizations;

[removed: ·Over 45] [added: ·50] years of expertise in HR and payroll with our technology backed by over 200 compliance experts and [removed: 600] [added: 650] HR business [removed: partners.][added: professionals.]

We focus on providing an industry-leading client [removed: experience,] [added: experience] and continue to see improving client satisfaction scores and retention.

Our mission is to be the leading provider of HR, payroll, benefits, and insurance solutions by being an essential partner to [removed: small] [added: small-] and medium-sized businesses across the U.S. and parts of Europe.

After several strategic PEO acquisitions over the past several years, we are [removed: now] the second largest provider of PEO services in the [removed: nation.][added: U.S. With over 650 HR business professionals, we have extensive expertise that we believe sets us apart in the industry.]

·Engaging in strategic acquisitions. In the past, we utilized acquisitions as a [removed: mean] [added: means] to expand our portfolio, enter new markets or increase our scale.

Our solutions bring together payroll and HCM software with flexible, [removed: personalized] [added: personalized, and] technology-enabled service capabilities.

Clients have the option of doing payroll online using our SaaS technology, outsourcing to our payroll [removed: specialists] [added: specialists,] or using a combination of those solutions.

Clients can select the modules they need and easily add on [removed: additional] services as they grow.

In addition, Paychex Flex presents function-focused analytics throughout the platform, [removed: assisting] [added: providing] HR leaders with [removed: making] [added: data to make] more informed business decisions.

Paychex Flex uses a [removed: mobile-first] [added: device-independent] design throughout our HCM suite, which allows full functionality of all application components, regardless of device or screen size.

We believe our Paychex mobile applications add greater value and convenience for our clients and their employees by allowing them instant access on their mobile [removed: device.][added: device, and we have experienced strong growth in mobile and self-service usage over the past year.]

HR and Compliance Expertise: Paychex supports its HCM software solutions with [removed: over 45] [added: 50] years of experience.

We have over [removed: 600] [added: 650] HR [added: business] professionals who are dedicated to our clients and have the experience and training to provide HR best practices and advice.

In addition, we have over 200 compliance professionals who are in real-time contact with tax agencies and regulators to understand upcoming or newly enacted laws and [removed: regulations,] [added: regulations] and advocate for our clients’ interests.

In addition, [removed: mid-market] [added: medium-sized] clients can utilize a relationship manager for more personalized service.

This flexible platform services our small- to medium-sized [removed: clients,] [added: clients] and a portion of our PEO business.

The Paychex Flex Intelligence Engine includes the Flex Assistant, a customer service chatbot [removed: who] [added: that] can answer over [removed: 200] [added: 340] commonly asked [removed: questions.][added: questions and offer access to 800 instructional resources.]

Our [added: Paychex] Flex Intelligence Engine allows clients to elect their preference for learning – via written how-to-documents, tutorial-style video vignettes, or a guided interactive tour.

Within this space, we serve a diverse [added: client] base [removed: of clients] 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 define the solution that best meets their needs and to grow within the [added: Paychex] Flex platform.

We utilize service agreements and arrangements with clients that generally do not contain specified contract [removed: periods,] [added: periods] and may be terminated by either party with [removed: 30-days’] [added: 30-days] notice of termination.

For the fiscal year ended May 31, [removed: 2020] [added: 2021] (“fiscal [removed: 2020”),] [added: 2021”),] client retention was at record levels of [removed: over 83%] [added: approximately 85%] of our beginning client [removed: base for the fiscal year.][added: base.]

We simplify their payroll with a combination of our [removed: products] [added: solutions] and customer service options for a quick and easy payday.

Our [removed: mid-market] [added: medium-sized] clients generally have more complex payroll and employee benefit needs, though with the environment of increasing regulations, we believe the need for HR outsourcing services has been moving down-market.

Both our [removed: small] [added: small-] and [removed: mid-market] [added: medium-sized] clients can choose one of our comprehensive HR outsourcing services, which include ASO and PEO solutions, and participate in our benefits offerings, which include our insurance and retirement services.

[removed: These services provide plan implementation, ongoing] compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services.

Our Learning Management solution [removed: compliments] [added: complements] our performance [removed: management.][added: management tool.]

oBenefits administration software [added: that] manages the employee-benefit enrollment process for both open-enrollment and life events.

oTime and attendance products, including our integrated [added: Paychex] Flex Time software, provide timekeeping, scheduling, and workforce analytics.

·Business services: We offer various business services [removed: to] [added: for] small- to medium-sized businesses.

·PEO solutions: Our licensed [removed: subsidiaries, Paychex Business Solutions, LLC, HR Outsourcing Holdings, Inc. (“HROi”), and Oasis] [added: PEO subsidiaries] offer businesses a combined package that includes payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative, among other services.

What differentiates our PEO solutions from our ASO solutions is that we serve as a co-employer of our clients’ [removed: employees, offer health care coverage to PEO client employees,] [added: employees] and assume the risks and rewards of [added: certain] workers’ compensation insurance and certain [removed: benefit] [added: health] insurance offerings.

