DEF 14A of Paychex Inc, Sep 1, 2023

DEF 14A of Paychex Inc

Filed Sep 1, 2023 · FY20230001193125-23-226898

Open on EDGAR

  1. HOW TO VOTE

    | PROXY STATEMENT SUMMARY | 1 | | PROPOSAL 1: ELECTION OF DIRECTORS FOR A ONE-YEAR TERM | 5 | | DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED MAY 31, 2023 | 14 | | BENEFICIAL OWNERSHIP OF PAYCHEX COMMON STOCK | 18 | | CORPORATE GOVERNANCE | 20 | | Role of the Board | 20 | | Environmental, Social, and Governance Efforts | 20 | | Board Leadership Structure | 22 | | Nomination Process | 23 | | Board Oversight of Risk | 23 | | Board Meetings and Committees | 24 | | Policy on Transactions with Related Persons | 27 | | Transactions with Related Persons | 27 | | Compensation and Leadership Committee Interlocks and Insider Participation | 28 | | Stockholder Engagement During Fiscal 2023 | 28 | | Communications with the Board of Directors | 29 | | CODE OF BUSINESS ETHICS AND CONDUCT | 29 | | PROPOSAL 2: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION | 30 | | PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION | 32 | | COMPENSATION DISCUSSION AND ANALYSIS | 33 | | Executive Summary | 33 | | Elements of Compensation | 41 | | Compensation Decision Process | 48 | | CEO Compensation | 51 | | CEO Pay Ratio | 51 | | Impact of the Internal Revenue Code | 52 | | The Compensation and Leadership Committee Report | 52 | | NAMED EXECUTIVE OFFICER COMPENSATION | 53 | | Fiscal 2023 Summary Compensation Table | 53 | | Grants of Plan-Based Awards for Fiscal 2023 | 56 | | Option Exercises and Stock Vested in Fiscal 2023 | 59 | | Outstanding Equity Awards as of May 31, 2023 | 60 | | Potential Payments upon Termination or Change in Control Fiscal 2023 | 63 | | Non-Qualified Deferred Compensation Fiscal 2023 | 66 | | Pay Versus Performance | 68 | | PROPOSAL 4: RATIFICATION OF THE SELECTION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 72 | | Fees for Professional Services | 73 | | Report of The Audit Committee | 74 | | FREQUENTLY ASKED QUESTIONS | 75 | | Appendix A: PAYCHEX, INC. NON-GAAP FINANCIAL MEASURES | A-1 | | Appendix B: PAYCHEX, INC. RECONCILIATION OF PERFORMANCE MEASURES TO THOSE REPORTED IN THE COMPANY’S CONSOLIDATED FINANCIAL STATEMENTS | B-1 |

  2. 2023 Nominees for Director

    2023 Nominees for Director There are twelve nominees for election as director, as listed on the following pages. Each of the nominees is a current member of the Board. The twelve persons listed have been nominated for election to the Board by the Company’s N&E Committee. The nominees, except for Messrs. Gibson, Golisano, and Mucci, are independent under the Nasdaq Stock Market (“Nasdaq”) director independence standards. If elected, each nominee will hold office until his or her successor is elected and has qualified or until his or her earlier resignation or removal. We believe that all the nominees will be available to serve as a director. However, if any nominee should become unable to serve, the named proxy holders may exercise discretionary authority to vote for substitute nominees proposed by the Board. The Board believes that the combination of the various qualifications, skills, and experience of the 2023 director nominees will continue to contribute to an effective and well-functioning Board. Due in part to stockholder feedback, board refreshment and diversity, equity, and inclusion (“DE&I”) continue to be important considerations of our Board. For more information on our nomination process, refer to the Corporate Governance sections of this proxy statement.

  3. 2023 Nominees for Director

    | The Board recommends the election of each of the director nominees identified on the following pages. Unless otherwise directed, the named proxy holders will vote the proxy FOR the election of each of these director nominees. |

  4. Summary of Director Nominees

    Summary of Director Nominees Our director nominees are accomplished professionals, with diverse areas of expertise, who are well-equipped to oversee the success of the business and effectively represent the interests of stockholders. Our director nominees:

  5. Summary of Director Nominees

    | • | are seasoned leaders who possess high personal and professional ethics and share the values of the Company; |

  6. Summary of Director Nominees

    | • | are highly accomplished in their fields and have served as directors and officers in a diverse range of companies, including technology, financial services, and payment companies, among others; |

  7. Summary of Director Nominees

    | • | strengthen our Board’s oversight capabilities by having varied lengths of tenure that provide historical and new perspectives about our Company; and |

  8. Summary of Director Nominees

    | • | bring extensive and diverse experience in strategic planning, business development, international business, mergers and acquisitions, and go-to-market strategies, among others. |

  9. Summary of Director Nominees

    The Board has identified qualifications, attributes, skills, and experience that are important to be represented on the Board as a whole, in light of the Company’s business and current needs. The Board believes the combination of the various qualifications, attributes, skills, diversity, and experience of the director nominees contribute to a well-functioning and effective Board. Below is a summary to highlight some but not all the important skills our director nominees bring to the Board.

  10. Board Diversity and Matrix

    Board Diversity and Matrix The Company seeks to maintain a Board comprised of a diverse mix of expertise, experience, skills, and backgrounds to reflect the diverse nature of the business environment in which the Company operates. For purposes of Board composition, diversity includes, but is not limited to, business experience, geography, age, gender, race, and ethnicity. The N&E Committee regularly evaluates Board composition and recognizes the importance of diversity, as demonstrated by four of our five newest Board members adding to either the gender or racial diversity of our Board, and we will continue to focus on Board refreshment. Pursuant to Rule 5606(f) of the Nasdaq Listing Rules, the following table reports certain information on each director’s voluntary self-identified characteristics, as of May 31, 2023.

  11. Board Diversity and Matrix

    | Board Diversity Matrix | | | | Total Number of Directors | 12 | | | | Female | Male | | Part I: Gender Identity | | | | Directors | 3 | 9 | | Part II: Demographic Background | | | | African American or Black | — | 1 | | White | 3 | 8 |

  12. Board Diversity and Matrix

    | Martin Mucci — Chairman of the Board of Paychex, Inc. | | | | | | | | | Director since 2010 Current Public Company Directorships: • Cintas Corporation • NCR Corporation Prior Public Company Directorships (Past Five Years): None | Age: 63 Board Committees: • Executive (Chair) | | Mr. Mucci is Chairman of the Board of Directors of the Company. He served as President and Chief Executive Officer (“CEO”) of the Company from September 2010 until December 2021 and as Chairman of the Board and CEO of the Company from December 2021 until October 2022. Mr. Mucci joined the Company in 2002 as Senior Vice President (“SVP”), Operations. Prior to joining Paychex, he held senior level positions with Frontier Communications, a telecommunications company, including President of Telephone Operations and CEO of Frontier Telephone of Rochester, over the course of his 20-year career. Mr. Mucci currently serves on the boards of NCR Corporation, a leading software- and services-led enterprise provider in the financial, retail, and hospitality industries, and Cintas Corporation, a leading provider of uniform rental, facility services, first aid, and safety products to over one million businesses of all types and sizes. He is also a member of the Business and Government Software and Services Advisory Team for Madison Dearborn Partners. Mr. Mucci was a member of the Board of Directors of Cbeyond, Inc., a telecommunications company focused on small businesses, until it was purchased by Birch Communications in July 2014. He is a Trustee Emeritus of St. John Fisher College. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Mucci is qualified to lead the Board due to his experience providing day-to-day leadership as the former President and CEO of Paychex, giving him extensive knowledge of the Company, its operations, challenges, and opportunities. In addition, Mr. Mucci’s educational background and senior leadership experience provide him with strong financial literacy. | | | | Thomas F. Bonadio — Founder and Chairman of The Bonadio Group | | | | | | | | | Director since 2017 Current Public Company Directorships: None Prior Public Company Directorships (Past Five Years): • CurAegis Technologies, Inc. | Age: 74 Board Committees: • Audit • Corporate Development Advisory • Nominating and ESG Independent | | Mr. Bonadio is the founder and Chairman of the Board of Directors of The Bonadio Group, the 43rd largest Certified Public Accountant firm in the U.S. and the largest independent provider of accounting, business advisory, and financial services in New York State outside of Manhattan. He has devoted his efforts to serving commercial companies in the Rochester area and helping The Bonadio Group grow from two people to its present size of more than 1,000 employees. Mr. Bonadio is also the General Partner of Impact Capital, a venture capital firm focused on growing companies operating in Upstate New York, and serves on the Board of Directors of Viridi, a private company with sustainable solutions in energy storage systems and electrical equipment. He also serves on the Board of Directors and as the Audit Committee Chair for Royal Oak, a private real estate investment trust. Mr. Bonadio has experience serving on community organizations as well as both not-for-profit and publicly traded boards. He also previously served on the Board of Directors and as the Audit Committee Chair for Conceptus, Inc., a medical device company, until it was purchased by Bayer AG of Germany in June 2013. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Bonadio is qualified to serve as a director of the Company due to his strong background in finance and business, his entrepreneurial experience, and his knowledge of the Certified Public Accountant community. Mr. Bonadio is a successful entrepreneur whose experience building his own business is representative of many clients Paychex serves today. He also brings a high degree of financial literacy obtained from his years in the financial services industry, and his ability to assess financial performance of other companies through the review and understanding of financial statements. This financial expertise is a great benefit to the Board and its committees. | | |

  13. Board Diversity and Matrix

    | Joseph G. Doody — Former Vice Chairman of Staples, Inc. | | | | | Director since 2010 Current Public Company Directorships: • Casella Waste Systems, Inc. Prior Public Company Directorships (Past Five Years): • Virtusa Corporation | Age: 71 Board Committees: • Investment • Nominating and ESG Independent | | Mr. Doody served as Vice Chairman of Staples, Inc., an office products company, from February 2014 until his retirement in September 2017. Prior to that, he served as President, North American Commercial, from January 2013 until February 2014, and President, North American Delivery, from March 2002 to January 2013. Mr. Doody serves on the Board of Directors of Casella Waste Systems, Inc., a vertically integrated waste management company. Mr. Doody previously served on the Board of Directors of Virtusa Corporation, a global provider of digital engineering and information technology outsourcing services that accelerate business outcomes for its clients, until it was acquired in February 2021. Mr. Doody is an emeritus member of the Foundation Board at The College at Brockport. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Doody is qualified to serve as a director of the Company due to his significant leadership and international experience. His long tenure in management of a large division of a multinational company enables him to provide our Board with important operational expertise. In addition, his deep knowledge of small- to medium-sized businesses brings a thorough understanding of the risks and opportunities affecting the Company’s clients and potential clients. Mr. Doody also has extensive experience in strategic planning and business development, which allows him to provide valuable input into the Company’s plans for market growth. | | | | David J.S. Flaschen — Investor and Advisor | | | | | Director since 1999 Current Public Company Directorships: • Informa plc (London Stock Exchange) Prior Public Company Directorships (Past Five Years): None | Age: 67 Board Committees: • Audit (Chair) • Compensation and Leadership • Corporate Development Advisory • Investment Independent | | Mr. Flaschen is an investor and advisor to a number of private companies providing business, marketing, and information services. He serves as a non-executive director and member of the Audit Committee for Informa plc, a leading business intelligence, academic publishing, and events company as well as a Financial Times Stock Exchange 100 public company which is traded on the London Stock Exchange. From 2005 to 2011, he was a partner with Castanea Partners, a private equity investment firm. Prior to joining Castanea Partners, Mr. Flaschen had over 20 years of executive and leadership experience in the marketing and business services industries, including roles at Thomson Financial, an information services company focused on the financial industry, and Dunn & Bradstreet, a company that provides market research, information, and analysis to the consumer products and services industries. Mr. Flaschen was a member of the 2018 National Association of Corporate Directors Blue Ribbon Commission, which published a signature report on Adaptive Governance for Board Oversight of Disruptive Risks. Mr. Flaschen is also a director/advisor of various private companies. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Flaschen is qualified to serve as a director of the Company as a result of his extensive executive experience in information and marketing services. Over the course of his career, Mr. Flaschen has worked internationally with a number of businesses, including Thomson Financial and AC Nielsen. He also brings a high degree of financial literacy obtained from his years in the financial services industry, and his ability to assess financial performance of other companies through review and understanding of financial statements. This financial expertise is a great benefit to the Board and its committees. | | |

