<PAGE>


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


          Date of Report (Date of earliest event reported): May 8,1996
                                                           ------------



                             THE VINCAM GROUP, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Florida                        0-28148                 59-2452823
-------------------------------   ------------------------   -------------------
(State or other jurisdiction of   (Commission File Number)    (I.R.S. Employer
incorporation or organization)                               Identification No.)


                 2850 Douglas Road Coral Gables, Florida 33134
              ---------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                                 (305) 460-2350
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not applicable
         --------------------------------------------------------------
         (Former name and former address, if changed since last report)





                                       1
<PAGE>


ITEM 5.  OTHER EVENTS

     On January 7, 1997, The Vincam Group,  Inc. (the "Company")  acquired Staff
Administrators,   Inc.   ("SAI"),   a  privately  held   professional   employer
organization ("PEO") headquartered in Denver,  Colorado (the "SAI Acquisition").
The Company issued 500,000 shares of its common stock in exchange for all of the
outstanding  shares of common stock of SAI. The  transaction  has been accounted
for  in  accordance  with  the  pooling  of  interests   accounting   treatment;
accordingly,  all prior period financial  statements  presented herein have been
retroactively  restated  to include  the assets and  liabilities  and results of
operations of SAI. In connection  with the  acquisition of SAI, the Company also
acquired,  in a transaction accounted for as a purchase, a 49% minority interest
in Staff Administrators of Western Colorado, Inc. ("SAWCI"), a 51% subsidiary of
SAI (the "SAWCI  Acquisition").  The Company  issued 20,000 shares of its common
stock for the 49% interest in SAWCI.

     The following  information presents the audited pooled consolidated results
of  operations  for the years ended  December 31, 1994,  1995 and 1996,  and the
pooled  consolidated  balance  sheets as of  December  31,  1995 and 1996 of the
Company and SAI.


              INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
                                                                           Page
The Vincam Group, Inc.

Report of Independent Certified Public Accountants...........................3

Balance Sheets as of December 31, 1995 and 1996..............................4

Consolidated Statements of Income for the Years Ended
 December 31, 1994, 1995 and 1996............................................5

Consolidated Statement of Changes in Stockholders'
 (Deficit) Equity for the Years Ended December 31, 1994,
 1995 and 1996...............................................................6

Consolidated Statements of Cash Flows for the Years
 Ended December 31, 1994, 1995 and 1996......................................7

Notes to Consolidated Financial Statements...................................9





                                       2
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
The Vincam Group, Inc.

     In  our  opinion,  the  consolidated  financial  statements  listed  in the
accompanying  index  present  fairly,  in all material  respects,  the financial
position of The Vincam Group, Inc. and its subsidiaries at December 31, 1995 and
1996 and the  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity  with generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial  statements based on our audits. We did not audit the
financial  statements of Staff  Administrators,  Inc. which  statements  reflect
total  assets of  $4,791,571  and  $5,723,717  at  December  31,  1995 and 1996,
respectively, and total revenues of $33,310,475, $55,824,216 and $77,975,919 for
each of the three years in the period ended December 31, 1996.  Those statements
were audited by other  auditors  whose report  thereon has been furnished to us,
and our opinion expressed herein,  insofar as it relates to the amounts included
for Staff  Administrators,  Inc.,  is based  solely  on the  report of the other
auditors.  We  conducted  our  audits of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

PRICE WATERHOUSE LLP

Miami, Florida
February 21, 1997

                                       3
<PAGE>


                             THE VINCAM GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                  December  31,     December 31,
                                                     1995              1996
                                                  -------------    -------------
                    Assets
Current assets:
  Cash and cash equivalents....................   $  1,169,570     $ 16,374,288
  Investments..................................        639,232          149,626
  Restricted cash..............................      5,290,955        2,331,917
  Accounts receivable  ........................      9,569,376       22,111,756
  Due from affiliates..........................        187,323          235,927
  Deferred taxes...............................      1,440,682        1,457,280
  Reinsurance recoverable......................         --            1,728,000
  Prepaid worker' compensation insurance 
   premium.....................................         --            5,483,972
  Prepaid expenses and other current assets....        489,834          784,159
                                                   ------------    -------------
         Total current assets..................     18,786,972       50,656,925

  Property and equipment, net..................      2,686,977        4,164,596
  Deferred taxes...............................        694,678          628,626
  Reinsurance recoverable......................         --            1,472,000
  Client contracts and other assets............        441,735        1,686,176
  Goodwill, net of accumulated amortization 
   of $64,228..................................         --            4,791,836
                                                  -------------    -------------
                                                  $ 22,610,362     $ 63,400,159
                                                  =============    =============