We are certified under the Small Business [removed: Efficiency Act to provide PEO solutions.]

Our virtual sales force manages inbound sales leads for the under [removed: 10] [added: ten] employee space, sales in areas without a direct sales force presence, and sales of various ancillary services.

The COVID-19 pandemic has further accelerated certain trends toward remote work, consumer-oriented user experience, and increased regulatory complexity which required us to pivot and adapt quickly to these changes.

As the global economy continues to evolve, whether due to legislative changes, the COVID-19 pandemic, or other factors, we are committed to supporting our clients to help them navigate these challenges.

Developments in fiscal 2021 designed to meet the evolving needs of employers and employees during the COVID-19 pandemic included:

The COVID-19 Help Center: Paychex brought a multifaceted response to the COVID-19 pandemic and delivers resources and services to help our clients respond and adapt.

The COVID-19 Help Center on our website continues to provide support throughout every stage of the pandemic.

Portfolio of Paycheck Protection Program (“PPP”) tools, which include the ability for employers to easily navigate the complexities of the PPP and Employee Retention Tax Credit.

Employee health and safety offerings, including COVID-19 leave tracking, COVID-19 screening, and health attestation solutions.

Enhanced Onboarding Self-Service experience, which simplifies the user experience for entering and reviewing new-hire information and includes the ability to invite employees to complete onboarding and documentation digitally.

In fiscal 2021, product development focused on new products geared toward increasing digital transformation and use of technology for our clients allowing them to function efficiently with a distributed workforce.

Our fiscal 2021 product development included enhancements to:

| | | |

| --- | --- | --- |

| | Data analytics and live reports | Online employee onboarding tool |

| | HR Connect | Performance management features |

| | Mobility and self-service tools | Voice recognition |

These services provide plan implementation, ongoing

In January 2021, we were among the first in the retirement industry to sponsor and maintain a Pooled Employer Plan (“PEP”) to help businesses provide a cost-effective retirement plan option for their eligible employees.

These services include:

oDigital communication solutions, including Paychex Flex HR Connect and HR Conversations, which helps strengthen connections and keep workers engaged no matter their work location.

Paychex Flex HR Connect provides the ability to digitally submit questions, requests, and incident reports directly to HR through an easy-to-use workflow.

HR Conversations enables managers and HR leaders to initiate communications with employees, and enhancements to performance assessments allow for 360-degree feedback digitally within the tool.

Efficiency Act to provide PEO solutions.

In fiscal 2021, we began to offer the PEO Protection Plus Package, which helps business owners protect their bottom line from unforeseen costs, including cyberattacks and employee lawsuits, as exposure to these risks rapidly increased due to the COVID-19 pandemic.

During fiscal 2021, in response to the COVID-19 pandemic, our entire field sales force pivoted to working in a virtual environment.

Human Capital

We strive to foster a diverse, equitable, and inclusive (“DE&I”) workplace; attract, retain, and develop talented employees; and keep them safe.

For detailed information regarding our HCM activities, we encourage investors to visit our Corporate Responsibility website page at https://www.paychex.com/corporate/corporate-responsibility.

We have also made our Corporate Social Responsibility (“CSR”) report for fiscal 2020 available on our website.

The information contained on our website and in our CSR report is not and should not be viewed as being incorporated by reference into this Form 10-K.

Our Employees: As of May 31, 2021, we employed approximately 15,000 people, primarily in the U.S. and on a full-time basis.

None of our employees were covered by collective bargaining agreements.

We have not experienced a strike or similar work stoppage, and we consider our relations with our employees to be good.

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.

The Paychex Values are:

| | | |

| --- | --- | --- |

| Integrity | Service | Innovation |

| Partnership | Accountability | Respect |

Each of these values guide our decision-making process and are critical to our ongoing success.

All employees are required to verify their understanding and observance of these values during our annual “Right Way” training, review these values with management during periodic performance discussions, and are further encouraged to attend ongoing training during the year.

The COVID-19 environment has further accelerated certain trends and increased regulatory complexity.

Greater than half of our revenues are from HR and benefits solutions beyond payroll.

With over 600 HR business partners, we have extensive expertise that we believe sets us apart in the industry.

The latest enhancements include expansion of our integration capabilities to connect users with some of the world’s leading business tools, a Help Center that gives users access to training and how-to tutorials, a pay-on-demand solution to grant employees access to earned wages before their scheduled pay day, a custom dashboard, and a newly enhanced grid entry view which offers more flexibility, customization, and visibility into employee pay data.

We also expanded into wearable technology where Paychex Flex Time users can also use our smartwatch solution, which enables users to track time worked via their smartwatch, making the time and attendance tracking process easier for an increasingly remote workforce.

Employees

As of May 31, 2020, we employed approximately 15,800 people, of which approximately 15,600 people were employed on a full-time basis.

