• Sales gaining momentum
• Internet and technology initiatives on target
• American Express Small Business Services President joins Board

HOUSTON, August 3, 1999 – Administaff, Inc. (NYSE:ASF), a leading Professional Employer Organization (PEO), today announced results for the second quarter and six months ended June 30, 1999. For the second quarter, the company reported net income and diluted earnings per share of $1.5 million and $0.11, versus $2.2 million and $0.15 for the second quarter of 1998. For the six months ended June 30, 1999, the company reported a net loss and diluted loss per share of $543,000 and $0.04, versus net income and diluted earnings per share of $1.4 million and $0.10 for the same period in 1998.

"These results are consistent with our expectations," commented Richard G. Rawson, executive vice president and chief financial officer. "Our gains in gross profit per worksite employee continue to demonstrate considerable pricing strength, and we continue to effectively manage our operating expenses while making significant progress on our Internet and technology initiatives."

Revenues for the second quarter of 1999 increased 28.5% to $506 million, primarily due to a 19.4% increase in the number of worksite employees paid and a 7.8% increase in payroll cost per worksite employee. Gross profit increased 22.0% to $19.9 million. The average

monthly gross profit per worksite employee increased to $164 in the 1999 period, compared to $161 in the 1998 period, as changes in the company’s direct cost structure were more than offset by increases in the comprehensive service fees charged by the company.

"Strong sales during the second quarter indicate solid momentum for the near term," said Paul J. Sarvadi, president and chief executive officer. "We experienced dramatic increases in many key sales metrics, including censuses per salesperson, close ratio, sales efficiency, total accounts sold and total employees sold."

Operating expenses increased 32.1% over the 1998 period, and increased to $149 per worksite employee per month in the 1999 period from $135 in the 1998 period due to higher compensation costs, depreciation, and general and administrative expenses associated with the company’s infrastructure investments. As a result, operating income for the second quarter of 1999 decreased to $1.8 million in the 1999 period compared to $2.6 million in the 1998 period.

"For the past few quarters we have been making a significant investment in transforming our service delivery platform, upgrading our national technology infrastructure and continuing our systematic sales and service expansion," commented Sarvadi. "We are excited to be entering the deployment phase of our web-based payroll and reporting functionality within Administaff Assistant, which will greatly enhance the value proposition for our clients."

For the six months ended June 30, 1999, revenues increased 29.8% to $982 million, primarily due to a 20.6% increase in the number of worksite employees paid and an 8.1% increase in payroll cost per worksite employee. Gross profit increased 21.7% to $33.5 million, with an average monthly gross profit per worksite employee of $142 in the 1999 period compared to $140 in the 1998 period. Operating expenses increased 32.7% over the 1998 period, and increased to $151 per worksite employee per month from $137 in the 1998 period. The resulting operating loss for the six months ended June 30, 1999, was $2.3 million compared to operating income of $565,000 in the 1998 period.

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, 1999, reflect the effect of this pattern, and the company expects that the remaining 1999 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 also announced that Steve Alesio has been elected to serve on the company’s board of directors. Alesio, president and general manager of the American Express Small Business Services Group, replaces Anne Busquet, who has resigned her board position due to other business commitments.

Administaff provides small and medium-sized businesses with a comprehensive Personnel Management System that includes benefits and payroll administration, medical and workers’ compensation insurance programs, personnel records management, employer liability management, employee recruiting and selection, performance management, and training and development services. The company currently has 25 offices in 15 major markets and serves clients and worksite employees throughout the United States. For additional information, visit the company’s web site at www.administaff.com.

(Note: The statements contained in this press release that 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 are: (i) regulatory and tax developments; (ii) changes in the company’s direct costs and operating expenses; (iii) the effectiveness of the company’s sales and marketing efforts, including its marketing agreement with American Express, American Express’ ability to set qualified appointments and the company’s ability to convert those appointments into sales; (iv) the estimated costs and effectiveness of capital projects and investments in technology and infrastructure; (v) changes in the competitive environments in the PEO industry; and (vi) the effectiveness and estimated costs of the company’s Year 2000 conversion and contingency plans. These factors are described in further detail in the company’s filings with the Securities and Exchange Commission.)