                 Liabilities and Stockholders' (Deficit) Equity

Current liabilities:
  Accounts payable and accrued expenses........   $  2,857,208     $  3,406,633
  Accrued salaries, wages and payroll taxes....      8,054,486       15,364,364
  Amounts due under acquisition agreement .....         --            2,623,437
  Reserve for claims...........................      3,562,876        5,085,016
  Income taxes payable.........................        638,487        1,307,576
  Current portion of long term borrowings......      1,412,121           89,167
  Distribution payable.........................        700,000            --
  Deferred compensation........................        263,000          242,013
  Deferred gain................................         --              323,157
                                                  -------------    -------------
         Total current liabilities.............     17,488,178       28,441,363
                                        
Long term borrowings, less current portion.....      1,243,610          807,883
Reserve for claims.............................      1,556,615        2,846,188
Income taxes payable...........................      1,386,323          672,818
Deferred compensation, due principally 
 to stockholders...............................        294,300           41,200
Deferred gain..................................         --              275,275
Other liabilities..............................         45,338           45,338
                                                  -------------    -------------
         Total liabilities.....................     22,014,364       33,130,065
                                                  -------------    -------------
Preferred stock, $.01 par value, 20,000,000 
 shares authoized, 165.376 shares mandatorily 
 redeemable Series A Preferred Stock issued 
 and outstanding in 1995.......................      6,263,610            --
                                                  -------------    -------------
Commitments and contingencies (Note 14)........         --                --
                                                  -------------    -------------
Stockholders' (deficit) equity:
Common stock, $.001 par value, 60,000,000 
 shares authorized, 4,956,066 and 8,013,332
 and shares issued and outstanding in 1995 
 and 1996, respectively........................          4,956            8,013
Additional paid in capital.....................           --         33,241,867
Accumulated deficit............................     (5,672,568)      (2,979,786)
                                                  -------------    -------------
         Total stockholders' (deficit) equity..     (5,667,612)      30,270,094
                                                  -------------    -------------
                                                  $ 22,610,362     $ 63,400,159
                                                  =============    =============
                                       4
<PAGE>


                             THE VINCAM GROUP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                  -----------------------------------------------
                                                      1994             1995             1996
                                                  -------------    -------------    -------------
<S>                                               <C>              <C>              <C> 
Revenues......................................... $224,843,043     $295,231,926     $473,595,457
                                                  -------------    -------------    -------------
Direct costs:
    Salaries, wages and employment
      taxes of worksite employees................  198,162,489      262,186,958      417,718,271
    Health care and workers' compensation........   12,212,883       15,330,888       22,861,174
    State unemployment taxes and other...........    1,911,734        2,056,824        4,220,633
                                                  -------------    -------------    -------------
           Total direct costs....................  212,287,106      279,574,670      444,800,078
                                                  -------------    -------------    -------------
Gross profit.....................................   12,555,937       15,657,256       28,795,379
                                                  -------------    -------------    -------------
Operating expenses:
    Administrative personnel.....................    4,663,598        7,571,833       13,041,095
    Other general and administrative.............    2,617,433        3,924,233        5,911,572
    Sales and marketing..........................    2,190,923        3,247,650        5,290,693
    Provision for doubtful accounts..............       40,000          189,090          434,300
    Depreciation and amortization................      217,977          375,078          805,331
                                                  -------------    -------------    -------------
           Total operating expenses..............    9,729,931       15,307,884       25,482,991
                                                  -------------    -------------    -------------
Operating income.................................    2,826,006          349,372        3,312,388
Interest (expense) income, net...................          911          142,834          696,707
                                                  -------------    -------------    -------------
Income before taxes..............................    2,826,917          492,206        4,009,095
Provision for income taxes.......................     (972,881)        (239,417)      (1,316,313)
                                                  -------------    -------------    -------------
Net income ...................................... $  1,854,036     $    252,789     $  2,692,782
                                                  =============    =============    =============
Net income per common and common
    equivalent share............................. $       0.26     $       0.04     $       0.32
                                                  =============    =============    =============
Weighted average number of shares
    outstanding used in earnings per
    share calculation............................    7,229,657        6,994,018        8,330,811
                                                  ============     =============    =============

</TABLE>

                                       5
<PAGE>


                             THE VINCAM GROUP, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY




<TABLE>
<CAPTION>

                                                                                                   Retained
                                                        Common Stock             Additional        Earnings
                                                   -------------------------      Paid in        (Accumulated
                                                     Shares       Par Value       Capital          Deficit)           Total
                                                   -----------   -----------   --------------   ---------------   -------------
<S>                                                <C>           <C>           <C>              <C>               <C>

Balance at January 1, 1994.......................   6,249,341    $    6,249    $      42,156    $      385,918    $    434,323

Net income.......................................          --            --               --         1,854,036       1,854,036
                                                   -----------   -----------   --------------   ---------------   -------------
Balance at December 31, 1994.....................   6,249,341         6,249           42,156         2,239,954       2,288,359

Acquisition of shares............................    (249,342)         (249)         (42,156)       (1,457,595)     (1,500,000)

Recapitalization, including
 transaction costs of $445,150 charged
 to retained earnings............................  (1,043,933)       (1,044)              --        (6,707,716)     (6,708,760)