For the fiscal year ended May 31, [removed: 2020][added: 2021]

| [removed: Delaware] [added: Delaware] (State or other jurisdiction of incorporation or organization) | | 16-1124166 (I.R.S. Employer Identification No.) |

As of November 30, [removed: 2019,] [added: 2020,] the last business day of the most recently completed second fiscal quarter, shares held by non-affiliates of the registrant had an aggregate market value of [removed: $27,530,894,822] [added: $29,976,304,817] based on the closing price reported for such date on the [removed: Nasdaq] [added: NASDAQ] Global Select Market.

As of June 30, [removed: 2020, 358,769,682] [added: 2021, 359,830,185] shares of the registrant’s common stock, [removed: $.01] [added: $0.01] par value, were outstanding.

Portions of the registrant’s definitive proxy statement to be issued in connection with its Annual Meeting of Stockholders to be held on or about October [removed: 15, 2020,] [added: 14, 2021,] to the extent not set forth herein, are incorporated by reference into Part III, Items 10 through 14, inclusive.

For the fiscal year ended May 31, [removed: 2020][added: 2021]

| | [Cautionary Note Regarding Forward-Looking [removed: Statements Pursuant to the United States Private Securities](#CautionaryNote) ‎[Litigation Reform Act of 1995](#CautionaryNote)] [added: Statements](#CautionaryNote)] | 1 | | |

| [Item 1A](#RiskFactors) | [Risk Factors](#RiskFactors) | [removed: 9] [added: 11] | | |

| [Item 1B](#UnresolvedStaffComments) | [Unresolved Staff Comments](#UnresolvedStaffComments) | [removed: 14] [added: 16] | | |

| [Item 2](#Properties) | [Properties](#Properties) | [removed: 15] [added: 16] | | |

| [Item 3](#LegalProceedings) | [Legal Proceedings](#LegalProceedings) | [removed: 15] [added: 17] | | |

| [Item 4](#MineSafetyDisclosures) | [Mine Safety Disclosures](#MineSafetyDisclosures) | [removed: 15] [added: 17] | | |

| [Item 5](#MarketforCommonEquity) | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity](#MarketforCommonEquity) ‎[Securities](#MarketforCommonEquity) | [removed: 15] [added: 17] | | |

| [Item 7](#MDA) | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#MDA) | [removed: 19] [added: 20] | | |

| [Item 7A](#MarketRisk) | [Quantitative and Qualitative Disclosures About Market Risk](#MarketRisk) | [removed: 33] [added: 35] | | |

| [Item 8](#FinancialStatementsAndSupplementaryData) | [Financial Statements and Supplementary Data](#FinancialStatementsAndSupplementaryData) | [removed: 35] [added: 37] | | |

| [Item 9](#ChangesAndDisagreements) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ChangesAndDisagreements) | [removed: 74] [added: 72] | | |

| [Item 9A](#ControlsAndProcedures) | [Controls and Procedures](#ControlsAndProcedures) | [removed: 74] [added: 72] | | |

| [Item 9B](#OtherInformation) | [Other Information](#OtherInformation) | [removed: 74] [added: 72] | | |

| [Item 10](#DirectorsExecutiveOfficers) | [Directors, Executive Officers and Corporate Governance](#DirectorsExecutiveOfficers) | [removed: 75] [added: 73] | | |

| [Item 11](#ExecutiveCompensation) | [Executive Compensation](#ExecutiveCompensation) | [removed: 76] [added: 74] | | |

| [Item 12](#SecurityOwnership) | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#SecurityOwnership) | [removed: 76] [added: 74] | | |

| [Item 13](#CertainRelationships) | [Certain Relationships and Related Transactions, and Director Independence](#CertainRelationships) | [removed: 77] [added: 75] | | |

| [Item 14](#PrincipalAccountingFees) | [Principal Accounting Fees and Services](#PrincipalAccountingFees) | [removed: 77] [added: 75] | | |

| [Item 15](#ExhibitsAndFinancialStatementSchedules) | [Exhibits and Financial Statement Schedules](#ExhibitsAndFinancialStatementSchedules) | [removed: 78] [added: 76] | | |

| [Item 16](#Item_16) | [Form 10-K Summary](#Item_16) | [removed: 80] [added: 77] | | |

| | [Signatures](#Signatures) | [removed: 80] [added: 78] | | |

CAUTIONARY NOTE REGARDING FORWARD-LOOKING [removed: STATEMENTS PURSUANT TO THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995][added: STATEMENTS]

Our actual results and financial [removed: conditions] [added: condition] may differ materially from those indicated in the forward-looking statements.

·the impact of the [removed: outbreak of] COVID-19 [added: pandemic] on the U.S. and global [removed: economy] [added: economy,] and [added: in particular] on our [removed: ability to provide services to our] [added: small- and medium-sized business] clients;

·the possibility of failure of our operating facilities, computer systems, or communication systems during a catastrophic [removed: event, including the outbreak of COVID-19;][added: event;]

·risks related to acquisitions and the integration of the businesses we [removed: acquire, including integrating Oasis Outsourcing Group Holdings, L.P.’s (“Oasis”) business with ours;][added: acquire;]

·changes in the availability of qualified people, including management, technical, compliance and sales personnel; [added: and]

·the possible effects of negative publicity on our reputation and the value of our [removed: brand; and][added: brand.]

