What changed in this filing

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Item 1. Business

2025-02-11 compared with 2024-02-09 · 40 added, 42 removed, 427 unchanged (16% of the section changed)

1 unchanged sentence

Since our formation in 1986, we have evolved from being solely a professional employer organization (“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutions provider.

Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offering and to leverage our buying power and expertise to provide additional valuable services to clients.

Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offerings and to leverage our buying power and expertise to provide additional valuable services to clients.

Our most comprehensive HR services offerings are provided through our Workforce Optimization ® and Workforce Synchronization TM solutions (together, our “PEO HR Outsourcing Solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management platform, our Insperity Premier TM platform.

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Our stock is traded on the New York Stock Exchange under the symbol “NSP.” We file or furnish periodic reports with the Securities and Exchange Commission (“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

Through the investor relations section of our website, we make available electronic copies of the documents that we file or furnish to the SEC, the charters of the standing committees of our Board of Directors (“Board”) and other documents related to our corporate governance, including our Code of Conduct.

Access to these electronic filings is available free of charge as soon as reasonably practicable after filing or furnishing them to the SEC.

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A significant factor in the development of the PEO industry has been increasing recognition and acceptance of PEOs and the co-employer relationship by federal and state governmental authorities.

Insperity and other industry leaders, in concert with the National Association of Professional Employer Organizations (“NAPEO”), have worked with the relevant governmental entities for the establishment of a regulatory framework that protects clients and employees, discourages

Insperity and other industry leaders, in concert with the National Association of Professional Employer Organizations (“NAPEO”), have worked with the relevant

2024 Form 10-K

unscrupulous and financially unsound PEOs, and promotes further development of the industry.

governmental entities for the establishment of a regulatory framework that protects clients and employees, discourages unscrupulous and financially unsound PEOs, and promotes further development of the industry.

Currently, 42 states have enacted legislation either recognizing PEOs or requiring licensing, registration, or certification, and several others are considering such regulation.

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• training and development services

• strategic HR projects

Our PEO HR Outsourcing Solutions are designed to attract and retain high-quality employees, while relieving client owners and key executives of many employer-related administrative and regulatory burdens.

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As part of our comprehensive service, we also maintain employment practice liability insurance coverage for ourselves and our clients, monitor developments in HR-related laws and regulations, and notify clients of the potential effect of such changes on employer liability.

MarketPlace SM provided by Insperity ® .

Through our many alliances with best-in-class providers, Insperity’s MarketPlace is an e-commerce portal that brings a wide range of products and services to our clients, WSEEs and their families.

Through MarketPlace, which is provided through Insperity Premier, our clients also have the opportunity to offer their products and services to other clients and WSEEs.

Middle Market Solutions.

We believe the middle market sector, which we generally define as those companies with employee populations ranging from approximately 150 to 5,000 WSEEs, has historically been under-served by the PEO industry.

Currently, we have a dedicated sales management, service personnel and consulting staff who concentrate

Currently, we have a dedicated sales management, service personnel and consulting staff who concentrate solely on the middle market sector.

Our average number of WSEEs per month in our middle market sector in 2024 decreased 3% from 2023, and the middle market sector as a percentage of our overall WSEE count remained consistent over this period, representing approximately 26% of our total average paid WSEEs during both 2024 and 2023.

Clients exceeding 1,000 paid WSEEs represented 3% and 5% of our total average paid WSEEs during 2024 and 2023, respectively.

2024 Form 10-K

solely on the middle market sector.

Our average number of WSEEs per month in our middle market sector in 2023 increased 10.5% from 2022, and the middle market sector as a percentage of our overall WSEE count also increased over this period, representing approximately 26.1% and 24.9% of our total average paid WSEEs during 2023 and 2022, respectively.

Clients with an average number of WSEEs exceeding 1,000 paid WSEEs represented 5.5% and 5.4% of our total average paid WSEEs during 2023 and 2022, respectively.