  14. Board Diversity and Matrix

    | John B. Gibson — President and Chief Executive Officer of Paychex, Inc. | | | | | Director since October 2022 Current Public Company Directorships: None Prior Public Company Directorships (Past Five Years): None | Age: 57 Board Committees: • Corporate Development Advisory • Executive | | Mr. Gibson has served as President and CEO of the Company since October 2022. Prior to serving as President and CEO, Mr. Gibson was promoted to the role of President and Chief Operating Officer (“COO”) in December 2021, leading the daily operations of the Company, including sales, service, marketing, and management. Mr. Gibson joined Paychex as SVP of Service in May 2013, bringing with him more than 20 years of experience in human resources (“HR”) solutions, technology, and business services. Prior to Paychex, Mr. Gibson served in senior executive positions at HR outsourcing and technology companies, including Ameritech (now AT&T) and Convergys, where he served as President of the HR Management division providing comprehensive global HR solutions to clients in 68 countries. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Gibson is qualified to serve as a director of the Company due to his leadership and experience. Mr. Gibson has been a key leader in the Company’s digital expansion, its service transformation, and the expansion of its professional employer organization and HR advisory services. His deep understanding of the Company’s market and focus on driving innovative technology and HR advisory solutions for the Company’s approximately 740,000 clients (as of May 31, 2023) make him a valued addition to the Board. | | | | B. Thomas Golisano — Founder of Paychex, Inc. | | | | | Director since 1979 Current Public Company Directorships: • Eastman Kodak Company Prior Public Company Directorships (Past Five Years): • Twinlab Consolidated Holdings, Inc. | Age: 81 Board Committees: • Executive | | Mr. Golisano founded Paychex in 1971 and served as Chairman of the Board of Directors until December 2021. He served as President and CEO of the Company until October 2004. Mr. Golisano serves on the Board of Directors of Eastman Kodak Company, a global manufacturer focused on commercial print and advanced materials and chemicals. Mr. Golisano is an entrepreneur, philanthropist, and civic leader who has been committed to building innovative businesses, supporting numerous not-for-profit organizations, and advocating for inclusive health and various civic issues. Mr. Golisano also serves as a director of numerous other not-for-profit organizations and private companies and founded the Golisano Institute for Business and Entrepreneurship, a provider of alternative post-secondary business education. He is the founder and a member of the Board of Trustees of the B. Thomas Golisano Foundation and is a Trustee Emeritus of Rochester Institute of Technology. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Golisano is qualified to serve as a director of the Company due to his relevant executive leadership experience and extensive knowledge of the operations of the Company. These skills were attained through his former roles of Chairman and CEO of Paychex. In addition, his experience investing in and supporting numerous successful start-up businesses equips him with expertise in identifying market opportunities, which allows him to provide valuable insights and guidance to the Board. | | |

  15. Board Diversity and Matrix

    | Pamela A. Joseph — CEO and Executive Chair of Xplor Technologies | | | | | Director since 2018 (previously served from 2005 – 2017) Current Public Company Directorships: • Adyen N.V. (Euronext) • TransUnion (Chair) Prior Public Company Directorships (Past Five Years): None | Age: 64 Board Committees: • Compensation and Leadership • Corporate Development Advisory • Nominating and ESG (Chair) Independent | | Ms. Joseph currently serves as the CEO and Executive Chair of Xplor Technologies, which was created following a merger of Clearent, LLC and Transaction Services Group. Ms. Joseph previously served as the CEO of Clearent, which was a full-service payment-solutions provider and owner-independent software vendor in select vertical markets. She is also an Operating Partner of Advent International, a global private equity firm. From May 2016 until September 2017, she served as President, COO, and Board Member of Total System Services, Inc., a provider of issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare, and business solutions. She was Vice Chair of U.S. Bancorp Payment Services and Chair of Elavon (formerly NOVA Information Systems, Inc.), a wholly owned subsidiary of U.S. Bancorp, from December 2004 until June 2015. U.S. Bancorp Payment Services and Elavon manage and facilitate consumer and corporate card issuing, as well as payment processing. Ms. Joseph also serves as Board Chairperson for TransUnion, a leading global information and insights company, and as a member of the Board of Directors of Adyen N.V., a payments platform business. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Ms. Joseph is qualified to serve as a director of the Company due to her extensive executive experience in the financial services and payment industries. Her wealth of technology experience brings insight to the Board and its committees. In addition, her experience with major acquisitions, board experience, and international expansion allows her to provide valuable input to the Company’s growth plans. | | | | Theresa M. Payton — Founder & CEO of Fortalice Solutions | | | | | Director since January 2023 Current Public Company Directorships: None Prior Public Company Directorships (Past Five Years): None | Age: 56 Board Committees: • Audit Independent | | Ms. Payton is the founder and CEO of Fortalice Solutions, an industry-leading security consulting company advising Fortune 150 Boards, C-Suite, and regulators on secured technology innovation and transformation efforts regarding customer delivery and privacy. Fortalice Solutions has completed over 500 global engagements advising and securing digital transformation programs and delivering business intelligence services for some of the nation’s largest organizations. Ms. Payton was also co-founder of Dark Cubed, a cybersecurity solutions company founded in 2015, which was acquired by Celerium, a leader in innovative cyber defense solutions, in September 2022. She spent over 16 years in the financial services industry including executive roles in banking technology for two of the country’s top financial institutions and was Chief Information Officer for the White House under the George W. Bush administration. She serves on the Federal Advisory Board of CyberArk, a publicly traded cybersecurity product company, and previously served as a member of the Transformation Innovation Advisory Board of UniCredit S.p.A., the largest pan-European bank headquartered in Milan, Italy, from January 2019 through August 2022. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Ms. Payton is qualified to serve as a director of the Company due to her significant technology and cybersecurity expertise and experience as an entrepreneur. Her business acumen, intense focus on the needs of clients, and her ability to provide sound governance insights on digital and security risks make her a strong addition to the Board. | | |

  16. Board Diversity and Matrix

    | Kevin A. Price — Founder & President of KAP Holdings, LLC d/b/a PartScription(TM) | | | | | Director since July 2021 Current Public Company Directorships: None Prior Public Company Directorships (Past Five Years): None | Age: 63 Board Committees: • Audit • Nominating and ESG Independent | | Mr. Price is the founder and President of KAP Holdings, LLC d/b/a PartScription, which he founded in 2006. KAP Holdings, LLC is a service company engaged in the distribution, wholesaling, and sourcing of products and parts to private and governmental agencies across a broad range of categories with integrated solutions to eliminate cost, lost time, and frustration in construction and renovation projects. PartScription is a fast growing, innovative ecommerce platform that aggregates millions of parts into a single search and order platform to improve selection, service, and profitability for retail hardware stores. Prior to his founding of KAP Holdings, LLC, he worked at Sears Holdings Corporation as the Vice President of the Customer Care Network where he managed Sears Parts Direct and the aftermarket insurance businesses, at Ameritech Corporation as Vice President of Sales and Planning and Administration, and as Senior Vice President of Operations at AC Nielsen. Mr. Price is an emeritus board member of Link Unlimited, and served on the Brennan School of Business Advisory Board at Dominican University and the College of Business and Public Administration Advisory Council at Drake University. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Price is qualified to serve as a director of the Company due to his extensive experience as an entrepreneur and significant executive leadership and e-commerce experience. Mr. Price is a strategic leader who has provided agile leadership to help drive business success. His experience is a great benefit to the Board and its committees. | | | | Joseph M. Tucci — Co-Founder and Chairman of Bridge Growth Partners, LLC | | | | | Lead Independent Director Director since 2000 Current Public Company Directorships: • Motorola Solutions, Inc. Prior Public Company Directorships (Past Five Years): • GTY Technology Holdings, Inc. | Age: 76 Board Committees: • Compensation and Leadership (Chair) • Executive • Nominating and ESG Independent | | Mr. Tucci is the co-founder and Chairman of the Board of Directors of Bridge Growth Partners, LLC, a private equity firm based in New York and founded in 2013. He serves on the Board of Directors of Motorola Solutions, Inc., a global leader in public safety and enterprise security, and Syniti, an enterprise data management solutions company. Mr. Tucci was the former Chairman of the Board of Directors and CEO of EMC Corporation (“EMC”), a provider of data-storage systems. He was EMC’s Chairman from January 2006 and CEO from January 2001 until September 2016, when Dell Technologies acquired the company. He was Chairman of the Board of Directors of VMWare, Inc., a cloud infrastructure company, from 2007 through September 2016. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Tucci is qualified to serve as a director of the Company due to his extensive executive leadership experience as CEO of EMC. Mr. Tucci has spent over 40 years in the technology industry in senior roles at large, complex, and global technology companies. His experience leading EMC through a period of dramatic revitalization, growth and market share gains, and new product introductions enables him to share knowledge of the challenges a company faces due to rapid changes in the marketplace. | | |

  17. Board Diversity and Matrix

    | Joseph M. Velli — Retired Financial Services and Technology Executive | | | | | Director since 2007 Current Public Company Directorships: • AssetMark Financial Holdings • Cognizant Technology Solutions Corp. • Computershare Ltd. (Australian Stock Exchange) Prior Public Company Directorships (Past Five Years): None | Age: 65 Board Committees: • Compensation and Leadership • Corporate Development Advisory (Chair) • Executive • Investment (Chair) Independent | | Mr. Velli currently serves on the Board of Directors of Computershare Limited, a global provider of corporate trust, stock transfer, employee share plan, and mortgage servicing services. He serves on the Board of Directors of Cognizant Technology Solutions Corp., a multinational corporation that provides information technology services. Mr. Velli is also on the Board of Directors of AssetMark Financial Holdings, Inc., an investment management and consulting firm. Mr. Velli previously served as Senior Executive Vice President of The Bank of New York and as a member of the Senior Policy Committee until October 2006. During his 22-year tenure with The Bank of New York, he headed Global Issuer Services, Global Custody and Investor Services, Global Liquidity Services, Pension and 401(k) Services, and Retail Banking. He served as Chairman and CEO of ConvergEx Group, LLC (“ConvergEx”), a provider of brokerage, software products, and technology services, from 2006 to 2013, and continued to serve on the ConvergEx Board until 2014. Mr. Velli has been a member of the Board of Trustees of William Paterson University since June 2017. He acts as an advisory council member to Lovell Minnick Partners, a venture capital and private equity firm, and provides advisory services to other private equity firms. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Mr. Velli is qualified to serve as a director of the Company due to his extensive experience with securities servicing, capital markets, business to business, marketing, and mergers and acquisitions matters, as well as his public board experience. He plays a key role in the Board’s discussions of the Company’s investments and liquidity. Mr. Velli has extensive experience with acquisitions and business services, providing valuable insights on potential growth opportunities for the Company. | | |