·potential outcomes related to pending or future litigation [removed: matters.][added: matters;]

Any of these factors, as well as such other factors as discussed in Part I, Item 1A, “Risk Factors” and throughout Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10\-K (“Form 10-K”), [removed: as well as] [added: and] in our periodic filings with the Securities and Exchange Commission (the “SEC”), could cause our actual results to differ materially from our anticipated results.

Our investor presentation regarding the financial results for the fiscal year ended May 31, [removed: 2020] [added: 2021] is available and accessible [removed: at Paychex's] [added: on our Paychex] Investor Relations page at [removed: https://www.paychex.com/investors.][added: https://investor.paychex.com.]

We intend to make future investor presentations available exclusively [removed: through] [added: on] our [added: Paychex] Investor Relations page.

| [Item 6](#SelectedFinancialData) | [\[Reserved\]](#SelectedFinancialData) | 19 | | |

| [Item 9C](#DisclosureRegardingForeignJurisdictions) | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#DisclosureRegardingForeignJurisdictions) | 73 | | |

·software defects, undetected errors, or development delays for our products;

| [Item 6](#SelectedFinancialData) | [Selected Financial Data](#SelectedFinancialData) | 18 | | |

We owned and leased the following properties as of May 31, [removed: 2020:][added: 2021:]

| Other U.S. locations | | [removed: 65,000] [added: 30,000] |

| Total owned facilities | | [removed: 1,090,000] [added: 1,055,000] |

| Rochester, New York | | [removed: 97,000] [added: 90,000] |

| Other U.S. locations | | [removed: 1,937,000] [added: 1,541,000] |

| International locations | | [removed: 86,000] [added: 92,000] |

| Total leased facilities | | [removed: 2,120,000] [added: 1,723,000] |

These include disputes or potential disputes related to breach of contract, tort, employment-related claims, tax claims, [removed: patent,] statutory, and other matters.

As of June 30, [removed: 2020,] [added: 2021,] there were [removed: 10,075] [added: 10,611] holders of record of our common stock, which includes registered holders and participants in the Paychex, Inc. Dividend Reinvestment and Stock Purchase Plan.

There were also [removed: 4,031] [added: 3,733] participants in the Paychex, Inc. Qualified Employee Stock Purchase Plan and [removed: 4,393] [added: 4,177] participants in the Paychex, Inc. Employee Stock Ownership Plan.

All shares repurchased during fiscal [removed: 2020] [added: 2021] were retired and were as follows:

| Second quarter | | — | | $ | — | | | — | | $ | [removed: 228.1] [added: 199.3] |

| [removed: May 1 to] [added: As of] May [removed: 31, 2020 | | — |] [added: 31,] | [removed: $] | [removed: —] [added: 2021] | | | [removed: —] | [added: 2020] | [removed: $] | [removed: 228.1] |

| [removed: Fiscal year] | | [removed: 2.0 |] [added: Fiscal Year] | [removed: $] | [removed: 84.68] | | [removed: $] | [removed: 171.9] | | | |

The following graph shows a five-year comparison of the total cumulative returns of investing $100 on May 31, [removed: 2015,] [added: 2016,] in Paychex common stock, the S&P 500 Index, and [removed: a] [added: two] Peer Group [removed: Index.][added: Indexes.]

][added: 1](https://www.sec.gov/Archives/edgar/data/723531/000072353121000035/payx-20210531x10kg001.jpg)]

| May 31, | | [removed: 2015 | |] 2016 | | 2017 | | 2018 | | 2019 | | 2020 | [added: | 2021 |]

The Peer Group was adjusted for fiscal [removed: 2020.][added: 2021.]

[removed: DST Systems,] [added: The Dun & Bradstreet Corporation, TD AMERITRADE Holding Corporation, Total Systems Services,] Inc. and [removed: Robert Half International,] [added: Worldpay,] Inc. were removed and replaced with [removed: IHS Markit Ltd.] [added: FleetCor Technologies, Inc., Sabre Corporation, TransUnion] and [removed: Worldpay,] [added: Verisk Analytics,] Inc., as they are more closely aligned with the Paychex business.

Our new Peer Group for fiscal [removed: 2020] [added: 2021] is comprised of the following companies:

| [removed: Fiserv,] [added: Global Payments] Inc. | | The Western Union Company |

| In millions, except per share amounts | | [removed: | | | | | | | | | |] [added: 2021] | | | [added: 2020] | | | [added: Change(3)] | | |

| Year ended May 31, | | [removed: 2020(1)] | [removed: | | | 2019(1) | | | | 2018(1),(2),(3) | | | | 2017(1)] [added: 2021] | | | [added: 2020] | [removed: 2016(4)] | | [added: 2019] |

| [removed: Service revenue | | $ | 3,953.6 | | | $ | 3,691.9 | | | $ | 3,314.2] [added: Total service revenue] | | | [removed: $] [added: 3,997.5] | [removed: 3,102.4] | | [added: 3,953.6] | [removed: $] | [removed: 2,905.8] | [added: 3,691.9] |

