• Revenues Up Sharply
• Expansion Program Remains on Schedule
• Worksite Employee Growth Rate Surpasses 30%

HOUSTON, TX – July 27, 1998 – Administaff, Inc. (NYSE: ASF), a leading Professional Employer Organization (PEO), today announced results for the second quarter and six months ended June 30, 1998. For the second quarter, the company reported net income of $2.2 million, or $0.15 per share (diluted), versus $934,000, or $0.07 per share (diluted), for the second quarter of 1997. For the six months ended June 30, 1998, the company reported net income of $1.4 million, or $0.10 per share (diluted), versus net income of $927,000, or $0.07 per share (diluted), for the same period in 1997.

"These results reflect an excellent balance between rapid growth and solid profitability," commented Richard G. Rawson, executive vice president of administration and chief financial officer. "The reliability of our business model continues to be reflected in the acceleration of year-over-year worksite employee growth and in our operating results."

For the second quarter and six months ended June 30, 1998, revenues were $394 million and $756 million, respectively, representing a 43.3% and 40.8% increase over the comparable 1997 periods. These increases were primarily the result of an increase in the number of worksite employees paid of 31.5% and 28.8% over the second quarter and six months ended June 30, 1997, respectively.

Gross profit for the second quarter of 1998 increased 40.2% to $16.3 million, with a monthly gross profit per worksite employee of $161 in the second quarter of 1998 compared to $151 in the second quarter of 1997. For the six months ended June 30, 1998, gross profit increased 34.6% to $27.5 million, with a monthly gross profit per worksite employee of $140 in the 1998 period versus $134 in the 1997 period. These increases reflect the company’s success in managing its pricing policy, which is designed to match changes in its direct cost structure with the fees charged for its services. Gross profit margin decreased to 4.1% and 3.6% for the second quarter and six months ended June 30, 1998, respectively, compared to 4.2% and 3.8% in the comparable 1997 periods. These declines are primarily due to an increase in the weighted average state

unemployment tax rate as a percentage of payroll cost and an increase in gross payroll cost per worksite employee.

Operating expenses were 3.5% and 3.6% of revenue for the second quarter and six months ended June 30, 1998, respectively, compared to 4.0% and 3.7% in the second quarter and six months ended June 30, 1997. These decreases were primarily due to a $1.3 million bad debt charge taken during the second quarter of 1997, partially offset by increases in corporate and sales staff, administrative expenses and depreciation related to the company’s national expansion plan and rapid growth. As a result, operating income for the second quarter of 1998 was $2.6 million versus $750,000 for the second quarter of 1997. For the six month period, the company reported operating income of $565,000 in 1998 versus $472,000 in 1997.

Paul J. Sarvadi, president and chief executive officer, said, "During the second quarter we successfully launched our on-line service, Administaff Assistant, as a key initiative. The company is focusing significant resources toward increasing capacity to accommodate our growth and ultimately achieving operating efficiencies. In the near future, we expect to devote substantial capital resources to Administaff Assistant and other projects which focus on these objectives."

Administaff Assistant is a secure on-line service, launched earlier this month, that provides up-to-date human resources information to Administaff clients and worksite employees.

The company generated net interest income of $886,000 and $1.7 million during the second quarter and six months ended June 30, 1998, respectively, versus $769,000 and $1.0 million in the comparable 1997 periods. These increases were the result of the investment of the proceeds from the sale of common stock to American Express and a portion of the proceeds from the company’s initial public offering ("IPO"), combined with the repayment of all outstanding debt in 1997.

Historically, the company’s earnings pattern has included losses in the first quarter, followed by improved profitability in subsequent quarters throughout the year. This pattern is due to the effects of employment-related taxes which are based on the individual employees’ cumulative earnings up to specified wage levels, causing employment-related taxes to be largest in the first quarter and then decline over the course of the year. The results for the second quarter and six months ended June 30, 1998 reflect the effects of this pattern, and the company expects that the remaining 1998 results will be consistent with this pattern.

Administaff will be hosting a conference call today at 11:00 a.m. EDT to discuss these results. To listen in, call 1-800-360-0001.

Administaff is one of the nation’s leading Professional Employer Organizations, providing a comprehensive Personnel Management System that encompasses a broad range of services including benefits and payroll administration, medical and workers’ compensation insurance programs, personnel records management, liability management, employee recruiting and selection, performance management, and training and development services to small and medium-sized businesses. The company has 21 offices in 13 major markets and serves clients and worksite employees throughout the United States.

Administaff, Inc.

Summary Financial Information

(in thousands, except per share amounts and statistical data)

(Unaudited)

⁽¹⁾ Excluding the effects of the second quarter bad debt charge, operating income, net income and basic and diluted net income per share would have been $2.1 million, $1.8 million and $0.13 per share, respectively, for the second quarter of 1997.

⁽²⁾ Excluding the effects of the second quarter bad debt charge, operating income, net income and basic and diluted net income per share would have been $1.8 million, $1.8 million and $0.13 per share, respectively, for the six months ended June 30, 1997.

NOTE: The statements contained in this press release which are not historical facts are forward-looking statements that involve a number of risks and uncertainties. Therefore, the actual results of future events described in such forward-looking statements could differ materially from those stated in such forward looking-statements. Among the factors that could cause actual results to differ materially include regulatory and tax developments, competitive activities and increases in direct costs and operating expenses, which are described in further detail in the company’s filings with the Securities and Exchange Commission.