  18. Board Diversity and Matrix

    | Kara Wilson — Senior Advisor at KKR & Co. Inc. | | | | | Director since 2017 Current Public Company Directorships: None Prior Public Company Directorships (Past Five Years): • KnowBe4 | Age: 53 Board Committees: • Audit • Corporate Development Advisory Independent | | Ms. Wilson currently serves as a Senior Advisor at KKR & Co. Inc., a global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, and credit, with strategic partners that manage hedge funds. She currently serves on a number of private, software solution company boards including Accela, Alludo, OneStream, OutSystems, ReliaQuest, and SkyHive. She previously served on the Board of Directors of KnowBe4, a security awareness computer-based training firm that assists companies in strengthening their security through their employees, until it was acquired in February 2023. She was formerly Chief Marketing Officer at Rubrik, Inc., a cloud data management company, a role she held from June 2017 until May 2019. She has over 20 years of experience in driving go-to-market strategies for large, medium, and hyper-growth start-ups. She has held marketing leadership roles with some of the technology industry’s most influential companies, including Cisco Systems, SAP, SuccessFactors, PeopleSoft/Oracle, Okta, and FireEye, Inc. Prior to Rubrik, Inc. from October 2016 to June 2017, Ms. Wilson was Executive Vice President and from August 2013 to June 2017, Chief Marketing Officer of cyber security company FireEye, where she helped launch FireEye’s initial public offering and was responsible for the company’s global marketing initiatives including corporate, product, and technical marketing, global communications, and field enablement. SPECIFIC QUALIFICATIONS AND SKILLS: The Board has concluded that Ms. Wilson is qualified to serve as a director of the Company due to her extensive experience in driving go-to-market strategies for enterprise technology companies. The Board can benefit from Ms. Wilson’s marketing experience to help Paychex with the development and execution of go-to-market strategies to effectively differentiate the Company in a highly competitive and constantly evolving industry. Ms. Wilson has experience at global companies and can provide insight on any expansion of the Company’s global presence. | | |

  19. Board Diversity and Matrix

    | DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED MAY 31, 2023 |

  20. Board Diversity and Matrix

    | Name (a) | Fees Earned or Paid in Cash (b) | Stock Awards (c) | Stock Options (d) | Total | | Thomas F. Bonadio | $125,000 | $84,985 | $84,998 | $294,983 | | Joseph G. Doody | $114,375 | $84,985 | $84,998 | $284,358 | | David J.S. Flaschen | $157,500 | $84,985 | $84,998 | $327,483 | | B. Thomas Golisano | $272,500 | $ — | $ — | $272,500 | | Pamela A. Joseph | $140,000 | $84,985 | $84,998 | $309,983 | | Theresa M. Payton(1) | $26,875 | $ — | $ — | $26,875 | | Kevin A. Price | $117,500 | $84,985 | $84,998 | $287,483 | | Joseph M. Tucci | $181,250 | $84,985 | $84,998 | $351,233 | | Joseph M. Velli | $132,500 | $84,985 | $84,998 | $302,483 | | Kara Wilson | $115,000 | $84,985 | $84,998 | $284,983 |

  21. Transactions with Related Persons

    | Mr. Golisano is its sole member. Mr. Golisano did not participate in the negotiation, decision-making process, or approval of the agreement between the Company and Kodak. Our N&E Committee considered the relevant information and approved the transaction after finding the transaction to be on arm’s length terms and in the best interests of the Company. |

  22. Compensation Programs Highlights

    | • | Our executive compensation program is designed to implement core compensation principles, including alignment with stockholders’ interests, long-term value creation, and pay-for-performance. A significant portion of pay is at risk where the amount realized will be dependent on achievement of financial targets or, in the case of certain time-vested equity awards, the value of the Company’s stock. |

  23. Compensation Programs Highlights

    | • | A mix of annual and long-term incentive programs creates a balance between short-term and long-term focus, reducing risk in the compensation programs. |

  24. Compensation Programs Highlights

    | • | Our equity-based, long-term incentive awards include a combination of stock options, time-based stock awards, and performance-based stock awards. |

  25. Compensation Programs Highlights

    | • | Stock ownership guidelines designed to align the directors’ and executives’ long-term financial interests with those of our stockholders. |

  26. Compensation Programs Highlights

    | • | Certain recoupment, non-compete, and other forfeiture provisions within our Annual Officer Performance Incentive Program (the “annual incentive program”) and equity-based compensation agreements. These provisions allow the Company to cancel all or any outstanding portion of equity awards and recoup the gross value of any payouts under the annual incentive program, vested time-based stock awards, vested performance-based stock awards, or profits from exercises of options. |

  27. How Pay is Tied to Company Performance

    | • | Variable compensation is comprised of an annual cash incentive program and longer-term equity-based incentives. Stock options and time-based stock awards provide value based on our stock price performance. Annual grants of performance-based stock awards provide the opportunity for stock to be awarded if pre-established financial goals are met for a two-year performance period with full vesting provided after an additional one-year service period (i.e., total of three years); |

  28. How Pay is Tied to Company Performance

    | • | Target compensation for the annual incentive program and annual grants of performance-based stock awards is generally established at the beginning of the performance period by the C&L Committee. NEOs have an opportunity to earn actual compensation that varies from target based on achievement against pre-established performance metrics; |

  29. How Pay is Tied to Company Performance

    | • | The financial measures used as performance targets are linked directly to our annual and long-term strategic business plans that are reviewed and approved by the Board. |

  30. How Pay is Tied to Company Performance

    Amounts realized in fiscal 2023 related to performance-based compensation programs for fiscal 2023 included payouts under the annual incentive program and were earned at 133% of target for our CEO, Mr. Gibson, and 133% of target for our other NEOs (excluding Mr. Mucci). Achievement was measured against financial targets established at the beginning of fiscal 2023. Refer to the section entitled “Elements of Compensation” and the subsections of “Annual Incentive Program” and “Equity-Based Compensation” within this CD&A for a more detailed discussion of variable compensation, performance targets established, and actual results against those targets.

  31. Summary of Mr. Mucci’s Fiscal 2023 Compensation Arrangements

    Summary of Mr. Mucci’s Fiscal 2023 Compensation Arrangements Outgoing CEO Retirement: Mr. Mucci actively participated in the search for his successor and played a crucial role in his successor’s development and ongoing mentorship, thereby facilitating a smooth transition leading up to and following his retirement as CEO in fiscal 2023. Mr. Mucci voluntarily retired as the Company’s CEO on October 14, 2022 and remained with the Company as a non-employee Chairman of the Board. In connection with his retirement as CEO, Mr. Mucci did not receive any cash severance or any vesting acceleration beyond the existing retirement eligibility provisions under his outstanding and unvested awards under the 2002 Plan. In addition, Mr. Mucci’s awards granted in July 2022, which included a cash annual incentive program award with an annual incentive target of 150% of his base salary and equity awards with a grant-date fair value of $7,125,024, were forfeited upon his retirement. Chairman Compensation: In connection with Mr. Mucci’s continuing service as Chairman of the Board of Directors of the Company, the C&L Committee approved the one-time amendment to allow for continued vesting of Mr. Mucci’s equity awards granted prior to July 2022. The C&L Committee believes that continued vesting was in the best interest of the Company to ensure (i) Mr. Mucci’s continued service as Chairman of the Board and involvement with the Company to facilitate a smooth CEO transition and (ii) the alignment of his compensation to the Company’s performance during the CEO transition period. In approving the continued vesting of certain awards for Mr. Mucci, the C&L Committee consulted with the independent compensation consultant retained by the Committee. The continued vesting is conditioned upon Mr. Mucci’s continuing Board service, and all unvested awards would be forfeited if his Board service ends prior to vesting. The amendment affected Mr. Mucci’s equity awards granted in July 2021. Under the original terms of these awards and based on Mr. Mucci’s retirement date of October 14, 2022, Mr. Mucci would not have been eligible to vest in the performance-based RSUs or the final vesting tranches of the time-based RSUs and stock options that were granted in July 2021. His performance-based RSUs granted in July 2021 and amended in October 2022 continued to be subject to the performance conditions and terms pursuant to the original award agreement and subject to one additional year of time-based vesting. The performance-based RSUs will be forfeited if Mr. Mucci’s Board service ends prior to the vesting date. This change was treated as a Type III modification under FASB ASC Topic 718 as the expectation of the achievement of the original service condition related to these awards changed from improbable to probable post-amendment. This change resulted in an incremental fair value of $6,357,544, which is reflected in the Fiscal 2023 Summary Compensation Table within this proxy statement along with the grant-date fair value of his July 2021 equity awards. Additionally, the amendment impacted Mr. Mucci’s stock options granted in July of 2021, 2020 and 2018 to allow for Mr. Mucci’s continued service as a director of the Company to postpone the commencement of the post-termination exercise period for stock options. This change was treated as a Type I modification under FASB ASC Topic 718 as the expectation of the original service conditions related to these awards were probable pre- and post-amendment. This change resulted in an incremental fair value of $152,035, which is reflected in the Fiscal 2023 Summary Compensation Table within this proxy statement along with the grant-date fair value of his July 2021 and July 2020 stock option awards. The resulting incremental fair values reflect the fair values of the modified awards as of October 14, 2022 and do not reflect additional grants to Mr. Mucci. There were no other amendments to Mr. Mucci’s award agreements, payments of cash severance, or other retirement-related benefits approved in connection with the CEO transition during fiscal 2023. Mr. Mucci began receiving compensation for his services as Chairman of the Board following his retirement as CEO of the Company effective as of October 14, 2022. The Board approved an annual cash retainer set at $195,000, payable in quarterly installments beginning in October 2022. The cash retainer is included in Mr. Mucci’s “All Other Compensation” column of the Fiscal 2023 Summary Compensation Table. Additionally, the Board approved an equity-based compensation structure for Mr. Mucci set at a total value of approximately $200,000, with 50% awarded in the form of stock options and 50% in the form of time-based RSUs, all subject to similar terms and conditions as the July 15, 2022 Board grants. The awards are included in Mr. Mucci’s “Option Awards” and “Stock Awards” columns of the Fiscal 2023 Summary Compensation Table. For fiscal 2024, the Board approved an annual cash retainer for Mr. Mucci set at $195,000, payable in quarterly installments beginning in October 2023. Additionally for fiscal 2024, the Board approved an equity-based compensation structure for Mr. Mucci set at a total value of approximately $218,000, with 50% awarded in the form of stock options and 50% in the form of time-based RSUs. The Board did not approve any other compensation for Mr. Mucci for fiscal 2024.