| Interest on funds held for clients | | | [removed: 86.9 | | | | 80.6 | | | | 63.5 | | |] [added: 59.3] | [removed: 50.6] | | [added: 86.9] | | [removed: 46.1] | [added: 80.6] |

| [removed: Total revenue | | $ | 4,040.5 | | | $ | 3,772.5 | | | $ | 3,377.7] [added: Total revenue] | | | [removed: $] [added: 4,056.8] | [removed: 3,153.0] | | [added: 4,040.5] | [removed: $] | [removed: 2,951.9] | [added: 3,772.5] |

| [removed: Operating income | | $ | 1,460.5 | | | $ | 1,371.3 | | | $ | 1,291.5] [added: Operating income] | | | [removed: $] [added: 1,460.7] | [removed: 1,253.9] | | [added: 1,460.5] | [removed: $] | [removed: 1,146.6] | [added: 1,371.3] |

| [removed: Net income | | $ | 1,098.1 | | | $ | 1,034.4 | | | $ | 994.1] [added: Net income] | | [added: $] | [removed: $] [added: 1,097.5] | [removed: 826.3] | [added: $] | [added: 1,098.1] | [removed: $] | [removed: 756.8] [added: $] | [added: 1,034.4] |

| [removed: Basic] [added: Basic] earnings per [removed: share | | $ | 3.06 | | | $ | 2.88 | | | $ | 2.77] [added: share] | | [added: $] | [removed: $] [added: 3.05] | [removed: 2.30] | [added: $] | [added: 3.06] | [removed: $] | [removed: 2.10] [added: $] | [added: 2.88] |

| [removed: Diluted] [added: Diluted] earnings per [removed: share | | $ | 3.04 | | | $ | 2.86 | | | $ | 2.75] [added: share] | | [added: $] | [removed: $] [added: 3.03] | [removed: 2.28] | [added: $] | [added: 3.04] | [removed: $] | [removed: 2.09] [added: $] | [added: 2.86] |

| Cash dividends per common share | | $ | [removed: 2.48 | | | $ | 2.30 | | | $ | 2.06 |] [added: 2.52] | | $ | [removed: 1.84 |] [added: 2.48] | | [removed: $] | [removed: 1.68] | |

| Purchases of property and equipment | | [removed: $] | [removed: 127.0 | | | $ | 123.8 | | | $ | 154.0 | | | $] [added: (114.6)] | [removed: 94.3] | | [added: (127.0)] | [removed: $] | [removed: 97.7] | [added: (123.8)] |

Management’s Discussion and Analysis of Financial Condition and Results of Operations reviews the operating results of Paychex, Inc. and its wholly owned subsidiaries (“Paychex,” the “Company,” “we,” “our,” or “us”) for [removed: each of the three] [added: our] fiscal [removed: years] [added: year] ended May 31, [removed: 2020] [added: 2021] (“fiscal [removed: 2020”] [added: 2021”] or the “fiscal year”), [removed: May 31, 2019 (“fiscal 2019”), and] [added: as compared to our fiscal year ended] May 31, [removed: 2018] [added: 2020] (“fiscal [removed: 2018”),] [added: 2020”),] and our financial condition as of May 31, [removed: 2020.][added: 2021.]

This review should be read in conjunction with the accompanying consolidated financial statements and the related Notes to Consolidated Financial Statements contained in Item 8 of this [removed: Annual Report on] Form 10-K [removed: (“Form 10-K”)] and the “Risk Factors” discussed in Item 1A of this Form 10-K.

Forward-looking statements in this review are qualified by the cautionary statement under the heading “Cautionary Note Regarding Forward-Looking [removed: Statements Pursuant to the United States Private Securities Litigation Reform Act of 1995”] [added: Statements”] contained at the beginning of Part I of this Form 10-K.

We are a leading [removed: provider of integrated] human [removed: capital management (“HCM”) solutions for human resources (“HR”),] [added: resource (“HR”) software and services company, offering HR,] payroll, benefits, and insurance services for small- to medium-sized businesses.

Within our [removed: HCM] [added: human capital management (“HCM”)] solutions, we offer a comprehensive portfolio of services and products that allow our clients to meet their diverse HR and payroll needs.

Clients may choose to have our service team handle everything for them, or process payroll themselves utilizing our proprietary, [removed: robust,] [added: robust] software-as-a-service (“SaaS”) Paychex Flex® platform and our SurePayroll® SaaS-based products.

[removed: However, in] [added: In] the current environment of increasing regulations, [removed: we believe] the [added: Company believes the] needs for HR outsourcing solutions have been moving down-market.

Any of our clients [removed: using] [added: on] Paychex Flex can opt for the integrated suite of HCM solutions, which allows clients to choose the services and software that will meet the needs of their business.

During fiscal 2021, the Company substantially completed cost-saving initiatives, including an acceleration of our long-term strategy to reduce our geographic footprint.

