ADP: Small Employers May Be Signaling Recovery

Automatic Data Processing's (ADP) sales of services to companies with 50 employees or fewer have increased since September, ADP Chief Executive Officer Gary Butler told Bloomberg BusinessWeek in an interview on Mar. 15.

"It's a clear indication that small business is coming back" and will help lead the recovery, Butler said. "You don't put in a new HR system or payroll system if your business isn't going to grow."

Butler, who joined the world's biggest payroll processor in 1975, said the increase in new business from smaller clients is similar to the uptick that came in 2002 and 2003 after the last recession. Data on the checks that the Roseland (N.J.)-based company is cutting—and anecdotal reports from ADP's approximately 4,000 salespeople—showed "a return to better buoyancy, particularly in the low end of the marketplace."

The chief executive said he authorized a 6% to 7% increase this year in the size of Automatic Data's sales force in anticipation of further growth, adding that he wasn't intending to issue a new forecast and that his remarks were consistent with previous comments to analysts.

new bookings "flat to slightly up"

Butler said companies with more than 1,000 employees are still hesitant to buy ADP's services. Last month he told analysts during a conference call that the "selling environment continues to be somewhat mixed across the business units, within employer services. Similar to what we told you three months ago, sales cycles for larger companies, particularly in the U.S., remain challenged."

ADP rose 1¢, to 44.25, in Nasdaq trading on Mar. 16. The shares have gained 3.3% this year.

Total bookings of new business will be "flat to slightly up" this year, with sales to large businesses little changed and sales to small businesses stronger, Butler said.

Butler is pressing Congress to pass the Hiring Incentives to Restore Employment Act, which would reduce payroll taxes and offer a tax credit to eligible employers, as quickly as possible. He said passage could come just as businesses are considering expanding their workforces and that HIRE could tip their decision. "It's a debate worth having about whether this is enough."

"Sitting where I sit," he said, it seems as if "the economy is at the cusp of trying to bounce back."