  32. Summary of Fiscal 2023 Elements of Compensation

    | Compensation Elements | Salary | Annual Incentive Program | Stock Options | Time-Based RSU Awards | Performance-Based RSU Awards | | | Fixed | Variable, At-Risk | | | | | Recipients | All NEOs | | | | | | When Granted | Reviewed annually | Annually | | | | | Form of Delivery | Cash | | Equity | | | | Type of Performance | Short-Term | | Long-Term | | | | Performance Period | Ongoing | 1-year | Vest ratably over 3 years | | 2-year performance period followed by 1- year service period | | How Payout is Determined | C&L Committee judgment | Quantitative based on achievement against targets; small portion qualitative | Based on stock price on exercise/vest date | | Quantitative based on achievement against targets | | Performance Metrics | N/A | Service revenue; operating income, net of certain items; and annualized new business revenue | N/A | | Service revenue; and operating income, net of certain items |

  33. Annual Incentive Program

    Annual Incentive Program The annual incentive program was established to motivate NEOs to meet the financial goals set by the Company as presented to its stockholders, while maintaining alignment with stockholders’ interests. Upon achievement of the minimum eligible performance, payouts under our annual incentive program are determined based upon the satisfaction of certain quantitative and qualitative components. The quantitative component consists of certain predetermined performance targets, which are established at the beginning of each fiscal year and are typically based on the Board-approved fiscal year financial plan. The targets for payout are established by the C&L Committee with consultation of management. The performance targets established are intended to provide a balance between growing revenue and managing expenses. Once a target is determined, it is set for the year and is normally not changed. For extraordinary circumstances, the C&L Committee reserves the right to apply discretion and make changes. The qualitative component of the annual incentive program consists of individual-specific qualitative goals established at the beginning of the fiscal year based on functions and responsibilities unique to the individual. The CEO can potentially receive up to 20% of base salary, the COO can potentially receive up to 15% of base salary, and all other NEOs can potentially receive up to 10% of base salary. For fiscal 2023, a portion of the NEO’s qualitative goals was based on DE&I and ESG program improvements. The assessment of qualitative goals is subjective and is not always based on quantifiable financial measurements. The C&L Committee may determine, at its sole discretion, whether satisfactory achievement has occurred, regardless of achievement against the pre-established individual goals. At its discretion for fiscal 2023, the C&L Committee individually evaluated each NEO and determined the specific percentage of the qualitative portion to award each NEO as presented on the following page. The weight given each quantitative performance target is determined by the C&L Committee when the targets are established, and this weight varies for each NEO based on the individual’s position. Each of the performance targets applicable to an NEO’s annual incentive program provide the NEO an opportunity to earn a percentage of their annualized base salary based on achievement at threshold, target, and maximum. The total percentage of base salary for all performance measures that the NEOs have the opportunity to earn are as follows:

  34. Annual Incentive Program

    | | Quantitative Component | | | Qualitative Component | | Position | Threshold | Target | Maximum | | | CEO | 55.0% | 130.0% | 205.0% | 20.0% | | COO | 47.5% | 110.0% | 172.5% | 15.0% | | SVP-Sales | 47.5% | 105.0% | 162.5% | 10.0% | | SVP-Other | 40.0% | 90.0% | 140.0% | 10.0% | | VP | 25.0% | 60.0% | 95.0% | 10.0% |

  35. Annual Incentive Program

    Thresholds are set as the floor with any achievement below threshold resulting in no payout for the respective performance metric. Maximums are set as a ceiling on the amount of payout a NEO can receive for each performance metric. The performance metrics for the fiscal 2023 annual incentive program for the NEOs were established as follows:

  36. Annual Incentive Program

    | | Fiscal 2023 Year-over-Year Growth Rates | | | % of Plan Dollars | | | | | Bonus Objectives(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | Achievement as a % of Target | | Service revenue | 2.6% | 6.8% | 9.0% | 96.0% | 100.0% | 102.0% | 100.9% | | Operating income, net of certain items(2) | 2.9% | 7.1% | 9.3% | 96.0% | 100.0% | 102.0% | 101.2% | | Annualized new business revenue(3) | 2.0% | 7.0% | 10.9% | 95.3% | 100.0% | 103.7% | 103.5% |

  37. Annual Incentive Program

    | (1) The annual incentive program allows for certain adjustments to metrics as reported in our consolidated financial statements. The acquisition component of service revenue is included up to a maximum of 2% of service revenue at target. |

  38. Annual Incentive Program

    | (2) Operating income, net of certain items, is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A for a discussion of this non-GAAP measure. |

  39. Annual Incentive Program

    | (3) Annualized new business revenue is the approximate amount of revenue to be earned over the first twelve-month period, from the sale in the current fiscal year, of certain management solutions; and professional employee organization and insurance solutions to new clients and new product sales to existing clients. This measure is not directly calculated from our audited financial statements, as reported service revenue also includes recurring revenue from pre-existing clients. This metric is set to provide incentive for executives to strive to exceed the target, given the relationship to recurring revenue. |

  40. Annual Incentive Program

    Each performance objective, along with the target percentage of base salary that can be earned for that metric, and the actual payout percentage is set forth below for our NEOs (excluding Mr. Mucci, whose award was forfeited upon his retirement as CEO of the Company on October 14, 2022), in accordance with calculations per the program:

  41. Annual Incentive Program

    | | Mr. Gibson(1) | | Mr. Rivera and Mr. Gioja | | Mr. Bottini | | Ms. Schaeffer | | | Bonus Objectives | % of Base Salary at Target | % of Base Salary Achieved(2) | % of Base Salary at Target | % of Base Salary Achieved(2) | % of Base Salary at Target | % of Base Salary Achieved(2) | % of Base Salary at Target | % of Base Salary Achieved(2) | | Service revenue | 35.9% | 45.9% | 30.0% | 39.0% | 25.0% | 31.1% | 20.0% | 25.9% | | Operating income, net of certain items(3) | 35.9% | 69.0% | 35.0% | 45.5% | 25.0% | 33.3% | 28.0% | 35.2% | | Annualized new business revenue(4) | 51.7% | 57.0% | 25.0% | 36.8% | 55.0% | 83.4% | 12.0% | 21.4% | | Total quantitative annual incentive | 123.5% | 171.9% | 90.0% | 121.3% | 105.0% | 147.8% | 60.0% | 82.5% | | Qualitative(5) | 18.3% | 18.7% | 10.0% | 10.0% | 10.0% | 10.0% | 10.0% | 10.0% | | Total | 141.8% | 190.6% | 100.0% | 131.3% | 115.0% | 157.8% | 70.0% | 92.5% |

  42. Annual Incentive Program

    | (1) Mr. Gibson was eligible to receive an award with a target of 150% of his base salary for the portion of the fiscal year he served as the Company’s President and CEO upon the same performance metrics established for Mr. Mucci for fiscal 2023. For the portion of fiscal 2023 in which Mr. Gibson served as President and COO, he was eligible to receive an award with an annual incentive target of 125% of his base salary upon the same performance metrics established for him for fiscal 2023. Mr. Gibson’s percentages are calculated based on the on pro-rata share of time spent as CEO and COO. |

  43. Annual Incentive Program

    | (2) If the actual achievement under a given performance metric is between two thresholds (e.g., between threshold and target or between target and maximum), then the percentage of base salary achieved would be calculated based on a straight-line interpolation of the achievement level above threshold or target, as appropriate, for such performance metric. |

  44. Annual Incentive Program

    | (3) Operating income, net of certain items, is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of this non-GAAP measure. |

  45. Annual Incentive Program

    | (4) Annualized new business revenue is the approximate amount of revenue to be earned over the first twelve-month period, from the sale in the current fiscal year, of certain management solutions; and professional employee organization and insurance solutions to new clients and new product sales to existing clients. This measure is not directly calculated from our audited financial statements, as reported service revenue also includes recurring revenue from pre-existing clients. This metric is set to provide incentive for executives to strive to exceed the target, given the relationship to recurring revenue. |

  46. Annual Incentive Program

    | (5) The NEOs have an opportunity to earn a percentage of base salary based on individual-specific qualitative goals related to the functions and responsibilities unique to the individual. The C&L Committee may determine, at its sole discretion, whether satisfactory achievement has occurred, regardless of achievement against the pre-established individual goals. |

  47. Annual Incentive Program

    The actual achievement translated to the incentive payments for our NEOs (excluding Mr. Mucci, whose award was forfeited upon his retirement as CEO of the Company on October 14, 2022) is as follows:

  48. Annual Incentive Program

    | | Annualized Base Salary(1) | Minimum Potential Payout(2) | Maximum Potential Payout(2) | % of Base Salary Achieved | Actual Incentive Compensation Earned(3) | | John B. Gibson(4) | $750,000 | — | $1,612,500 | 190.6% | $1,429,782 | | Efrain Rivera | $575,000 | — | $862,500 | 131.3% | $755,115 | | Mark A. Bottini | $530,000 | — | $914,250 | 157.8% | $836,424 | | Michael E. Gioja | $550,000 | — | $825,000 | 131.3% | $722,284 | | Stephanie L. Schaeffer | $375,000 | — | $393,750 | 92.5% | $346,910 |

  49. Annual Incentive Program

    | (1) This represents the NEO’s annualized base salary as of May 31, 2023, except for Mr. Gibson as described in footnote 4. It may differ from base salary paid for fiscal 2023 reflected in the Fiscal 2023 Summary Compensation Table, which is contained in the Named Executive Officer Compensation section of this proxy statement, due to timing of salary increases, start dates, etc. |

  50. Annual Incentive Program

    | (2) These columns represent the range of payout that each NEO has the opportunity to earn. The minimum potential payout indicates that no payout is earned if achievement is below threshold. The maximum potential payout is based on the percentage of base salary that each NEO can earn for maximum achievement. |

  51. Annual Incentive Program

    | (3) Actual incentive compensation earned is calculated as annualized base salary multiplied by the percentage of base salary achieved and is provided in the Fiscal 2023 Summary Compensation Table, which is contained in the Named Executive Officer Compensation section of this proxy statement. |

  52. Annual Incentive Program

    | (4) Mr. Gibson’s calculated amounts are based on the on the performance metrices applicable and a pro-rata share of time spent as CEO and COO. |

  53. Equity-Based Compensation

    Equity-Based Compensation To align our NEOs’ interests with the long-term interests of our stockholders, we grant equity awards under the 2002 Plan. Annual grants of equity awards to the NEOs are approved during the regularly scheduled meeting of the C&L Committee in July after the release of our fiscal year-end earnings and upcoming fiscal year financial guidance. Our trading black-out period normally lifts on the third business day following such release of information. The C&L Committee anticipates continuing its granting practice. The C&L Committee may also grant equity awards to individuals upon hire or promotion to executive officer positions. These equity awards are not granted during any trading black-out periods. Recipients are notified shortly after C&L Committee approval of their grant, noting the number of stock options, shares of time-based stock, target performance-based stock awards and goals, the vesting schedule, and exercise price. Any sales restrictions or other terms of the award are also communicated at that time. Annually, the C&L Committee reviews the NEO compensation of our Peer Group to determine the desired pay range for our officers. See the “Compensation Decision Process” section later in this CD&A for further information on the Committee’s process for determining total compensation, including equity awards. This review, along with each officer’s individual performance and potential, determine the total compensation. The quantity of equity awards is based on an estimated total value as determined by the C&L Committee in conjunction with its total compensation review and evaluation. In July 2022, the C&L Committee made an annual equity grant to our NEOs that was a blend of stock options, time-based RSUs and performance-based RSUs. The award value was split as follows: This annual distribution provides for 50% of the total equity-based compensation value to be performance-based RSUs with opportunity based on stock-price appreciation, consistent with the C&L Committee’s total compensation determination. For our July 2022 annual grants, the fair value of awards at the time of grant was: $7,125,024 for the former CEO; $1,999,961 for the former COO; $1,949,914 for the CFO; $1,600,054 for the SVP-Sales; $1,700,039 for the SVP-IT and PD; and $775,058 for the VP, Chief Legal and Ethics Officer. In October 2022, the C&L Committee granted additional equity awards to the former COO upon his promotion to CEO, with a total fair value at the time of grant of $2,499,950. The estimated total value of the equity-based compensation was increased in the fiscal year ended May 31, 2021 to adjust the compensation closer to market based on benchmarking analysis against our Peer Group and to better align internal pay equity. See further discussion under the “Peer Group” section within this CD&A. The following equity-based compensation was granted in fiscal 2023 for our NEOs (including Mr. Mucci, whose July 2022 annual grant was forfeited upon his retirement as CEO of the Company on October 14, 2022):