As such, the Company ceased the use of certain leased properties.

| First quarter | | 0.4 | | $ | 74.70 | | $ | 28.8 | | $ | 199.3 |

| Third quarter | | 0.5 | | $ | 90.38 | | | 47.2 | | $ | 152.1 |

| March 1 to March 31, 2021 | | — | | $ | — | | | — | | $ | 152.1 |

| April 1 to April 30, 2021 | | — | | $ | — | | | — | | $ | 152.1 |

| May 1 to May 31, 2021 | | 0.8 | | $ | 98.83 | | | 79.7 | | $ | 72.4 |

| Fiscal year | | 1.7 | | $ | 90.83 | | $ | 155.7 | | | |

In July 2021, our Board authorized an additional program allowing us to repurchase up to $400.0 million of our common stock which expires on January 31, 2024.

| Paychex | | $100.00 | | $112.73 | | $128.98 | | $174.18 | | $151.49 | | $218.39 |

| S&P 500 | | $100.00 | | $117.47 | | $134.36 | | $139.45 | | $157.35 | | $220.79 |

| Peer Group - old | | $100.00 | | $118.33 | | $150.41 | | $176.65 | | $194.66 | | $254.29 |

| Peer Group - new | | $100.00 | | $116.29 | | $145.72 | | $169.82 | | $190.66 | | $246.04 |

| Equifax, Inc. | | Sabre Corporation |

| Fiserv, Inc. | | TransUnion |

| FleetCor Technologies, Inc. | | Verisk Analytics, Inc. |

Item 6. \[Reserved\]

A detailed review of our fiscal 2020 performance compared to our fiscal year ended May 31, 2019 performance and our financial condition as of May 31, 2020 is set forth in Part II, Item 7 of our Annual Report on Form 10-K (“Form 10-K”) for fiscal 2020.

Our medium-sized clients generally have more complex payroll and employee benefit needs, though with the environment of increasing regulations, we believe the need for HR outsourcing services has been moving down-market.

A key component of our service delivery strategy is to be a proactive partner with our clients and to develop and release integrated solutions within Paychex Flex to meet their current and future needs.

Our ongoing investments in our platforms have prepared us well for the demands of the current business and regulatory environments, allowing us to adapt while maintaining strong service delivery, resulting in high levels of client satisfaction and retention.

Fiscal 2021 Business Highlights

| Dividends paid to stockholders(2) | | $ | 908.7 | | $ | 889.4 | | 2 | | % |

(2)Dividends paid to stockholders represented approximately 83% of net income for fiscal 2021 compared to approximately 81% of net income for fiscal 2020.

(3)Percentage changes are calculated based on unrounded numbers.

We continue to make investments in technology a priority as companies look to leverage technology solutions to maintain operations, stay connected to employees, and increase productivity.

In fiscal 2021, we enhanced our solutions to support businesses as they navigate the federal stimulus programs and engage in digital transformation.

We have continued to evolve our products to help business leaders find, hire, and retain employees quickly and effectively with an eye on driving engagement and managing labor costs.

Our fiscal 2021 technology and solution developments provide a unique combination of data, technology, and service designed to meet the evolving needs of employers and employees, and include:

Portfolio of Paycheck Protection Program (“PPP”) tools, which include the ability for employers to easily navigate the complexities of the PPP and Employee Retention Tax Credit (“ERTC”).

This portfolio contains resources to help small businesses navigate complex regulations and evaluate business decisions during this challenging time as well as tools for PPP loan applications, including access to small business loan providers, and signature-ready PPP loan forgiveness applications.

We have continued to update these tools in near real-time throughout the COVID-19 pandemic in response to changes in regulations.

Employee health and safety offerings, including a COVID-19 leave tracking tool to identify employee-submitted issues, a COVID-19 screening tool to give employers a way to initiate employee COVID-19 screenings and track test results within a single platform, and health attestation solutions which enable employers to customize and

digitally distribute a health attestation form to employees daily, securely store responses in real-time, and view advanced analytics for individuals or the entire workforce.

Digital communication solutions, including Paychex Flex HR Connect and HR Conversations, which helps strengthen connections and keep workers engaged no matter their work location.

Paychex Flex HR Connect provides the ability to digitally submit questions, requests, and incidents directly to HR through an easy-to-use workflow.

HR Conversations enables managers, employees, and HR staff to initiate communications with employees and enhancements to performance assessments allow for 360-degree feedback digitally within the tool.

Pooled Employer Plan, which provides business owners with a plan option that relieves the compliance and administration burdens of a traditional 401(k) plan, giving their employees access to a retirement plan benefit and allowing them to prepare for their future.

Clover® Integration, which streamlines payroll and time and attendance management for business owners using the popular Clover platform from Fiserv.

With Paychex Flex available in the Clover App Market, business owners can more efficiently manage the essential tasks of payroll, staffing, time tracking, and scheduling all within a single application to help save time, increase accuracy, and reduce cost.

None.

[Table of Contents](#TableOfContents)

Our management currently believes that resolution of outstanding legal matters will not have a material adverse effect on our financial position or results of operations.