Net income.......................................          --            --               --           252,789         252,789
                                                   -----------   -----------   --------------   ---------------   -------------
Balance at December 31, 1995.....................   4,956,066         4,956               --        (5,672,568)     (5,667,612)

Issuance of common stock, net of
   transaction costs of $3,058,685
   charged to paid in capital....................   2,000,000         2,000       26,939,315                --      26,941,315

Conversion of preferred stock into
   common stock..................................   1,043,933         1,044        6,262,566                --       6,263,610

Issuance of common stock to
   employees under stock option plans............      13,333            13           39,986                --          39,999

Net income.......................................          --            --               --         2,692,782       2,692,782
                                                  ------------   -----------   --------------   ---------------   -------------
Balance at December 31, 1996.....................   8,013,332    $    8,013    $  33,241,867    $   (2,979,786)   $ 30,270,094
                                                  ============   ===========   ==============   ===============   =============
</TABLE>


                                       6
<PAGE>


                             THE VINCAM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                  ------------------------------------------------
                                                                       1994             1995              1996
                                                                  -------------     -------------    -------------
<S>                                                               <C>               <C>              <C>

Cash flows from operating activities:
   Net income.................................................    $  1,854,036      $    252,789     $  2,692,782
   Adjustments to reconcile net income to net cash
     provided by  (used in) operating activities:
     Depreciation and amortization............................         217,977           375,078          805,331
     Provision for doubtful accounts..........................          40,000           189,090          434,300
     Deferred gain............................................              --                --          598,432
     Deferred income tax (benefit) expense....................        (415,514)         (573,611)          49,454
     Changes in assets and liabilities:
       (Increase) decrease in restricted cash.................      (2,952,582)           79,579        4,209,038
       Increase in accounts receivable........................      (2,312,498)       (2,946,817)     (12,093,493)
       Increase in due from affiliates........................         (68,504)           (8,350)         (48,604)
       Increase in reinsurance recoverable....................              --                --       (3,200,000)
       Increase in prepaid workers' compensation
         insurance premium....................................              --                --       (5,483,972)
       Increase in prepaid expenses and  other
         current assets.......................................         (51,204)         (314,716)        (292,369)
       Increase in other assets...............................         (81,658)          (41,361)        (197,460)
       Increase in accounts payable and
         accrued expenses.....................................         434,120         1,297,576          187,204
       Increase in accrued salaries, wages and payroll  taxes.       1,792,881         1,811,101        6,085,090
       Increase in reserve for claims.........................       2,212,782         1,688,475        2,381,243
       Increase (decrease) in income taxes payable............         189,096           345,593          (44,416)
       Decrease in deferred compensation......................              --                --         (274,087)
       Increase (decrease) in other liabilities...............          25,104           (40,000)              --
                                                                  -------------     -------------    -------------
Net cash provided by (used in) operating activities...........         884,036         2,114,426       (4,191,527)
                                                                  -------------     -------------    -------------
Cash flows from investing activities:
   Purchases of property and equipment........................        (797,592)         (519,775)      (2,117,133)
   Acquisition of client contracts............................              --          (117,440)         (29,295)
   (Issuance) collection of notes receivable from stockholders        (123,078)          123,078               --
   Cash placed in escrow in connection with acquisition of SMG              --                --       (1,250,000)
   Cash paid in acquisition of SMG, net of cash
     acquired of $137,748.....................................              --                --       (2,219,566)
   Cash paid in acquisition of minority interest..............          (8,105)               --               --
   (Purchase) redemption of short term investments............        (271,166)         (639,232)         489,606
                                                                  -------------     -------------    -------------
Net cash used in investing activities.........................      (1,199,941)       (1,153,369)      (5,126,388)
                                                                  -------------     -------------    -------------
Cash flows from financing activities:
   Principal payments on borrowings...........................        (215,716)         (107,157)      (1,758,681)
   Recapitalization costs.....................................              --          (445,150)              --
   Cash paid in connection with acquisition of stock..........              --          (300,000)              --
   Issuance of common stock, net of transaction
     costs of $3,058,685......................................              --                --       26,941,315
   Payment of distribution payable............................              --                --         (700,000)
   Issuance of common stock to employees under stock plans....              --                --           39,999
                                                                  -------------     -------------    -------------
Net cash (used in) provided by financing activities...........        (215,716)         (852,307)      24,522,633
                                                                  -------------     -------------    -------------
Net (decrease) increase in cash and cash equivalents..........        (531,621)          108,750       15,204,718
Cash and cash equivalents, beginning of year..................       1,592,441         1,060,820        1,169,570
                                                                  -------------     -------------    -------------
Cash and cash equivalents, end of year........................    $  1,060,820      $  1,169,570     $ 16,374,288
                                                                  =============     =============    =============
Supplemental disclosures of cash flow information:
Cash paid during the year for
       Interest...............................................    $     91,941      $    183,242     $    138,101
                                                                  =============     =============    =============
       Income taxes...........................................    $  1,017,438      $    473,010     $  1,155,366
                                                                  =============     =============    =============

</TABLE>

                                       7
<PAGE>


                             THE VINCAM GROUP, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


Supplemental disclosure of non-cash financing activities:

Acquisition of assets and liabilities of The Stone Mountain Group, Inc.