  54. Equity-Based Compensation

    | NEO | Performance-Based RSU Awards (at Target)(1) | Stock Option Awards(2) | Time-Based RSU Awards(3) | | John B. Gibson | 23,620 | 42,439 | 7,141 | | Efrain Rivera | 8,956 | 21,405 | 3,391 | | Mark A. Bottini | 7,349 | 17,563 | 2,783 | | Michael E. Gioja | 7,808 | 18,661 | 2,957 | | Stephanie L. Schaeffer | 3,560 | 8,507 | 1,348 | | Martin Mucci(4) | 32,726 | 78,211 | 12,391 |

  55. Equity-Based Compensation

    | (1) Performance-based RSU awards are subject to a two-year performance period with full vesting provided after an additional one-year service period (i.e., total of three years). In the event of retirement after the first anniversary of the grant date, the NEO will earn shares on the normal vesting date without having to fulfill the one-year service requirement. If the retirement is prior to the end of the performance period, a pro-rata payment of the final determined share payout will be earned on the normal vesting date, based on the ratio of the number of days from the beginning of the performance period through the retirement date to the total number of days in the performance period. Retirement eligible means the executive is age 60 or older with 10 or more years of service. |

  56. Equity-Based Compensation

    | (2) Stock option awards vest one-third per year over three years and have a term of 10 years. In the event of retirement on or after the one-year anniversary of the grant date, the next two installment scheduled to vest will vest in accordance with the terms of the award agreement. Retirement eligible means the executive is age 60 or older with 10 or more years of service. |

  57. Equity-Based Compensation

    | (3) Time-based RSU awards vest one-third per year over three years. In the event of retirement on or after the one-year anniversary of the grant date, the next two installments scheduled to vest will vest in accordance with the terms of the award agreement. Retirement eligible means the executive is age 60 or older with 10 or more years of service. |

  58. Equity-Based Compensation

    | (4) This table does not reflect the equity awards that Mr. Mucci received upon becoming the Chairman of the Board effective October 14, 2022, which were discussed previously in “Chairman Compensation” under “Summary of Mr. Mucci’s Fiscal 2023 Compensation Arrangements.” |

  59. Prior Performance Stock Awards

    Prior Performance Stock Awards Prior performance-based stock awards were designed to provide variable compensation that focused on longer-term results. Performance-based stock awards had a two-year performance period to determine the number of stock awards (restricted shares or restricted stock units) to be issued. The NEO was generally required to serve for one additional year for the restrictions to lapse. We began using restricted stock units to settle performance-based stock awards in the fiscal year ended May 31, 2020 for NEOs who were retirement eligible, which means the NEO is age 60 or older with 10 or more years of service. As described above, for fiscal 2023, we changed to granting performance-vesting RSUs to all NEOs, which are subject to a two-year performance period with full vesting provided after an additional one-year service period (i.e., total of three years). The performance targets as approved by the Board for performance-based stock awards are based on service revenue and operating income, net of certain items, as projected in the strategic planning process. The C&L Committee established performance targets intended to be appropriately challenging at all levels, including the threshold level, but attainable with increasing difficulty for each level beyond threshold. The threshold level was expected to be appropriately challenging but achievable under normal circumstances. The target level would be achieved if the Company performed as expected under our strategic plan for the two-year period. The maximum level would be achievable only with exceptional performance. The two-year performance period for performance-based stock awards granted in July 2021 was completed at the end of fiscal 2023. The shares earned were at maximum achievement based on achievement against pre-established targets for the performance period as follows:

  60. Prior Performance Stock Awards

    | Performance Goal ($ In Millions) | Two-Year Performance Targets Established | | | Actual Achievement | | | | Threshold | Target | Maximum | ($) | % of Target | | Service revenue(1) | $8,389 | $8,830 | $9,096 | $9,461 | 107% | | Operating income, net of certain items(2) | $3,138 | $3,304 | $3,403 | $3,716 | 113% | | Percent of plan | 95% | 100% | 103% | | | | Payout as a percent of target | 60% | 100% | 150% | | 150% |

  61. Prior Performance Stock Awards

    | (1) Service revenue as calculated under the performance share agreement allows for 2% of total service revenue to be delivered from acquisitions during the performance period. Refer to Appendix B for a description of this non-GAAAP measure and a reconciliation of service revenue as calculated for the performance period to service revenue reported in our consolidated financial statements. |

  62. Prior Performance Stock Awards

    | (2) Operating income, net of certain items, is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of non-GAAP measures. In addition, this measure as calculated under the performance share agreement excludes the impact of business acquisitions and other unusual items during the performance period. Refer to Appendix B for a description of this non-GAAP measure and a reconciliation of the amount for the performance period to the most comparable GAAP measure of operating income. |

  63. Recoupment, Non-Compete, and Other Forfeiture Provisions

    Recoupment, Non-Compete, and Other Forfeiture Provisions We retain the right to claw back any incentive payment or award under any policy adopted by the Company implementing Section 10D of the Exchange Act and any regulations promulgated or national securities exchange listing conditions adopted with respect thereto. In the annual incentive program, we retain the right to recoup all or a portion of the payouts made under the annual incentive program if those payouts were based on financial statements that are subsequently subject to restatement and where fraud or misconduct was involved. We will, to the extent permitted by governing law, require reimbursement of a portion of any compensation received where:

  64. Recoupment, Non-Compete, and Other Forfeiture Provisions

    Should any of these activities occur, we may cancel all or any outstanding portion of the equity awards subject to this provision and recover the gross value of any vested time-based stock awards and vested performance-based stock awards, including all dividends and dividend equivalents. In the case of non-qualified stock options, we may suspend the NEO’s right to exercise the option and/or may declare the option forfeited. In addition, we may seek to recover all profits from certain prior exercises as liquidated damages and pursue other available legal remedies.

  65. Change in Control Plan

    Change in Control Plan Executives of the Company are covered by a Change in Control Plan. Upon involuntary termination by the Company without cause or a voluntary termination by the participant for good reason, within 12 months following a change in control, the executive becomes entitled to certain severance benefits. Such severance benefits are conditioned upon the execution of a general release in favor of the Company. Cause means the participant’s dereliction of duty to the Company, conviction for a felony, or willful misconduct that has a substantial adverse effect on the Company. Good reason means a significant change to the duties, authority, or position that were assigned immediately before the change in control including: the reduction in or removal of any material duties, authority, or position within the Company; assignment of duties inconsistent with the participant’s position, authorities, or responsibilities; material reduction to base salary, annual incentive, or other elements of total compensation; relocation of the participant’s principal workplace to an area outside of a 50-mile-radius, or the failure of a successor company to assume or adopt the Change in Control Plan. Refer to the “Potential Payments upon Termination or Change in Control” discussion within the Named Executive Officer Compensation section of this proxy statement for further information.

  66. Role of the Compensation Consultant

    Role of the Compensation Consultant As outlined in its charter, the C&L Committee has the authority to retain consultants and advisers, at the Company’s expense, to assist in the discharge of the committee’s duties. The C&L Committee can retain and dismiss such consultants and advisers at any time. The consultants report directly to the committee and have direct access to the committee through the C&L Committee’s Chair. The C&L Committee requires that any consultant it retains cannot be utilized by management for other purposes. Although management, particularly the VP, Chief Human Resources Officer, may work closely with the consultant, the consultant is ultimately accountable to the C&L Committee on matters related to executive compensation. The C&L Committee retains the services of Frederic W. Cook & Co. (“FW Cook”) as its independent compensation consultant. FW Cook has not provided any other services to the Company prior to or subsequent to being retained as the compensation consultant to the C&L Committee. The C&L Committee was solely responsible for the decision to retain FW Cook as its consultant. FW Cook advises the C&L Committee on matters of NEO compensation, assists with analysis and research, and provides updates on evolving best practices in compensation. While FW Cook may express an opinion on compensation matters, the C&L Committee is solely responsible for setting the type and amount of compensation for NEOs. The C&L Committee recognizes that it is essential to receive objective advice from its compensation consultant. The C&L Committee closely examines the procedures and safeguards that FW Cook takes to ensure that the compensation consulting services are objective. The C&L Committee has assessed the independence of FW Cook pursuant to SEC rules and concluded that FW Cook’s work for the C&L Committee does not raise any conflict of interest. In making this assessment, the following factors were taken into consideration:

  67. Role of the Compensation Consultant

    | • | that the compensation consultant reports directly to the C&L Committee, and the C&L Committee has the sole power to terminate or replace its compensation consultant at any time; |

  68. Role of the Compensation Consultant

    | • | the compensation consultant does not provide any other services to the Company; |

  69. Role of the Compensation Consultant

    | • | whether aggregate fees paid by the Company to the compensation consultant, as a percentage of the total revenue of the compensation consultant, are material to the compensation consultant; |

  70. Role of the Compensation Consultant

    | • | the compensation consultant’s policies and procedures designed to prevent conflicts of interest; |

  71. Role of the Compensation Consultant

    | • | any business or personal relationships between the compensation consultant, on one hand, and any member of the C&L Committee or executive officer, on the other hand; and |

  72. Role of the Compensation Consultant

    | • | whether the compensation consultant owns any shares of the Company’s stock. |

  73. Role of Compensation and Leadership Committee and Management

    | • | reviews the companies in our Peer Group for any changes; |

  74. Role of Compensation and Leadership Committee and Management

    | • | establishes and approves the performance targets and payouts under incentive-based programs and awards; and |

  75. Role of Compensation and Leadership Committee and Management

    | • | grants equity awards under our 2002 Plan. |

  76. Role of Compensation and Leadership Committee and Management

    | • | compensation consultant reports and analyses; |

  77. Role of Compensation and Leadership Committee and Management

    | • | benchmarking information with NEOs at Peer Group companies for all compensation elements; and |

  78. Role of Compensation and Leadership Committee and Management

    The C&L Committee strives for our NEOs’ compensation to be in line with our Peer Group. The information provided by the compensation consultant indicates whether our compensation package, if target performance is achieved, is comparable to the median compensation of our Peer Group, given current competitive practices, overall best practices, and other compensation and benefit trends. Management reports are used to evaluate compensation recommendations and the impact to total compensation for each individual. They are also used to view a complete picture of the trend of compensation to executive officers, both as a team and as individuals. This facilitates discussion that more accurately details individual officer compensation, noting differences that reflect officer tenure, performance, and position in the management structure. The C&L Committee uses these management updates along with peer information, where available, as tools to evaluate executive compensation. This information is reviewed in a subjective manner. There is no implied direct or formulaic linkage between peer information and the C&L Committee’s compensation decisions. Our CEO and our VP, Chief Human Resources Officer provide recommendations to the C&L Committee on design elements for compensation. These individuals, and from time to time invited guests including other officers, will attend the meetings of the C&L Committee to present and respond to questions on current or proposed plan design. Annually, our CEO reviews achievement of the recently completed fiscal year’s plan and presents recommendations regarding: salary for each of the NEOs (other than himself), the upcoming fiscal year’s annual incentive program structure, and equity awards. Management is excluded from executive sessions of the C&L Committee where final decisions on compensation are made, particularly those on our CEO’s performance and compensation. Executive sessions occur at each meeting of the C&L Committee.