However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse impact on the Company’s financial position and the results of operations in the period in which any such effect is recorded.

| First quarter | | 2.0 | | $ | 84.68 | | $ | 171.9 | | $ | 228.1 |

| Third quarter | | — | | $ | — | | | — | | $ | 228.1 |

| March 1 to March 31, 2020 | | — | | $ | — | | | — | | $ | 228.1 |

| April 1 to April 30, 2020 | | — | | $ | — | | | — | | $ | 228.1 |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Paychex | | $100.00 | | $113.56 | | $128.03 | | $146.48 | | $197.81 | | $172.03 |

| S&P 500 | | $100.00 | | $101.72 | | $119.48 | | $136.67 | | $141.84 | | $160.05 |

| Peer Group - old | | $100.00 | | $102.63 | | $120.62 | | $155.74 | | $177.20 | | $193.26 |

| Peer Group - new | | $100.00 | | $105.21 | | $124.50 | | $158.25 | | $185.85 | | $204.80 |

| The Dun & Bradstreet Corporation | | TD AMERITRADE Holding Corporation |

| Equifax, Inc. | | Total Systems Services, Inc. |

| Global Payments Inc. | | Worldpay, Inc. |

Item 6. Selected Financial Data

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Cash, restricted cash, and total corporate investments | | $ | 1,013.7 | | | $ | 779.9 | | | $ | 719.7 | | | $ | 777.4 | | | $ | 793.2 | |

| Total assets | | $ | 8,550.7 | | | $ | 8,676.0 | | | $ | 7,915.4 | | | $ | 7,280.8 | | | $ | 6,440.8 | |

| Total debt | | $ | 801.9 | | | $ | 796.4 | | | $ | — | | | $ | — | | | $ | — | |

| Stockholders’ equity | | $ | 2,781.4 | | | $ | 2,619.5 | | | $ | 2,356.8 | | | $ | 2,227.2 | | | $ | 1,911.7 | |

| Return on stockholders’ equity | | | 41 | % | | | 42 | % | | | 44 | % | | | 39 | % | | | 40 | % |

(1)In fiscal 2017, we early-adopted new accounting guidance related to employee stock-based compensation payments.

As a result, a discrete tax benefit was recognized upon exercise or lapse of stock-based awards.

This discrete tax benefit increased diluted earnings per share by approximately $0.04 per diluted share, $0.02 per diluted share, $0.04 per diluted share, and $0.05 per diluted share for fiscal 2020, fiscal 2019, fiscal 2018, and fiscal 2017, respectively.

(2)In fiscal 2018, the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) significantly impacted our net income, basic and diluted earnings per share, and return on stockholders’ equity.

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K for additional discussion of the impact of the Tax Act.

(3)In fiscal 2018, an additional expense and corresponding tax benefit was recognized as a result of the termination of certain license agreements.

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K for additional discussion of the impact of the termination of certain license agreements.

(4)In the fiscal year ended May 31, 2016 (“fiscal 2016”), a net tax benefit was recorded for income derived in prior tax years from customer-facing software we produced.

This net tax benefit increased diluted earnings per share by approximately $0.06 per diluted share.

Our mid-market clients generally have more complex payroll and employee benefit needs.

Effective December 20, 2018, the Company acquired Oasis Outsourcing Group Holdings, L.P. (“Oasis”).

Upon closing, Oasis became a wholly owned subsidiary of the Company.

Oasis is an industry leader in providing HR outsourcing services.

The purchase price was $992.2 million, net of $262.3 million in cash acquired, including $132.1 million of restricted cash.

The acquisition was financed through a combination of cash on hand and the issuance of long-term private placement debt totaling $800.0 million.

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table shows the executive officers of the Company as of May 31, 2021, and information regarding their positions and business experience.

Such executive officers hold principal policy-making powers at the Company.

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | |

| Name | | Age | | | | | | Position and business experience | |

| Martin Mucci | | 61 | | | | | | Mr. Mucci has served as President and Chief Executive Officer of the Company since September 2010. Mr. Mucci joined the Company in 2002 as Senior Vice President, Operations. Prior to joining Paychex, he held senior level positions with Frontier Communications of Rochester, a telecommunications company, including President of Telephone Operations and Chief Executive Officer of Frontier Telephone of Rochester, during his 20-year career. Mr. Mucci also serves as a director of NCR Corporation. Mr. Mucci was a director of Cbeyond, Inc. until it was purchased by Birch Communications in July 2014. He is a Trustee Emeritus of St. John Fisher College. He also serves as a director of the Company and is chairman of the Executive Committee. | |

| Efrain Rivera | | 64 | | | | | | Mr. Rivera joined Paychex in June 2011 as Senior Vice President, Chief Financial Officer, and Treasurer. Prior to joining the Company, Mr. Rivera served as Vice President of Finance and Administration for Houghton College from 2009 to 2011. He previously served for over twenty years with Bausch & Lomb Incorporated, a world leader in the development, manufacture, and marketing of eye health products, most recently as Corporate Vice President and Chief Financial Officer from 2007 to 2009. | |