Other Product and Services Offerings

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We also strive to leverage our relationships with our customers to enable cross-selling of our various products and services.

During 2023 and 2022, revenues from our other products and services offerings as a percentage of our total revenues were 0.8% and 0.7%, respectively.

Following are the key components of our other products and services, which are offered separately or as a bundle:

Comprehensive Traditional Payroll and Human Capital Management Solution.

Our Insperity Workforce Acceleration solution is a comprehensive human capital management and payroll services solution for clients that do not choose our PEO HR Outsourcing Solutions.

Our Workforce Acceleration solution is a comprehensive human capital management and payroll services solution for clients that do not choose our PEO HR Outsourcing Solutions.

This solution combines a third-party cloud-based human resources software suite that provides integrated payroll, HR administration and employee onboarding, benefits administration, performance management, and time and attendance functionality with HR guidance and tools, as well as reporting and analytics.

In addition, through a strategic partner, Workforce Acceleration clients have access to a national, licensed insurance brokerage that specializes in the insurance needs of small businesses.

Recruiting Services.

Our Recruiting Services offer direct hire placement on an as-needed basis and provides outsourced support for individual requisitions or large-scale hiring projects.

Our Recruiting Services offer direct hire placement on an as-needed basis and provide outsourced support for individual requisitions or large-scale hiring projects.

In addition, we provide consulting services to assist in the creation and maintenance of consistent hiring practices and retention strategies.

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This practice aligns clients’ payments to us with our obligations to make payments to tax authorities, which are higher in the earlier part of the year and decrease as limits on wages subject to payroll tax are reached.

2023 Form 10-K

The CSA also establishes the division of responsibilities between us and the client as co-employers.

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The client retains the employees’ services and remains liable for complying with certain government regulations that require control of the worksite or daily supervisory responsibility or is otherwise beyond our ability to assume.

A third group of responsibilities and liabilities are assumed by both Insperity and the client where such concurrent responsibility is appropriate.

A third group of responsibilities and liabilities are assumed by both Insperity and the client

2024 Form 10-K

where such concurrent responsibility is appropriate.

The specific division of applicable responsibilities under our CSAs generally is as follows:

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• Compliance with federal, state, and local pay-or-play health care mandates and all such other similar federal, state and local legislation

• Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective bargaining agreement and related benefits

• Compliance with the National Labor Relations Act, including all organizing efforts and expenses related to a collective bargaining agreement and related benefits

• Professional licensing requirements, fidelity bonding, and professional liability insurance

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• Implementation of policies and practices relating to the employee/employer relationship

2023 Form 10-K

• Internal compliance with all federal, state and local employment laws, including Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act and immigration laws and regulations

We maintain employment practice liability insurance coverages (including coverages for our clients) to manage our exposure for various employee-related claims.

Our incurred costs in excess of annual premiums with respect to this exposure have historically been insignificant to our operating results.

Because we are a co-employer with the client for some purposes, it is possible that we could incur liability for violations of such laws, even if we are not responsible for the conduct giving rise to such liability.

Our CSA ordinarily addresses this issue by providing that the client will indemnify us for liability incurred to the extent the liability is attributable to conduct by the client.

Our CSA ordinarily addresses this issue by providing that the client will indemnify us for liability incurred to the extent the liability is attributable to conduct by

2024 Form 10-K

Notwithstanding this contractual right to indemnification, it is possible that we could be unable to collect on a claim for indemnification and may therefore be ultimately responsible for satisfying the liability in question.

In most instances, clients are required to remit their comprehensive service fees no later than the same day as the applicable payroll date by wire transfer or automated clearinghouse transaction.

Although we are ultimately liable, as the employer for payroll purposes, to pay employees for work previously performed, we retain the ability to terminate immediately the CSA and associated WSEEs or to require prepayment, letters of credit, or other collateral upon deterioration in a client’s financial condition or upon non-payment by a client.