  79. Peer Group

    Peer Group In addition to many other factors that affect compensation decisions, the C&L Committee takes into account the compensation practices of our Peer Group, where available, in formulating our compensation program. The C&L Committee assesses total compensation at the median of the Peer Group, even though Paychex performs above the median of its Peer Group in certain financial categories as shown in the charts that follow. Peer Group comparisons were available for the positions of CEO and CFO, and both Mr. Gibson and Mr. Rivera have total compensation that falls below the median total compensation of the Peer Group. For the remaining NEOs (excluding Mr. Mucci), compensation was compared to the average NEO compensation, excluding the CEO and CFO positions, for the Peer Group. These results were below the median total compensation of our Peer Group. Peer Group benchmarking is not the sole determining factor in the C&L Committee’s decisions on compensation, and the C&L Committee reserves the discretion to adjust compensation based on other factors as previously discussed. The Peer Group companies are not necessarily limited to the markets in which Paychex does business. The Peer Group companies were selected based upon the following criteria: comparable business model, company size including revenues and earnings, executive talent sources, competition for investor capital, companies considered by our investors to be our peers, and overall reasonableness. The Peer Group is comprised of the following industries or segments: a direct competitor in the HCM industry, financial transaction management companies, and business services and outsourcing companies. Our Peer Group used for evaluating executive compensation for fiscal 2023 consisted of the following companies:

  80. Peer Group

    | Peer Group | | | Automatic Data Processing, Inc. | Global Payments Inc. | | Bread Financial Holdings, Inc. | H&R Block, Inc. | | Broadridge Financial Solutions, Inc. | Intuit, Inc. | | Equifax, Inc. | Moody’s Corporation | | Fiserv, Inc. | TransUnion | | FleetCor Technologies, Inc. | Verisk Analytics, Inc. | | Gartner, Inc. | The Western Union Company |

  81. Peer Group

    | (1) Based on each Peer-Group company’s fiscal-year 2022 results. |

  82. Peer Group

    The C&L Committee annually reviews and approves the selection of Peer Group companies, adjusting the group from year to year based upon our business and changes in the Peer Group companies’ business or the comparability of their metrics. The Peer Group may also be adjusted in the event of mergers, acquisitions, or other significant economic changes. The Peer Group used to determine fiscal 2023 compensation was not adjusted from the prior year.

  83. CEO Compensation

    | • | Payout under the annual incentive program at 133% of target based on the pro-rata share of time spent as CEO and COO; and |

  84. CEO Compensation

    | • | Aggregate annual equity award grants comprised of 23,620 performance-based stock awards at target with a grant-date fair value of $2,499,969, 42,439 stock options with vesting pro-rata over three years with a grant-date fair value of $1,200,009, and 7,141 shares of time-based stock awards with vesting pro rata over three years with a grant-date fair value of $799,933. |

  85. CEO Pay Ratio

    CEO Pay Ratio Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are required to provide the ratio of the annual total compensation of Mr. Gibson, our CEO, to the annual total compensation of our median employee. These rules allow us to identify our median employee once every three years unless there has been a change in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change in our pay ratio disclosure. To identify the median employee for fiscal 2023, we took the following steps:

  86. CEO Pay Ratio

    | • | We identified our global employee population of approximately 16,200 employees, excluding our CEO, who were employed by us on March 1, 2023. Our employees are primarily located in the U.S. and we included all employees, whether employed on a full-time, part-time, or seasonal basis; |

  87. CEO Pay Ratio

    | • | As permitted by the SEC’s “de minimis” exemption, we adjusted our global employee population to exclude employees from certain jurisdiction outside of the U.S. (216 in Germany and 199 in Denmark); |

  88. CEO Pay Ratio

    | • | We identified the median employee by examining the previous 12-month period of total compensation for our adjusted global employee population, excluding our CEO, who were employed by us on March 1, 2023; and |

  89. CEO Pay Ratio

    | • | We did not make any assumptions, adjustments, or estimates with respect to the total compensation, however we did annualize the compensation for any full-time or part-time employees that were not employed by us for the entire 12-month period. |

  90. CEO Pay Ratio

    We calculated total annual compensation for fiscal 2023 for the median employee using the same methodology we used for our NEOs as set forth in the 2023 Summary Compensation Table later in this proxy statement. Because Messrs. Mucci and Gibson each served as CEO for part of fiscal 2023, we calculated the total annual compensation for fiscal 2023 for the CEO by annualizing the portion of Mr. Gibson’s annual total compensation from the Fiscal 2023 Summary Compensation Table for his service as CEO starting on October 14, 2023. The table below sets forth comparative information regarding: (A) the total annual compensation of our CEO for fiscal 2023; (B) the median of the total annual compensation of all other employees of the Company, excluding employees of certain non-U.S. jurisdictions and our CEO, for fiscal 2023; and (C) the ratio of the CEO total annual compensation to the median of the total annual compensation of all other employees, excluding employees of certain non-U.S. jurisdictions and our CEO:

  91. CEO Pay Ratio

    | Mr. Gibson, our CEO, total annual compensation (A) | $6,989,857 | | Median employee total annual compensation, excluding employees of certain non-U.S. jurisdictions and our CEO (B) | $69,165 | | Ratio of CEO to median employee compensation (C) | 101:1 |

  92. Fiscal 2023 Summary Compensation Table

    Fiscal 2023 Summary Compensation Table The table below presents the total compensation for each of the NEOs.

  93. Fiscal 2023 Summary Compensation Table

    | Name and Principal Position (a) | Fiscal Year (b) | Salary (c) | Bonus (d) | Stock Awards (e) | Option Awards (f) | Non-Equity Incentive Plan Compensation (g) | All Other Compensation (h) | Total (i) | | John B. Gibson President and CEO | 2023 | $730,673 | $— | $3,299,902 | $1,200,009 | $1,429,782 | $19,814 | $6,680,180 | | | 2022 | $557,154 | $— | $1,563,543 | $534,512 | $948,700 | $15,405 | $3,619,314 | | | 2021 | $449,231 | $— | $805,521 | $538,009 | $713,213 | $5,931 | $2,511,905 | | Efrain Rivera Senior Vice President and CFO | 2023 | $575,000 | $— | $1,364,915 | $584,999 | $755,115 | $14,595 | $3,294,624 | | | 2022 | $567,308 | $— | $1,467,922 | $485,788 | $862,500 | $14,780 | $3,398,298 | | | 2021 | $471,692 | $— | $984,493 | $657,572 | $748,873 | $9,784 | $2,872,414 | | Mark A. Bottini Senior Vice President of Sales | 2023 | $526,692 | $— | $1,120,057 | $479,997 | $836,424 | $15,038 | $2,978,208 | | | 2022 | $504,615 | $— | $1,190,257 | $393,889 | $879,750 | $14,957 | $2,983,468 | | | 2021 | $426,769 | $— | $805,521 | $538,009 | $735,500 | $10,525 | $2,516,324 | | Michael E. Gioja Senior Vice President of Information Technology and Product Development | 2023 | $546,692 | $— | $1,190,034 | $510,005 | $722,284 | $17,363 | $2,986,378 | | | 2022 | $525,385 | $— | $1,269,528 | $420,148 | $795,000 | $16,961 | $3,027,022 | | | 2021 | $449,231 | $— | $805,521 | $538,009 | $713,213 | $15,669 | $2,521,643 | | Stephanie L. Schaeffer Vice President, Chief Legal and Ethics Officer, and Secretary | 2023 | $370,865 | $— | $542,562 | $232,496 | $346,910 | $12,585 | $1,505,418 | | Martin Mucci(1) Chairman and former CEO | 2023 | $454,808 | $— | $10,441,146 | $3,393,468 | $— | $152,750 | $14,442,172 | | | 2022 | $1,063,461 | $— | $5,653,529 | $1,870,969 | $2,418,750 | $18,317 | $11,025,026 | | | 2021 | $898,462 | $— | $3,952,973 | $2,640,232 | $2,117,565 | $18,015 | $9,627,247 |

  94. Fiscal 2023 Summary Compensation Table

    | (1) Mr. Mucci retired from his position as CEO effective October 14, 2022 and retained his role as Chairman of the Board. In accordance with applicable SEC rules, the Fiscal 2023 Summary Compensation Table includes the compensation he received as Chairman of the Board for services provided after October 14, 2022, as well as the Stock Awards and Option Awards that he received in July 2022, which were forfeited upon his retirement as the CEO of the Company. |

  95. Grants of Plan-based Awards for Fiscal 2023

    Grants of Plan-based Awards for Fiscal 2023 The table below presents estimated possible payouts under the Company’s annual incentive program for fiscal 2023 based on achievement of performance objectives at various levels for the Company and individual NEOs. It also summarizes equity awards granted during fiscal 2023 to each of the NEOs. This information does not set forth the actual payout awarded to the NEOs for fiscal 2023. For Mr. Mucci, the table below also includes the equity awards granted to him as Chairman of the Board for his services provided after October 14, 2022.

  96. Grants of Plan-based Awards for Fiscal 2023

    | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (j) | All Other Option Awards: Number of Securities Underlying Options (#) (k) | Exercise or Base Price of Option Awards ($/Sh) (l) | Grant- Date Fair Value of Stock and Option Awards ($) (m) | | Name (a) | Grant Type (b) | Grant Date (c) | Threshold ($) (d) | Target ($) (e) | Maximum ($) (f) | Threshold (#) (g) | Target (#) (h) | Maximum (#) (i) | | | | | | John B. Gibson | Annual Incentive Program | 7/15/2022 | $537,500 | $1,075,000 | $1,612,500 | | | | | | | | | | Time-Based RSUs | 7/15/2022 | | | | | | | 3,478 | | | $399,970 | | | Performance-Based RSUs | 7/15/2022 | | | | 5,512 | 9,186 | 13,779 | | | | $999,988 | | | Stock Options | 7/15/2022 | | | | | | | | 21,954 | $115.00 | $600,003 | | | Time-Based RSUs | 10/15/2022 | | | | | | | 3,663 | | | $399,963 | | | Performance-Based RSUs | 10/15/2022 | | | | 8,660 | 14,434 | 21,651 | | | | $1,499,981 | | | Stock Options | 10/15/2022 | | | | | | | | 20,485 | $109.19 | $600,006 | | Efrain Rivera(1) | Annual Incentive Program | 7/15/2022 | $287,500 | $575,000 | $862,500 | | | | | | | | | | Time-Based RSUs | 7/15/2022 | | | | | | | 3,391 | | | $389,965 | | | Performance-Based RSUs | 7/15/2022 | | | | 5,374 | 8,956 | 13,434 | | | | $974,950 | | | Stock Options | 7/15/2022 | | | | | | | | 21,405 | $115.00 | $584,999 | | Mark A. Bottini(1) | Annual Incentive Program | 7/15/2022 | $304,750 | $609,500 | $914,250 | | | | | | | | | | Time-Based RSUs | 7/15/2022 | | | | | | | 2,783 | | | $320,045 | | | Performance-Based RSUs | 7/15/2022 | | | | 4,409 | 7,349 | 11,024 | | | | $800,012 | | | Stock Options | 7/15/2022 | | | | | | | | 17,563 | $115.00 | $479,997 | | Michael E. Gioja(1) | Annual Incentive Program | 7/15/2022 | $275,000 | $550,000 | $825,000 | | | | | | | | | | Time-Based RSUs | 7/15/2022 | | | | | | | 2,957 | | | $340,055 | | | Performance-Based RSUs | 7/15/2022 | | | | 4,685 | 7,808 | 11,712 | | | | $849,979 | | | Stock Options | 7/15/2022 | | | | | | | | 18,661 | $115.00 | $510,005 | | Stephanie L. Schaeffer | Annual Incentive Program | 7/15/2022 | $131,250 | $262,500 | $393,750 | | | | | | | | | | Time-Based RSUs | 7/15/2022 | | | | | | | 1,348 | | | $155,020 | | | Performance-Based RSUs | 7/15/2022 | | | | 2,136 | 3,560 | 5,340 | | | | $387,542 | | | Stock Options | 7/15/2022 | | | | | | | | 8,507 | $115.00 | $232,496 | | Martin Mucci(1) | Annual Incentive Program(2) | 7/15/2022 | $806,250 | $1,612,500 | $2,418,750 | | | | | | | | | | Time-Based RSUs(3) | 7/15/2022 | | | | | | | 12,391 | | | $1,424,965 | | | Performance-Based RSUs(3) | 7/15/2022 | | | | 19,636 | 32,726 | 49,089 | | | | $3,562,552 | | | Stock Options(3) | 7/15/2022 | | | | | | | | 78,211 | $115.00 | $2,137,507 | | | Time-Based RSUs(4) | 10/15/2022 | | | | | | | 916 | | | $100,018 | | | Stock Options(4) | 10/15/2022 | | | | | | | | 3,299 | $109.19 | $99,993 | | | Time-Based RSUs(5) | 7/15/2021 | | | | | | | 7,791 | | | $850,699 | | | Performance-Based RSUs(5) | 7/15/2021 | | | | 16,871 | 28,119 | 42,179 | | | | $4,502,912 | | | Stock Options(5) | 7/15/2021 | | | | | | | | 108,086 | $112.67 | $1,105,478 | | | Stock Options(5) | 7/15/2020 | | | | | | | | 195,428 | $73.53 | $3,585 | | | Stock Options(5) | 7/11/2018 | | | | | | | | 179,191 | $69.54 | $46,905 |