     On August 30, 1996, the Company  acquired  substantially  all of the assets
and  liabilities of The Stone Mountain  Group,  Inc.  ("SMG"),  in a transaction
accounted  for as a  purchase.  The  fair  value  of  the  assets  acquired  and
liabilities assumed, and the consideration paid were as follows:

Fair value of net assets acquired:
Client contracts....................................        $   1,300,000
Accounts receivable.................................              883,187
Property and equipment..............................               10,231
                                                            --------------
Fair value of non-cash assets acquired..............            2,193,418
                                                            --------------
Accounts payable and accrued expenses...............              362,221
Accrued salaries, wages and payroll taxes...........            1,224,788
Other liabilities...................................              430,470
                                                            --------------
Fair value of liabilities assumed...................            2,017,479
                                                            --------------
Fair value of net assets acquired, excluding cash...              175,939
Cash acquired.......................................              137,748
                                                            --------------
Fair value of net assets acquired...................        $     313,687
                                                            ==============

Promissory notes payable to SMG shareholders........        $   1,373,437
Cash placed in escrow...............................            1,250,000
Cash paid for acquisition of SMG....................            2,357,314
                                                            --------------
Purchase price......................................        $   4,980,751
                                                            ==============

     The following is a  reconciliation  of the purchase  price to the excess of
costs  associated  with the  acquisition  over the  estimated  fair value of net
assets acquired allocated to goodwill:

Purchase price......................................        $   4,980,751
Net assets acquired.................................             (313,687)
Costs associated with the acquisition...............              189,000
                                                            --------------
Amount allocated to goodwill........................        $   4,856,064
                                                            ==============

     In connection with the acquisition of the assets of SMG, the Company issued
promissory notes for $1,373,437 due in 1997 and placed in escrow $1,250,000,  in
accordance with an escrow agreement for potential  purchase price adjustments in
the event that,  among other  things,  client  retention  fails to meet  certain
targets.

     In January  1995,  the  Company  issued a  subordinated  note  payable  for
$1,200,000 as partial consideration for shares reacquired by the Company.

     During  February  1995,  the Company and its  stockholders  entered into an
Agreement  and  Plan of  Recapitalization  whereby  the  Company's  stockholders
exchanged a portion of their shares of common stock for approximately 166 shares
of Series A Participating  Convertible  Preferred Stock valued at  approximately
$6,264,000.

     During  1995,  the  Company  acquired  $334,054 of  computer  hardware  and
software under a capital lease agreement.


                                       8
<PAGE>


                             THE VINCAM GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1994, 1995 and 1996


NOTE 1- NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Vincam Group, Inc. and its subsidiaries ("Vincam" or the "Company") are
a professional  employer organization ("PEO") engaged primarily in the provision
of human resource management and personnel administration services. In addition,
the Company provides certain managed care services, including managed behavioral
health  care,  employee  assistance  programs,   drug-free  workplace  programs,
utilization review services,  comprehensive  workers' compensation managed care,
risk management and loss containment services.

     The Company  provides  PEO  services  primarily  to small and medium  sized
companies  in a variety of  industries,  including  manufacturing,  retail,  and
hospitality. Managed care services are provided to PEO clients and to health and
workers'  compensation  insurance companies,  health maintenance  organizations,
other managed care providers and large, self insured employers.

     PEO service  contracts  with client  companies  are  generally for one year
terms with  automatic  renewal  options and subject to termination on a 30 days'
notice by either party during the first year and  annually  thereafter.  Managed
care  contracts  with clients are for terms of one or more years and are subject
to  cancellation  by either party upon 30 to 180 days'  notice  depending on the
nature of the services provided.

     The Company does not have a concentration of customers in any one industry;
however,  during 1994,  1995 and 1996, a  significant  portion of the  Company's
revenues were generated in South Florida.  The Company's  revenues are generated
predominantly by PEO services.

     A  summary  of  the  significant   accounting   policies  followed  in  the
preparation of the accompanying  consolidated  financial statements is presented
below:

     Principles of consolidation.  The accompanying financial statements include
the accounts of The Vincam Group,  Inc. and its principal  subsidiaries,  Vincam
Human  Resources,  Inc.  ("VHR"),  Vincam/Staff  Administrators,  Inc.  ("SAI"),
Psych/Care,  Inc.  ("Psych/Care") and Vincam Occupational Health Services,  Inc.
("VOHS").   All  material  intercompany  balances  and  transactions  have  been
eliminated.

