Business Units or Product Lines

ADP operates primarily through two main business segments: Employer Services, which offers payroll processing, tax and benefits administration, and compliance solutions; and Professional Employer Organization (PEO) Services, which provides comprehensive human resource outsourcing services including business administrative services, employee benefits, and workplace safety programs.

Business Models for Each Product Line

In Employer Services, ADP generates revenue primarily through service fees for payroll processing and additional services such as tax filing, time and labor management, and human resources solutions. Major expense categories include technology and maintenance, employee compensation, and customer support. The PEO Services generate revenue by providing small and mid-sized business clients with a cost-effective solution for outsourcing employee management tasks, with expenses typically related to wages and benefits for the worksite employees, insurance, and regulatory compliance.

Future Opportunities for Growth

ADP has opportunities for growth in expanding its cloud-based solutions and technology offerings to enhance its digital HR services. There is also potential in expanding internationally, particularly in emerging markets, and increasing its market share in the small and mid-sized business sector through tailored solutions and strategic acquisitions.

Potential Major Risks

Key risks include increased competition from existing and new players offering similar payroll and HR solutions, potential data security breaches, regulatory changes impacting employment services, and economic downturns affecting small and medium-sized business clients' financial health.