Payroll Services NAICS 541214

May 28, 2025 - Industry Employment Up and Wages Hold Steady

• Payroll services industry employment steadily increased for most of 2024 and in the early part of 2025. According to the US Bureau of Labor Statistics (BLS), employment was up 3.8% in March 2025 from the previous year. Average wages for nonsupervisory employees have been relatively flat so far in 2025 after rising sharply throughout the previous year, with the latest BLS reports showing an increase of 3.5% in March year over year to an average wage of $33.09 per hour. The increases reflect high-demand in a rapidly transforming and technologically complex industry. More companies are outsourcing their payroll services as tax regulations become too volatile; an increase in gig workers, contractors, and remote workers present unique payroll challenges; and technology advances from increased reliance on cloud computing and AI all contribute to employment and wage growth.
• The line between payroll services and insurance companies is growing fuzzy and the pending $4.1 billion merger between payroll service giants Paychex and Paycor further solidifies the industry trend. At the corporate level, the merger will broaden Paychex’s customer base and allow it to utilize Paycor’s AI technology to become a “one-stop shop” for all corporate HR needs - including selling insurance. Previously, payroll companies had mainly left the selling of insurance (mostly worker’s compensation coverage) to its partner agents, but payroll firms are increasingly removing the middle man and selling policies directly. The announced merger - coming on the heels of ADP’s $2.1 billion purchase of WorkForce Software in 2024 - is cause for concern among insurance industry agents who fear being squeezed out of a lucrative customer base.

• In mid-November, a federal judge in Texas struck down a Department of Labor (DOL) rule that expanded overtime pay for US workers. In April 2024, the DOL issued final regulations that raised the salary threshold for white-collar workers to receive overtime. As a result of the DOL rule, the annual salary threshold increased to $43,888 from $35,568. The Texas court ruling now blocks a second increase raising the threshold to $58,656, which was scheduled to take effect in January 2025. Under the Fair Labor Standards Act, employers must pay overtime for working more than 40 hours per week. However, salaried workers with some executive, administrative, and professional (EAP) duties and a minimum salary are exempt from the overtime rule. The federal judge in Texas ruled that by setting the salary threshold as high as it did, the DOL created a “de facto ‘salary only’ test for the EAP exemption.” The Texas court ruling will strip overtime eligibility from an estimated 1 million workers. The Texas lawsuit was brought by a coalition of business and trade associations led by the Chamber of Commerce in Plano, Texas.
• Wage reductions that swept through the white-collar workforce in 2023 are taking hold in several blue-collar sectors, according to The Wall Street Journal. During the pandemic, when employers were starving for workers, recruits were lured by generous pay. However, the power dynamic has shifted as the labor market has softened, and many employers are offering lower wages. Among 20,000 different job titles listed on ZipRecruiter, so far in 2024, average posted pay has dropped in retail, agriculture, manufacturing, food, and transportation and warehousing. Some of the biggest declines in advertised pay offerings were in retail (down nearly 60%), agriculture (-24.5%), and manufacturing (-17.3%). Some white-collar positions are also seeing new-hire wages drop. Wages for new hires in finance have fallen 9.2% in the past year, professional services wages are off 2.4%, and insurance pay has declined 1.6%, according to payroll and benefits software firm Gusto.