     Revenue recognition. Revenues and the related costs of wages, salaries, and
employment  taxes  from  professional  employer  services  related  to  worksite
employees  are  recognized  in the  period in which the  employee  performs  the
service.  Because  the  Company  is  at  risk  for  all  of  its  direct  costs,
independently  of whether  payment is received from its clients,  and consistent
with industry  practice,  all amounts  billed to clients for gross  salaries and
wages,  related  employment  taxes,  and health care and  workers'  compensation
coverage are  recognized  as revenue by the Company.  The Company  establishes a
reserve for doubtful  accounts when it determines  that collection from a client
is unlikely.

     Revenues from behavioral  health services are recognized  during the period
in which the  Company is  obligated  to provide  behavioral  health  services to
participants.  Revenues  from risk  management,  loss  containment  and workers'
compensation  managed care  services are  recognized  in the period in which the
services are performed.

     Accounting  estimates.  The  preparation of financial  statements  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting period.  The more significant  estimates relate to
the  Company's  reserve  for  claims.  Actual  results  could  differ from those
estimates.

                                       9
<PAGE>


     Reserve  for claims.  The  Company's  workers'  compensation  benefits  and
certain of its health care benefits are provided under large deductible  insured
plans.  The Company records  reserves for workers'  compensation and health care
claims costs based on actuarial calculations using the Company's loss history of
workers'  compensation and health care claims,  including  estimates of incurred
but not reported  claims.  Prior to 1994,  the Company's  workers'  compensation
insurance was under a loss-sensitive  retrospectively  rated plan which provided
for retroactive premium adjustments based on actual loss experience.

     In December  1996,  the Company  entered into an agreement  with a national
insurance  company  to  provide  guaranteed  fixed  cost  workers'  compensation
insurance  coverage for 1997 through 1999, subject to a deductible of $2,000 per
medical only claim.  Accordingly,  effective  January 1, 1997,  the Company will
record workers'  compensation  costs based primarily on the fixed portion of the
premium of its workers' compensation insurance policy.

     In addition,  in December  1996,  the Company  entered into an agreement to
reinsure  its  remaining  claims,   other  than  those  acquired  upon  the  SAI
Acquisition  (see  Note  2),  under  the  Company's  large  deductible  workers'
compensation  insurance  policies  for the years 1994,  1995,  and 1996,  for an
aggregate  premium of  $3,200,000.  As a result,  the Company has  recorded  the
premium as a reinsurance  recoverable  at December 31, 1996,  and has recorded a
deferred gain in the amount of  approximately  $600,000 which will be recognized
to income in future periods based on the proportion of cumulative claims paid to
the total estimated liability for claims.

     At December 31, 1995 and 1996,  the Company has  classified  as current the
estimated amounts of reserves established for claims and reinsurance recoverable
expected to be paid and to be collected,  respectively, within one year, as well
as the related deferred gain expected to be recognized within one year.

     Property  and  equipment.  Property  and  equipment  are  recorded at cost.
Depreciation  and  amortization are computed using the straight line method over
the estimated useful lives of the respective assets. Repairs and maintenance are
charged to expense as incurred, while expenditures which extend the useful lives
of the assets are capitalized.

     Goodwill.  Assets and  liabilities  acquired in  connection  with  business
combinations  accounted  for under the  purchase  method are  recorded  at their
respective estimated fair values. Goodwill represents the excess of the purchase
price over the fair value of net assets  acquired,  including the recognition of
applicable  deferred taxes, and is amortized on a straight-line  basis over a 25
year period. The Company reviews long-lived assets, identifiable intangibles and
goodwill and reserves for impairment whenever events or changes in circumstances
indicate the carrying amount of the assets may not be fully recoverable.


     Advertising  costs.  Advertising  expenditures are charged to operations as
incurred.  Advertising  expense  amounted to $333,600,  $386,123 and $547,698 in
1994, 1995 and 1996, respectively.

     Client  contracts.  Costs  incurred in connection  with the  acquisition of
client contracts from other professional employer organizations,  as well as the
fair market value of contracts  acquired in connection  with  purchase  business
combinations,  are capitalized and amortized using the straight line method over
a period of 5 to 15 years,  based on the term of the client contracts and/or the
previous  professional  employer organization client retention rate. The Company
periodically  assesses the status of contracts  acquired to determine the future
realizability  of the  capitalized  costs.  At December  31, 1995 and 1996,  the
Company had recorded client  contracts of $117,440 and $1,430,951,  respectively
(net of accumulated amortization of $0 in 1995 and $59,183 in 1996).

     Cash  and cash  equivalents.  Cash  equivalents  include  investments  with
original  maturities  of three  months  or less  and are  stated  at cost  which
approximates market value.

     Income taxes.  The Company  records  income tax expense using the liability
method of  accounting  for deferred  income taxes.  Under the liability  method,
deferred tax assets and  liabilities  are recognized for the expected future tax
consequences of temporary differences between the financial statement and income

                                       10
<PAGE>


tax bases of the Company's assets and liabilities. An allowance is recorded when
it is more likely  than not that any or all of a deferred  tax asset will not be
realized.  The provision for income taxes includes taxes currently  payable plus
the net change during the year in deferred tax assets and  liabilities  recorded
by the Company.