  97. Grants of Plan-based Awards for Fiscal 2023

    | (1) NEOs deemed retirement eligible with respect to July 2022 grants, subject to the Company’s service requirements. |

  98. Grants of Plan-based Awards for Fiscal 2023

    | (2) Reflects a non-equity grant under the annual incentive program that was forfeited upon Mr. Mucci’s retirement as of October 14, 2022. |

  99. Grants of Plan-based Awards for Fiscal 2023

    | (3) Reflects equity award grants that were forfeited upon Mr. Mucci’s retirement as of October 14, 2022. |

  100. Grants of Plan-based Awards for Fiscal 2023

    | (4) Reflects equity award grants relating to compensation Mr. Mucci received for his services as Chairman of the Board following his retirement as CEO of the Company as of October 14, 2022. |

  101. Grants of Plan-based Awards for Fiscal 2023

    | (5) Reflects equity awards granted prior to fiscal 2023 amended as of October 14, 2022. |

  102. Grant-Date Fair Value of Stock and Option Awards (Column (m))

    | • | The fair value of the time-based RSUs granted to Mr. Mucci in October 2022, relating to director compensation for his continuing services as Chairman of the Board following his retirement as CEO of the Company, was $109.19 per share and was determined based on the closing price of the underlying common stock on the date of grant. |

  103. Grant-Date Fair Value of Stock and Option Awards (Column (m))

    | • | The fair value of Mr. Mucci’s October 15, 2022 stock option grant, relating to director compensation for his continuing services as Chairman of the Board following his retirement as CEO of the Company, was $30.31 and was based on the Black-Scholes option pricing model, applying the following assumptions; a risk-free interest rate of 4.3%; a dividend yield of 2.6%; a stock-price volatility factor of 0.27; and an expected option life of 7.5 years from the date of grant. |

  104. Option Exercises and Stock Vested in Fiscal 2023

    Option Exercises and Stock Vested in Fiscal 2023 The following table provides information about the value realized by the NEOs upon the exercise of stock options and the lapsing of the restrictions on stock awards during fiscal 2023. Certain columns in this table and the presentation of information on an award-by-award basis are not required by the rules relating to executive compensation disclosures and are not a substitute for the information required by Item 402 of SEC Regulation S-K, but rather are intended to provide additional information that stockholders may find useful.

  105. Option Exercises and Stock Vested in Fiscal 2023

    | | Option Awards | | | Stock Awards | | | | Name (a) | Date of Grant (b) | Number of Shares Acquired on Exercise (#) (c) | Value Realized on Exercise ($) (d) | Date of Grant (e) | Number of Shares Acquired on Lapsing (#) (f) | Value Realized on Lapse ($) (g) | | John B. Gibson | | | | 7/10/2019 | 8,646 | $1,009,853 | | | | | | 7/15/2020 | 3,651 | $419,865 | | | | | | 7/15/2021 | 1,914 | $220,110 | | | | | | 1/15/2022 | 467 | $56,185 | | Efrain Rivera | 7/10/2019 | 14,642 | $449,524 | 7/10/2019 | 10,582 | $1,235,978 | | | 7/15/2020 | 16,224 | $690,750 | 7/15/2020 | 4,455 | $511,517 | | | | | | 7/15/2021 | 2,116 | $242,974 | | Mark A. Bottini | | | | 7/10/2019 | 8,293 | $968,622 | | | | | | 7/15/2020 | 3,651 | $419,282 | | | | | | 7/15/2021 | 1,708 | $196,156 | | Michael E. Gioja | | | | 7/10/2019 | 8,230 | $961,264 | | | | | | 7/15/2020 | 3,644 | $418,398 | | | | | | 7/15/2021 | 1,831 | $210,246 | | Stephanie L. Schaeffer | | | | 7/10/2019 | 4,529 | $528,987 | | | | | | 7/15/2020 | 1,920 | $220,800 | | | | | | 7/15/2021 | 820 | $94,300 | | Martin Mucci | | | | 7/10/2019 | 47,044 | $5,494,739 | | | | | | 7/15/2020 | 17,064 | $1,962,360 | | | | | | 7/15/2021 | 7,792 | $896,080 |

  106. Outstanding Equity Awards as of May 31, 2023

    Outstanding Equity Awards as of May 31, 2023 The following table presents the equity awards made to NEOs which were outstanding as of May 31, 2023.

  107. Outstanding Equity Awards as of May 31, 2023

    | | Option Awards | | | | | | Stock Awards | | | | | Name (a) | Option Grant Date (b) | Number of Securities Underlying Unexercised Options (Exercisable) (#) (c) | Number of Securities Underlying Unexercised Options (Unexercisable) (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Total Potential Current Value of Outstanding Options($) (g) | Number of Shares or Units of Stock That Have Not Vested (#) (h) | Market Value of Shares or Units of Stock That Have Not Vested ($) (i) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (k) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (l) | | John B. Gibson | 10/15/2022 | — | 20,485 | $109.19 | 10/14/2032 | | | | | | | | 7/15/2022 | — | 21,954 | $115.00 | 7/14/2032 | | | | | | | | 1/15/2022 | 991 | 1,981 | $125.00 | 1/15/2032 | | | | | | | | 7/15/2021 | 8,849 | 17,698 | $112.67 | 7/14/2031 | | | | | | | | 7/15/2020 | 26,549 | 13,274 | $73.53 | 7/14/2030 | | | | | | | | 7/10/2019 | 34,165 | — | $85.46 | 7/10/2029 | | | | | | | | 7/11/2018 | 31,653 | — | $69.54 | 7/10/2028 | $3,035,834 | | | | | | | | | | | | | 25,912 | $2,718,946 | 35,430 | $3,717,670 | | Efrain Rivera | 7/15/2022 | — | 21,405 | $115.00 | 7/14/2032 | | | | | | | | 7/15/2021 | 9,355 | 18,709 | $112.67 | 7/14/2031 | | | | | | | | 7/15/2020 | — | 16,224 | $73.53 | 7/14/2030 | $509,434 | | | | | | | | | | | | | 22,554 | $2,366,539 | 13,434 | $1,409,630 | | Mark A. Bottini | 7/15/2022 | — | 17,563 | $115.00 | 7/14/2032 | | | | | | | | 7/15/2021 | 7,585 | 15,170 | $112.67 | 7/14/2031 | | | | | | | | 7/15/2020 | 26,549 | 13,274 | $73.53 | 7/14/2030 | | | | | | | | 7/10/2019 | 34,165 | — | $85.46 | 7/10/2029 | | | | | | | | 7/11/2018 | 31,653 | — | $69.54 | 7/10/2028 | | | | | | | | 7/12/2017 | 41,159 | — | $57.24 | 7/11/2027 | | | | | | | | 7/6/2016 | 113,318 | — | $60.84 | 7/5/2026 | | | | | | | | 7/6/2016 | 43,760 | — | $60.84 | 7/5/2026 | | | | | | | | 7/8/2015 | 46,875 | — | $47.32 | 7/8/2025 | | | | | | | | 7/9/2014 | 15,481 | — | $41.70 | 7/9/2024 | $15,603,609 | | | | | | | | | | | | | 18,380 | $1,928,613 | 11,024 | $1,156,696 | | Michael E. Gioja | 7/15/2022 | — | 18,661 | $115.00 | 7/14/2032 | | | | | | | | 7/15/2021 | 8,091 | 16,181 | $112.67 | 7/14/2031 | | | | | | | | 7/15/2020 | 26,549 | 13,274 | $73.53 | 7/14/2030 | | | | | | | | 7/10/2019 | 34,165 | — | $85.46 | 7/10/2029 | | | | | | | | 7/11/2018 | 31,653 | — | $69.54 | 7/10/2028 | | | | | | | | 7/12/2017 | 41,159 | — | $57.24 | 7/11/2027 | | | | | | | | 7/6/2016 | 41,329 | — | $60.84 | 7/5/2026 | | | | | | | | 7/6/2016 | 40,068 | — | $60.84 | 7/5/2026 | $8,587,501 | | | | | | | | | | | | | 19,330 | $2,028,297 | 11,712 | $1,228,940 |

  108. Outstanding Equity Awards as of May 31, 2023

    | | Option Awards | | | | | | Stock Awards | | | | | Name (a) | Option Grant Date (b) | Number of Securities Underlying Unexercised Options (Exercisable) (#) (c) | Number of Securities Underlying Unexercised Options (Unexercisable) (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Total Potential Current Value of Outstanding Options($) (g) | Number of Shares or Units of Stock That Have Not Vested (#) (h) | Market Value of Shares or Units of Stock That Have Not Vested ($) (i) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (k) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (l) | | Stephanie L. Schaeffer | 7/15/2022 | — | 8,507 | $115.00 | 7/14/2032 | | | | | | | | 7/15/2021 | 3,793 | 7,584 | $112.67 | 7/14/2031 | | | | | | | | 7/15/2020 | 13,963 | 6,981 | $73.53 | 7/14/2030 | | | | | | | | 7/10/2019 | 17,896 | — | $85.46 | 7/10/2029 | | | | | | | | 7/11/2018 | 15,826 | — | $69.54 | 7/10/2028 | | | | | | | | 7/12/2017 | 20,579 | — | $57.24 | 7/11/2027 | $2,547,571 | | | | | | | | | | | | | 9,348 | $980,886 | 5,340 | $560,326 | | Martin Mucci | 10/15/2022 | — | 3,299 | $109.19 | 10/14/2032 | | | | | | | | 7/15/2021 | 36,029 | 72,057 | $112.67 | 7/14/2031 | | | | | | | | 7/15/2020 | 130,285 | 65,143 | $73.53 | 7/14/2030 | | | | | | | | 7/10/2019 | 195,228 | — | $85.46 | 7/10/2029 | | | | | | | | 7/11/2018 | 179,191 | — | $69.54 | 7/10/2028 | | | | | | | | 7/12/2017 | 214,482 | — | $57.24 | 7/11/2027 | | | | | | | | 7/6/2016 | 208,590 | — | $60.84 | 7/5/2026 | | | | | | | | 7/6/2016 | 226,636 | — | $60.84 | 7/5/2026 | | | | | | | | 7/8/2015 | 206,801 | — | $47.32 | 7/8/2025 | | | | | | | | 7/9/2014 | 195,313 | — | $41.70 | 7/9/2024 | $69,960,305 | | | | | | | | | | | | | 76,597 | $8,037,271 | — | $— |