| Mark A. Bottini | | 60 | | | | | | Mr. Bottini joined Paychex in October 2011 as Senior Vice President of Sales. From 2008 to 2011, Mr. Bottini served as Vice President of Sales for Ricoh, North America, a provider of advanced office technology and innovative document imaging products, services, and software. He assumed his most recent position with Ricoh when Ricoh acquired IKON Office Solutions, Inc. During his nearly 20 years with IKON, Mr. Bottini served in a variety of sales leadership and field management roles. | |

| John B. Gibson | | 55 | | | | | | Mr. Gibson joined Paychex in May 2013 as Senior Vice President of Service. Prior to joining the Company, Mr. Gibson served as President and Chief Executive Officer for AlphaStaff, a national provider of human resource outsourcing services to small- and medium-sized businesses. Prior to joining AlphaStaff in 2010, Mr. Gibson was President of the HR Management Division of Convergys, a global leader in technology, outsourcing, and business services. From 2004 to 2007, he served as Senior Vice President of Global Operations and Client Services of Convergys. | |

| Michael E. Gioja | | 63 | | | | | | Mr. Gioja was named Senior Vice President of Information Technology and Product Development in July 2011. Mr. Gioja has been with the Company since November 2008 and previously served as Senior Vice President of Information, Technology, Product Management, and Development and Vice President of Product Management. Previously, he was Chief Information Officer and Executive Vice President of Products and Services for Workstream, Inc., a provider of on-demand enterprise talent management solutions and services. | |

| | | | | | | | | | |

[Table of Contents](#TableOfContents)

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Name | | | | Age | | | Position and business experience | |

| Karen E. Saunders McClendon​ | | | | 55 | | | Ms. Saunders McClendon joined the Company in April 2021 as Vice President and Chief Human Resources Officer. Prior to joining the Company, she served as Vice President of Human Resources for Comcast Cable from 2013 to 2021. From 2009 to 2013, she served as Vice President of Human Resources for Aramark. | |

| | | | | | | | | |

| Stephanie L. Schaeffer | | | | 51 | | | Ms. Schaeffer was named Vice President and Chief Legal Officer in January 2006. In 2011, she was appointed Corporate Secretary. She joined Paychex in 2000 as Corporate Counsel and was promoted to Director of Legal Affairs in 2004. In her current role, she is responsible for overseeing all the Company's legal functions, including litigation, corporate governance, and regulatory matters. | |

| Robert L. Schrader | | | | 49 | | | Mr. Schrader was named Vice President and Controller in July 2019. He joined the Company in December 2014 and previously held roles as Senior Director of Financial Planning and Analysis and Director of Internal Audit. Prior to joining Paychex, he served as a Chief Financial Officer for Unither Manufacturing, LLC, and held various senior management positions during his ten-year career at Bausch & Lomb, including Vice President of Finance and Controller of Global Quality and Operations. Previously in his career, he held leadership roles with a public accounting firm. | |

The additional information required by this item is set forth in the Company’s Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders, anticipated to be held on or about October 14, 2021, in the sections “MANAGEMENT PROPOSAL 1: ELECTION OF DIRECTORS FOR A ONE-YEAR TERM,” “CORPORATE GOVERNANCE,” “DELINQUENT SECTION 16(a) REPORTS,” and “CODE OF BUSINESS ETHICS AND CONDUCT” and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item is set forth in the Company’s Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders, anticipated to be held on or about October 14, 2021, in the sections “COMPENSATION DISCUSSION AND ANALYSIS,” “NAMED EXECUTIVE OFFICER COMPENSATION,” “DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED May 31, 2021,” “THE GOVERNANCE AND COMPENSATION COMMITTEE REPORT” and the sub-heading “Governance and Compensation Committee Interlocks and Insider Participation” within the section “CORPORATE GOVERNANCE” and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is set forth below and in the Company’s Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders, anticipated to be held on or about October 14, 2021, under the section “BENEFICIAL OWNERSHIP OF PAYCHEX COMMON STOCK,” and is incorporated herein by reference.

The Company maintains equity compensation plans in the form of stock incentive plans.

Under the Paychex, Inc. 2002 Stock Incentive Plan, as last amended and restated effective October 15, 2020 (the “2002 Plan”), non-qualified or incentive stock options, restricted stock, restricted stock units, performance shares, and performance stock options have been awarded to employees and the Board.

The 2002 Plan was adopted on July 9, 2020 by the Board and became effective upon stockholder approval at the Company’s Annual Meeting of Stockholders held on October 15, 2020.

Refer to Note F of the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K, for more information on the Company’s stock incentive plans.

[Table of Contents](#TableOfContents)

The following table details information on securities authorized for issuance upon the exercise of outstanding options under the Company’s equity compensation plans as of May 31, 2021:

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| In millions, except per share amounts | | Number of securities to be issued upon exercise of outstanding options(1) | | | Weighted-average exercise price of outstanding options | | | Number of securities remaining available for future issuance under equity compensation plans(2) | |

| Equity compensation plans approved by security holders | | | 4.3 | | $ | 62.54 | | | 16.4 |

(1)Amounts include performance stock options granted, assuming achievement of performance goals at target.

Actual number of shares to be earned may differ from the target amount.