     The  Company is subject to certain  state  taxes  based on gross  receipts,
payroll and taxable income within that state.  Taxes based on gross receipts and
payroll are  classified  as  salaries,  wages and  employment  taxes of worksite
employees in the  accompanying  consolidated  statements of income,  while taxes
based on income are included in the provision for income taxes.

     Net income per common and common  equivalent  share.  Net income per common
and common  equivalent  share has been  computed  based on the weighted  average
number of shares of common stock and common stock equivalents outstanding during
each of the three years ended  December 31, 1996.  The Company has considered as
outstanding  common  stock  equivalents  during  each of the three  years  ended
December 31, 1996,  options  awarded to employees  and  directors of the Company
(see Notes 10 and 11). For purposes of the  calculation of net income per common
and common equivalent share, the mandatorily  redeemable preferred stock is also
considered a common stock equivalent.

     Net income per common and common  equivalent  share amounts for each of the
years presented have been calculated giving retroactive effect to an approximate
8,417 for 1 stock split effected by the Company in June 1995 and a 3 for 4 split
effected on February 21, 1996  (jointly,  the "Stock  Splits," see Note 10). All
common and common equivalent share amounts have also been retroactively adjusted
to reflect the Stock Splits.

     Stock  based   compensation.   Effective  1996,  the  Company  adopted  the
disclosure  provisions  of Statement of Financial  Accounting  Standard No. 123,
Accounting for Stock Based Compensation  ("SFAS 123") and retained the intrinsic
value method of accounting for such stock based compensation (see Note 11).

     Fair value of financial instruments.  The Company estimates the fair market
value of financial  instruments through the use of public market prices,  quotes
from  financial  institutions  and  other  available  information.  Considerable
judgment is required in interpreting  data to develop  estimates of market value
and, accordingly, amounts are not necessarily indicative of the amounts that the
Company could  realize in a current  market  exchange.  At December 31, 1995 and
1996,  the Company's  financial  instruments  consist  primarily of  instruments
without  extended  maturities,  the fair value of which,  based on  management's
estimates, equaled their carrying values.

NOTE 2 - ACQUISITIONS

     On August 30, 1996, the Company  acquired  substantially  all of the assets
and liabilities of The Stone Mountain Group, Inc. ("SMG"),  a PEO in Snellville,
Georgia  for  $4,980,751  in cash and  notes  (the  "SMG  Acquisition").  Of the
$4,980,751  purchase price,  $2,357,314 was paid at closing,  $1,373,437 will be
payable in 1997,  and  $1,250,000  was placed in escrow for  potential  purchase
price adjustments in the event that, among other things,  client retention fails
to meet certain  targets.  The SMG  Acquisition was accounted for by the Company
using the purchase method of accounting. Excess of costs over the estimated fair
value of net assets  acquired of $4,856,064  associated with the SMG Acquisition
was allocated to goodwill, and is being amortized over a period of 25 years. The
most  significant  adjustments  to the  balance  sheet  resulting  from  the SMG
Acquisition are disclosed in the supplemental  disclosure of non-cash  investing
and financing activities in the accompanying statement of cash flows.

     The following  information  presents the  unaudited pro forma  consolidated
results of operations  of the Company for the years ended  December 31, 1995 and
1996 as if the SMG  Acquisition  had  occurred on January 1, 1995,  after giving
effect to certain adjustments.

                                       December 31,              December 31,
                                           1995                      1996
                                     ---------------           ---------------
                                        
Revenues.........................    $  337,148,831            $  505,567,360
                                     ===============           ===============
Net income.......................    $      710,498            $    2,508,064
                                     ===============           ===============
Net income per common and
  common equivalent share........    $         0.06            $         0.30
                                     ===============           ===============

     These  results are presented  for  informational  purposes only and are not
necessarily indicative of the future results of operations or financial position
of the Company or the results of operations or financial position of the Company
that would have been achieved had the acquisition  actually  occurred on January
1, 1995.
                                       11
<PAGE>


     On  January  7, 1997,  the  Company  acquired  Staff  Administrators,  Inc.
("SAI"),  a privately held PEO  headquartered in Denver,  Colorado.  The Company
issued 500,000 shares of its common stock in exchange for all of the outstanding
shares  of  common  stock of SAI.  The  transaction  has been  accounted  for in
accordance with the pooling of interests accounting treatment;  accordingly, all
prior  period  financial  statements  presented  herein have been  retroactively
restated to include the assets and liabilities and results of operations of SAI.
In  connection  with the  acquisition  of SAI, the Company also  acquired,  in a
transaction  accounted  for as a  purchase,  a 49%  minority  interest  in Staff
Administrators of Western Colorado, Inc. ("SAWCI"), a 51% subsidiary of SAI (the
"SAWCI Acquisition").  The Company also issued 20,000 shares of its common stock
for the 49% interest in SAWCI. The most  significant  adjustments to the balance
sheet  resulting from the SAWCI  Acquisition  include an increase in goodwill of
$566,641 and an increase in client contracts of $301,848.

