What Does ADP Stand for in Payroll?

Approximately 1 in 6 U.S. employees see the letters ADP on their paychecks, pay advice and benefits interfaces. That's because their employers use Automatic Data Process Inc. to process their payroll, benefits or both. ADP is a major presence in the payroll and human resources services market. If your company uses ADP for payroll, you may find it helps with a number of other employee services.

ADP began as a payroll services company in the 1950s when payroll automation first became possible. The success ADP had in getting companies to outsource their payroll led to substantial growth and eventual public ownership on the New York Stock Exchange. ADP reported annual revenues of more than $11 billion for the 2013 fiscal year.

Over time, ADP figured out vertical integration opportunities. As business trends led companies to focus on core competencies and to remove non-essential positions, ADP introduced outsourced human resources services ranging from payroll and benefits administration to assistance with hiring, firing, discipline, policy development and situational consulting. Some companies place ADP on an annual retainer to act as a virtual HR department.

During the 1990s, electronic direct deposits began replacing paper paychecks. ADP was an early entrant into the direct deposit services market, saving their clients substantial paper costs and physical check distribution. Today, employees at most companies that use ADP payroll services either receive only paper check advice or access their pay stubs via electronic interfaces. However, ADP still offers traditional paycheck services for companies that want it and employees who need paper checks.

Although ADP is strong in its industry, it isn't the only payroll service of its kind. A number of major competitors serve companies across the country. Although ADP serves small businesses, its operation has traditionally focused on medium-sized to large businesses including large Fortune 500 and multinational companies. Competitors like Paychex have focused on small to medium-sized employers that may have previously found outsourcing too expensive a proposition.