Although we are ultimately liable, as the employer for payroll purposes, to pay employees for work previously performed, we retain the ability to immediately terminate the CSA and associated WSEEs or to require prepayment, letters of credit, or other collateral upon deterioration in a client’s financial condition or upon non-payment by a client.

These rights, the periodic nature of payroll, and the overall quality of our client base have resulted in an excellent overall collections history.

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We target successful businesses with approximately 10 to 5,000 employees that recognize the advantage in the strategic use of high-performance human resources practices.

We have set a long-term goal to serve approximately 10% of the overall small and medium-sized business community in terms of WSEEs.

We believe approximately 10% of the overall small and medium-sized business community in terms of WSEEs are “good fit” companies for our PEO services.

We serve clients and WSEEs located throughout the United States.

2023 Form 10-K

By region, our revenue distribution for the year ended December 31, 2024, was as follows:

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(1) The Southwest region includes Texas.

Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information related to the change in revenues by region.

All prospective PEO HR Outsourcing Solutions clients are evaluated on the basis of a comprehensive analysis of employer-related risks entailing many factors, including (where permitted) industry and operations, workplace safety and workers’ compensation, unemployment history, operating stability, group medical information, human resources practices and other employer risks.

As part of our client selection strategy, we strive to minimize offering our PEO HR Outsourcing Solutions to businesses falling within certain specified NAICS (North American Industry Classification System) codes for those industries that we believe present a higher employer risk such as employee injury, high turnover or litigation.

2024 Form 10-K

and other employer risks.

Our PEO HR Outsourcing Solutions client base is broadly distributed throughout a wide variety of industries as follows:

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(3) our termination of the CSA resulting from the client’s non-compliance or inability to make timely payments;

and (4) competition from other PEOs or business services firms.

(4) competition from other PEOs or business services firms;

and (5) clients electing to bring HR in-house.

Marketing and Sales

As of December 31, 2024, we had 106 sales offices located in 48 markets.

Our sales offices typically consist of seven to nine Business Performance Advisors (“BPAs”), a district sales manager, and an office administrator.

Our sales offices typically consist of Business Performance Advisors (“BPAs”), a district sales manager, and an office administrator.

To take advantage of economic efficiencies, multiple sales offices may share a physical location.

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• market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile

2024 Form 10-K

• market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers

• existing relationships within a given market, such as vendor or client relationships

2023 Form 10-K

• expansion cost issues, such as advertising and overhead costs

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We routinely seek to develop new marketing approaches and campaigns to capitalize on changes in the competitive landscape for our human resources services and to more successfully reach our target market.

We have an agreement with the Professional Golf Association Champions Tour to be the title sponsor of the Insperity Invitational ™ presented by UnitedHealthcare ® professional golf tournament held annually in The Woodlands, Texas (a suburb of Houston).

We have an agreement with the PGA Tour Champions to be the title sponsor of the Insperity Invitational ™ presented by UnitedHealthcare ® professional golf tournament held annually in The Woodlands, Texas (a suburb of Houston).

In addition, we have an arrangement with Jim Nantz, a sports commentator, to serve as our national spokesperson.

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Upon completion of a favorable employer risk evaluation, the BPA presents the bid and attempts to complete the sale and enroll the prospect.

Our selling process typically takes approximately 90 days for clients with less than 150 employees, and 180 days or longer for middle market clients.

Our selling process typically takes approximately 90 days for clients with fewer than 150 employees, and 180 days or longer for middle market clients.

The process can be extended during economic downturns.

We have implemented a sales process that allows our BPAs to offer our PEO HR Outsourcing Solutions or Workforce Acceleration, our traditional payroll solution, to each prospective client with which they meet.

We have implemented a sales process that allows our BPAs to offer our PEO HR Outsourcing Solutions or refer our Workforce Acceleration, our traditional payroll solution, to each prospective client with which they meet.