     The following combines audited selected historical financial information of
SAI and  Vincam  for the years  ended  December  31,  1994,  1995 and 1996,  and
reflects the most significant adjustments resulting from the SAI Acquisition.

<TABLE>
<CAPTION>
                                                      DECEMBER 31, 1994
                              -------------------------------------------------------------
                                                                                 POOLED
                                 VINCAM            SAI         ADJUSTMENTS       RESULTS
                              -------------   -------------   -------------   -------------
<S>                           <C>             <C>             <C>             <C>
Revenues..................... $191,532,568    $ 33,310,475    $       --      $224,843,043
                              =============   =============   =============   =============
Net income................... $  1,799,950    $     54,086    $       --      $  1,854,036
                              =============   =============   =============   =============
Net income per common and
  common equivalent share.... $       0.27    $       --      $       --       $       0.26
                              =============   =============   =============   =============


                                                      DECEMBER 31, 1995
                              -------------------------------------------------------------
                                                                                 POOLED
                                 VINCAM            SAI         ADJUSTMENTS       RESULTS
                              -------------   -------------   -------------   -------------
                                        
Revenues..................... $239,407,710    $ 55,824,216    $       --      $295,231,926
                              =============   =============   =============   =============
Net income................... $    809,837    $   (557,048)   $       --      $    252,789
                              =============   =============   =============   =============
Net income per common and
  common equivalent share.... $       0.13    $       --      $       --      $       0.04
                              =============   =============   =============   =============


                                                      DECEMBER 31, 1996
                              -------------------------------------------------------------
                                                                                 POOLED
                                 VINCAM            SAI         ADJUSTMENTS       RESULTS
                              -------------   -------------   -------------   -------------
                                        
Revenues..................... $395,619,538    $ 77,9754,919   $       --      $473,595,457
                              =============   =============   =============   =============
Net income................... $  3,585,976    $   (893,194)   $       --      $  2,692,782
                              =============   =============   =============   =============
Net income per common and
  common equivalent share.... $       0.46    $       --      $       --      $       0.32
                              =============   =============   =============   =============

</TABLE>
                                       12
<PAGE>


NOTE 3 - INITIAL PUBLIC OFFERING

     In May 1996, the Company completed its initial public offering and received
proceeds of approximately $27,900,000,  net of $2,100,000 underwriting discounts
and  commissions,  from the sale of  2,000,000  shares  of  common  stock of the
Company.  The Company  used a portion of the  proceeds to retire a  subordinated
promissory  note in the amount of $1,200,000  (see Note 8) and to pay a $700,000
distribution  payable  related  to the  Company's  repurchase  of an  option  to
purchase  the  Company's   headquarters.   In  addition,  the  Company  incurred
approximately   $960,000  in  other  costs  in  connection  with  the  offering.
Simultaneously with the completion of the initial public offering, the Company's
mandatorily  redeemable Series A Participating  Convertible Preferred Stock (the
"Series A Preferred Stock") was converted into 1,043,933 shares of the Company's
common stock (see Note 9).

     Also in connection  with the  completion of the  Company's  initial  public
offering,  the Company  amended and restated its  Articles of  Incorporation  to
increase  the  authorized  number of shares of the  Company's  common stock from
39,500,000 to  60,000,000,  and to increase the  authorized  number of shares of
preferred stock from 500,000 to 20,000,000.

NOTE 4 - RESTRICTED CASH

     The Company had cash  deposits at December 31, 1995 and 1996 of  $5,290,955
and  $1,081,917,  respectively,  which served as collateral  on certain  standby
letters of credit issued in connection with the Company's workers'  compensation
insurance plan (see Notes 7 and 8).

     In  connection  with  the  SMG  Acquisition,  the  Company  has  in  escrow
$1,250,000.  At December 31,  1996,  the escrow  funds have been  classified  as
restricted  cash in the  accompanying  consolidated  balance sheet (see Note 2).

NOTE 5 - ACCOUNTS RECEIVABLE

     At  December  31,  1995 and  1996,  accounts  receivable  consisted  of the
following:

                                                 1995           1996
                                            ------------   ------------
Billed to clients ........................  $ 3,188,922    $ 7,935,584
Unbilled revenues ........................    6,565,045     14,752,822
                                            ------------   ------------
                                              9,753,967     22,688,406
Less:  allowance for doubtful accounts....     (184,591)      (576,650)
                                            ------------   ------------
                                            $ 9,569,376    $22,111,756
                                            ============   ============

                                       13
<PAGE>


NOTE 6 - PROPERTY AND EQUIPMENT

     Property  and  equipment  consist  of  the  following  as of  December  31:

