Payroll Software Industry in the US - SWOT Analysis

of one

Payroll Software Industry in the US - SWAT Analysis

Key Takeaways


The research team has provided a SWOT (strengths, weaknesses, opportunities, threats) analysis of the US payroll software industry below.


  • Perhaps the greatest strength of the payroll software market in the United States is its robustness, both in terms of industry size and business participation.
  • As of 2021, the payroll software industry in the country was value at approximately $9.9 billion, bolstered by the diversity of between 517 and 599 independent operators, according to market researcher IBISWorld.
  • Notably, the industry's current scale is the reflection of relatively rapid growth, with a revenue CAGR of 5.3% from 2016 through the present, as well as a 16.4% annual growth rate in the number of participating businesses during the same period.
  • This expansion has outpaced the nation's larger economy as well as the US technology sector, making the industry an attractive one for investment and development.
  • Underpinning this growth is the success of the industry in evolving to cloud-based systems, per IBISWorld and ResearchAndMarkets.
  • This transition to the cloud has "revolutionized the industry" over the past half-decade, increasing the affordability and general attractiveness of its products.
  • In particular, the expansion of market offerings to cloud-based software has (1) introduced a more lucrative and easy pay-as-you-go subscription model, (2) enabled the seamless interface of payroll software products with related data (e.g., tax, employee details) and complementary systems and (3) supported customers in migrating all software products to the cloud, thereby further "bolstering demand."


  • Despite this recent industry renaissance, however, the payroll software market in the country is fundamentally constrained by the fact that its offerings are "predominantly used by businesses," which represent a large but inherently limited consumer base compared with products that can cross over to the wider mass consumer market.
  • Additionally, despite its diversity in industry participants, America's payroll software industry is dominated by a very small subset of key players.
  • As noted by IBISWorld, Credible Markets and other industry researchers, four companies (i.e., Workday, Ultimate Software Group, Automatic Data Processing and Intuit) represented 65.7% of the industry's revenue last year.
  • Not only does a highly consolidated competitive landscape come with a variety of disadvantages (e.g., less innovation/agility), but in the case of the US payroll software market, it is expected to drive an increase in merger and acquisition activity, which can be both disruptive and costly.
  • Separately, the industry is challenged by the fact that its businesses are largely located in California and New York, two states which are known to adopt new and sometimes unforeseen regulatory changes faster than many other US domiciles.
  • Additionally, the sector is more "labor-intensive" than many other industries, with wages representing almost half (46.1%) of business revenue.



  • In comparison, there appear to be very few environmental obstacles or threats that will impede the expansion of America's payroll software industry in the coming years.
  • Some industry participants have been challenged by the pandemic, given that the shifting economic conditions exacerbated the relative scale of labor expenses compared to revenue.
  • More significantly moving forward, however, is the strain that industry participants may face amid the current geopolitical uncertainty, particularly between the US and China.
  • Although technically a factor that is outside of America, the majority of major payroll software providers in the country are multinational conglomerates, according to IBISWorld, MarketResearchFuture, ResearchAndMarkets and other industry experts.
  • Although the US and larger North America region are forecast to "maintain the dominant position in the global payroll software market," shifts in trade dynamics and international relations could have a meaningful impact on how the industry's US-based businesses operate on a global, corporate-wide basis as well as their general profitability.

Research Strategy

For this research on the US payroll software industry, the research team referenced the most reputable sources of information that were available in the public domain, including the American Payroll Association as well as publications by market researchers including IBISWorld, ResearchAndMarkets, Credible Research and Market Research Future.

Did this report spark your curiosity?