This strategy allows us to leverage the same sales force for all of our primary offerings and increases the ability of our BPAs to add clients to our Workforce Acceleration solution when the client is not prepared for PEO HR Outsourcing Solutions.

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Based on an analysis of the 2021 through 2023 annual NAPEO surveys of the PEO industry, we have successfully leveraged our full-service approach into significantly higher returns for Insperity on a per WSEE per month basis.

During the three-year period from 2020 through 2022, our staff support ratio averaged 57% higher than the PEO industry average.

During the same three-year period, our gross profit per WSEE and operating income per WSEE exceeded industry averages by 142% and 208%, respectively.

2024 Form 10-K

the three-year period from 2021 through 2023, our staff support ratio averaged 57% higher than the PEO industry average.

During the same three-year period, our gross profit per WSEE and operating income per WSEE exceeded industry averages by 119% and 146%, respectively.

Competition in the PEO industry revolves primarily around quality of services, scope of services, choice and quality of benefits packages, reputation, and price.

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and (3) large regional PEOs in certain areas of the country.

Vendor Relationships

Benefits and Workers’ Compensation Relationships

Insperity provides benefits to its WSEEs under arrangements with a variety of vendors.

We consider our contracts with UnitedHealthcare (“United”) and the Chubb Group of Insurance Companies (“Chubb”) to be the most significant elements of our employee benefits package, as they would be the most difficult to replace.

We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts (known as Harvard Pilgrim Health Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts.

We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Harvard Pilgrim Health Care, formerly known as Tufts, all of which provide fully insured policies or service contracts.

The health insurance contract with United provides approximately 86 % of our participants’ health insurance coverage and expires on December 31, 2026, subject to cancellation by either party upon 180 days’ notice.

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• human resources management and employee administration

2024 Form 10-K

• benefits and defined contribution plan administration

• time and attendance collection and administration

2023 Form 10-K

• payroll processing

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Subject to the issues discussed below, we believe that our operations are in compliance, in all material respects, with all applicable federal statutes and regulations.

2024 Form 10-K

Employee Benefit Plans

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• a group health plan, which includes medical, dental, vision and prescription drug coverage

2023 Form 10-K

• a 401(k) retirement plan

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Employment Taxes

As a co-employer, Insperity generally assumes responsibility and liability for the payment of federal and state employment taxes with respect to wages and salaries paid to our WSEEs.

As a co-employer, and under the terms of the CSA, Insperity generally assumes responsibility and liability for the payment of federal and state employment taxes with respect to wages and salaries paid to our WSEEs.

There are essentially three types of federal employment tax obligations included in Subtitle C — Employment Taxes of the Code:

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• obligations under FUTA, governed by Code Section 3301, et seq.

2024 Form 10-K

Under these Code sections, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of these taxes.

The SBEA provides a CPEO shall be treated as the employer under Subtitle C – Employment Taxes of the Code and shall be responsible for reporting federal employment taxes on remuneration paid by the CPEO rather than the CPEO clients.

2023 Form 10-K

For any client CSA that is not a CPEO contract, Code Section 3401, which applies to federal income tax withholding requirements, contains an exception to the general common law test applied to determine whether an entity is an “employer” for purposes of federal income tax withholding.

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We refer to BPAs who have been employed for two months and completed initial sales training as “trained BPAs.” During 2024 and 2023, the average number of BPAs were 769 and 748, respectively, while the average number of trained BPAs were 698 and 685, respectively.

2024 Form 10-K

We offer numerous programs and benefits in furtherance of our human capital management objective, including:

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flexible remote working arrangements;

and employee benevolence programs to provide additional assistance to corporate employees in times of need.

2023 Form 10-K

and employee well-being programs to provide additional assistance to corporate employees in times of need.

We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our corporate employees, including periodic surveys of our corporate employees to obtain their opinions on key topics.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business