  109. Potential Payments Upon Termination or Change in Control Fiscal 2023

    Potential Payments Upon Termination or Change in Control Fiscal 2023

  110. Potential Benefits Upon Separation from Company

    | | | Potential Payments Upon Separation | | | | | | Annual Compensation per the Summary Compensation Table(1) | Voluntary Resignation/ Termination | Death or Disability | Retirement | Termination Other Than For Cause/ Resignation For Good Reason within One Year of Change of Control | | John B. Gibson | | | | | | | Base Salary(2) | | $ — | $— | $— | $1,500,000 | | Annual Incentive(3) | | — | 1,429,782 | 1,429,782 | 2,128,500 | | Stock Options(4) | | — | 416,804 | — | 416,804 | | Time-Based Stock Awards(5) | | — | 2,718,946 | — | 2,718,946 | | Performance-Based Stock Awards(6) | | — | 1,239,223 | — | 1,239,223 | | Benefits(7) | | — | — | — | 53,167 | | Total | $6,680,180 | $ — | $5,804,755 | $1,429,782 | $8,056,640 | | Efrain Rivera | | | | | | | Base Salary(2) | | $ — | $— | $— | $862,500 | | Annual Incentive(3) | | — | 755,115 | 755,115 | 862,500 | | Stock Options(4) | | — | 509,434 | 509,434 | 509,434 | | Time-Based Stock Awards(5) | | — | 2,366,539 | 1,798,448 | 2,366,539 | | Performance-Based Stock Awards(6) | | — | 469,877 | — | 469,877 | | Benefits(7) | | — | — | — | 24,612 | | Total | $3,294,624 | $ — | $4,100,965 | $3,062,997 | $5,095,462 | | Mark A. Bottini | | | | | | | Base Salary(2) | | $ — | $— | $— | $795,000 | | Annual Incentive(3) | | — | 836,424 | 836,424 | 914,250 | | Stock Options(4) | | — | 416,804 | 416,804 | 416,804 | | Time-Based Stock Awards(5) | | — | 1,928,613 | 1,464,508 | 1,928,613 | | Performance-Based Stock Awards(6) | | — | 385,565 | — | 385,565 | | Benefits(7) | | — | — | — | 53,793 | | Total | $2,978,208 | $ — | $3,567,406 | $2,717,736 | $4,494,025 |

  111. Potential Benefits Upon Separation from Company

    | | | Potential Payments Upon Separation | | | | | | Annual Compensation per the Summary Compensation Table(1) | Voluntary Resignation/ Termination | Death or Disability | Retirement | Termination Other Than For Cause/ Resignation For Good Reason within One Year of Change of Control | | Michael E. Gioja | | | | | | | Base Salary(2) | | $ — | $— | $— | $825,000 | | Annual Incentive(3) | | — | 722,284 | 722,284 | 825,000 | | Stock Options(4) | | — | 416,804 | 416,804 | 416,804 | | Time-Based Stock Awards(5) | | — | 2,028,297 | 1,534,391 | 2,028,297 | | Performance-Based Stock Awards(6) | | — | 409,647 | — | 409,647 | | Benefits(7) | | — | — | — | 27,383 | | Total | $2,986,378 | $ — | $3,577,032 | $2,673,479 | $4,532,131 | | Stephanie L. Schaeffer | | | | | | | Base Salary(2) | | $ — | $— | $— | $375,000 | | Annual Incentive(3) | | — | 346,910 | — | 262,500 | | Stock Options(4) | | — | 219,203 | — | 219,203 | | Time-Based Stock Awards(5) | | — | 980,886 | — | 980,886 | | Performance-Based Stock Awards(6) | | — | 186,775 | — | 186,775 | | Benefits(7) | | — | — | — | 23,553 | | Total | $1,505,418 | $ — | $1,733,774 | $— | $2,047,917 | | Martin Mucci(8) | | | | | | | Base Salary | | | | $— | | | Annual Incentive | | | | — | | | Stock Options | | | | 2,322,999 | | | Time-Based Stock Awards | | | | 2,807,384 | | | Performance-Based Stock Awards | | | | — | | | Benefits | | | | — | | | Total | $14,442,172 | | | $5,130,383 | |

  112. Non-qualified Deferred Compensation Fiscal 2023

    Non-qualified Deferred Compensation Fiscal 2023 We offer a non-qualified and unfunded deferred compensation plan to our NEOs. Eligible employees can defer up to 50% of their base salary and annual incentive program award. The Company does not contribute to this plan. Gains and losses are credited based on the participant’s selection of a variety of designated investment choices. The NEO has sole control as to which of the designated funds to invest in and earns the resulting return on such investment. We do not match any participant deferral or guarantee a certain rate of return. Distributions are paid at one of the following dates selected by the participant: the participant’s termination date; the date the participant retires from any active employment; or a designated specific date. Payments can be made either in a lump sum or in annual installments over a period not to exceed ten years. The following table summarizes the activity under the plan:

  113. Non-qualified Deferred Compensation Fiscal 2023

    | | Fiscal 2023 | | | | | Name (a) | Executive Contributions ($) (b) | Aggregate Earnings/ (Losses), Net ($) (c) | Aggregate Withdrawals/ Distributions ($) (d) | Aggregate Balance as of May 31, 2023 ($) (e) | | John B. Gibson | $756,026 | $(14,968) | $— | $2,553,147 | | Efrain Rivera | $716,694 | $(126,959) | $— | $6,279,194 | | Mark A. Bottini | $87,975 | $2,205 | $— | $463,497 | | Martin Mucci | $— | $(31,274) | $(2,179,030) | $1,276,298 |

  114. Non-qualified Deferred Compensation Fiscal 2023

    Mr. Gioja and Ms. Schaeffer are currently not participating in this plan.

  115. Pay Versus Performance

    Pay Versus Performance In accordance with rules adopted by the SEC, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEO”) and Non-PEO NEOs and Company performance for the fiscal years listed below.

  116. Pay Versus Performance

    | | Summary Compensation Table Total for PEO | | Compensation Actually Paid to PEO | | Average Summary Compensation Table Total for Non-PEO NEOs (2) (d) | Average Compensation Actually Paid to Non-PEO NEOs (2)(3) (e) | Value of Initial Fixed $100 Investment Based On: | | Net Income (in millions) (h) | Operating Income, Net of Certain Items (5) (in millions) (i) | | Fiscal Year (a) | Gibson (1) (b) | Mucci (1) (b) | Gibson (1)(3) (c) | Mucci (1)(3) (c) | | | Total Shareholder Return (f) | Peer Group Total Shareholder Return (4) (g) | | | | 2023 | $6,680,180 | $14,442,172 | $5,660,044 | $(3,614,572) | $2,691,157 | $1,782,985 | $157.41 | $121.58 | $1,557 | $1,933 | | 2022 | $— | $11,025,026 | $— | $23,305,787 | $3,257,026 | $5,846,642 | $180.70 | $120.09 | $1,393 | $1,782 | | 2021 | $— | $9,627,247 | $— | $21,142,733 | $2,605,572 | $4,992,766 | $144.16 | $128.92 | $1,098 | $1,434 |

  117. Pay Versus Performance

    | (1) Martin Mucci was PEO in fiscal 2021, 2022, and from June 1, 2022 through October 13, 2022. John B Gibson was PEO during fiscal 2023 following October 13, 2022. The amounts deducted and added in calculating Compensation Actually Paid (“CAP”) for Messrs. Gibson and Mucci are as follows: |

  118. Pay Versus Performance

    | | 2023 | | 2022 | 2021 | | | Gibson | Mucci | Mucci | Mucci | | Summary Compensation Table Total | $6,680,180 | $14,442,172 | $11,025,026 | $9,627,247 | | Deduction of stock awards and option awards reported in the Summary Compensation Table | (4,499,911) | (13,834,614) | (7,524,498) | (6,593,205) | | Fiscal year-end value of equity awards granted during the fiscal year that remained unvested as of the last day of the fiscal year | 4,462,431 | 168,166 | 11,354,810 | 10,612,220 | | Change in fair value from the last day of the prior fiscal year to the last day of the fiscal year of unvested equity awards | (733,534) | (3,045,896) | 5,958,022 | 6,279,372 | | Change in fair value from the last day of the prior fiscal year to the vesting date during the fiscal year | (297,669) | (1,465,668) | 2,196,647 | 925,937 | | Value of dividends or other earnings paid on equity awards not otherwise included | 48,547 | 121,268 | 295,780 | 291,162 | | Compensation Actually Paid | $5,660,044 | $(3,614,572) | $23,305,787 | $21,142,733 |

  119. Pay Versus Performance

    | (2) For fiscal 2023, the Company’s Non-PEO NEOs were Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Stephanie L. Schaeffer. For fiscal 2022 and 2021, the Company’s Non-PEO NEOs were Efrain Rivera, John B. Gibson, Mark A. Bottini, and Michael E. Gioja. The amounts deducted and added in calculating the average CAP for these NEOs are as follows: |

  120. Pay Versus Performance

    | | 2023 | 2022 | 2021 | | Summary Compensation Table Total | $2,691,157 | $3,257,026 | $2,605,572 | | Deduction of stock awards and option awards reported in the Summary Compensation Table | (1,506,266) | (1,831,397) | (1,418,164) | | Fiscal year-end value of equity awards granted during the fiscal year that remained unvested as of the last day of the fiscal year | 1,432,683 | 2,733,022 | 2,282,633 | | Change in fair value from the last day of the prior fiscal year to the last day of the fiscal year of unvested equity awards | (594,115) | 1,226,988 | 1,099,982 | | Change in fair value from the last day of the prior fiscal year to the vesting date during the fiscal year | (269,858) | 398,987 | 371,626 | | Value of dividends or other earnings paid on equity awards not otherwise included | 29,384 | 62,016 | 51,117 | | Compensation Actually Paid | $1,782,985 | $5,846,642 | $4,992,766 |

  121. Pay Versus Performance

    | (3) In calculating the year-over-year change in the value of unvested option awards as well as the change in value to mid-year vesting dates, the options’ Black-Scholes values were calculated at each measurement date in accordance with FASB ASC Topic 718. In valuing performance share awards, the fair value of unearned or earned but unvested awards was calculated based on interim or final payout factors, as of the relevant measurement date. |

  122. Pay Versus Performance

    | (4) The Peer Group Total Shareholder Return (“TSR”) set forth in this table utilizes the Company’s peer group used for executive compensation benchmarking purposes which was also utilized in the stock performance graph required by Item 201(e) of Regulation S-K included in our Form 10-K for the year ended May 31, 2023. |

  123. Pay Versus Performance

    | (5) Operating income, net of certain items is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of this non-GAAP measure and a reconciliation to the most comparable GAAP measure of operating income. |

  124. Pay Versus Performance Relationships

    Pay Versus Performance Relationships CAP amounts for fiscal 2023 were affected by the changes in our NEOs that occurred during the fiscal year. The following chart sets forth the relationship between CAP to our PEOs, the average of CAP to our Non-PEO NEOs, and the Company’s cumulative TSR over the three most recently completed fiscal years. In addition, the following chart compares the Company’s cumulative TSR over the three most recently completed fiscal years to that of the Company’s peer group that the Company uses for executive compensation benchmarking purposes which is also the industry line peer group reported in the Company’s Form 10-K for the year ended May 31, 2023. Non-PEO NEOs, and the Company’s consolidated Net Income during the three most recently completed fiscal years. The following chart sets forth the relationship between CAP to our PEOs, the average of CAP to our Non-PEO NEOs, and the Company’s Operating Income, Net of Certain Items during the three most recently completed fiscal years.