                                                                       Estimated
                                                                        Useful
                                                                        Lives
                                             1995            1996     (In Years)
                                        ------------    ------------  ----------
Land................................    $   284,374     $   284,374
Building............................        775,158         775,158        30
Building improvements...............        529,146         551,012         7
Furniture and fixtures..............        369,782         747,227         5
Office and computer equipment.......      1,512,077       3,240,515        3-5
Vehicles............................         43,188          20,249         3
                                        ------------    ------------
                                          3,513,725       5,618,535
Less: accumulated depreciation
      and amortization                     (826,748)     (1,453,939)
                                        ------------    ------------
                                        $ 2,686,977     $ 4,164,596
                                        ============    ============

     At December 31, 1995 and 1996, gross fixed assets included  $346,690 and $0
of office and computer  equipment under capital lease  obligations.  The Company
purchased these assets during 1996. See Notes 8, 10 and 14.

NOTE 7 - RESERVE FOR CLAIMS

     In December  1996,  the Company  entered into an agreement  with a national
insurance company to provide workers'  compensation  insurance coverage for 1997
through  1999,  subject  to a  deductible  of $2,000  per  medical  only  claim.
Accordingly,  effective  January 1,  1997,  the  Company  will  record  workers'
compensation  costs based  primarily on the fixed  portion of its premium  under
such policy,  rather than through the  previous  practice of applying  actuarial
estimates.

     In addition,  in December  1996,  the Company  entered into  agreements  to
reinsure  substantially all of the remaining  claims,  other than those acquired
upon  the  SAI  Acquisition,  under  the  Company's  large  deductible  workers'
compensation  insurance  policies  for the years  1994,  1995 and  1996,  for an
aggregate premium of $3,200,000.  Since reserves for claims for these years have
been previously provided,  the Company has recorded the premium as a reinsurance
recoverable  at December 31, 1996 and has recorded a deferred gain in the amount
of  approximately  $600,000 which will be recognized to income in future periods
based  on the  proportion  of  cumulative  claims  paid to the  total  estimated
liability for claims.

     In connection  with the  reinsurance of claims  exposure from 1994 to 1996,
the  insurance  carrier has agreed to provide  letters of credit in favor of the
Company's  lender to guarantee  outstanding  letters of credit to the  Company's
previous  workers'  compensation  insurance  provider under the Company's credit
agreement (see Note 8).

     As a consequence of the reinsurance  agreement described above, at December
31,  1996,  the  Company has  classified  as current  the  estimated  amounts of
reserves established for claims and reinsurance  recoverable expected to be paid
and to be  collected,  respectively,  within  one year,  as well as the  related
deferred gain expected to be recognized within one year.

     At December 31, 1995 and 1996, the Company's  reserves for claims costs are
as follows:

                                                           1995         1996
                                                        -----------  -----------
Accrued workers' compensation claims..................  $4,168,924   $6,476,630
Accrued health care claims............................     654,182      929,109
Reserve for behavioral health care claims.............     296,385      525,465
                                                        -----------  -----------
                                                         5,119,491    7,931,204
Less: workers' compensation claims expected
  to be settled in more than one year                   (1,556,615)  (2,846,188)
                                                        -----------  -----------
Reserve for claims--current                             $3,562,876   $5,085,016
                                                        ===========  ===========
                                       14
<PAGE>


Note 8 - Borrowings

Borrowings at December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
                                                                                     1995               1996
                                                                                --------------     --------------
<S>                                                                             <C>                <C>
Subordinated note payable in quarterly installments of $150,000
beginning in March 1998, interest due quarterly at the quoted
rate for 1 year U.S. Treasury Bills (7% at December 31, 1996),
paid in June 1996............................................................   $   1,200,000                 --

Note payable to bank, original amount of $1 million, repayable
in monthly instalments of $4,167, plus interest at 8.5% per
annum, through November 1998 when a balloon payment of
$750,000 is due, secured by land and building................................         895,732            841,561

Note payable for state unemployment taxes, maturing in 1998
with monthly payments of $3,264..............................................         207,647             55,489

Notes payable to an affiliate................................................          41,750                 --

Capital lease obligation for computer hardware and software,
payable in monthly instalments of $7,479 through May 2000,
interest imputed at 12.3% per annum, paid in September 1996..................         310,602                 --
                                                                                --------------     --------------
                                                                                    2,655,731            897,050

Less: current portion                                                              (1,412,121)           (89,167)
                                                                                --------------     --------------
                                                                                $   1,243,610      $     807,883
                                                                                ==============     ==============
</TABLE>

     The Company incurred  interest expense of approximately  $97,000,  $205,000
and $142,000 during 1994, 1995 and 1996, respectively.

     In June 1996, the Company amended its existing credit agreement with a bank
(as amended,  the "Credit  Agreement") and increased the amount  available under
the Credit  Agreement  to  $13,000,000.  The  Credit  Agreement  provides  for a
revolving  credit facility with a sublimit of $8,000,000 to fund working capital
advances  and standby  letters of credit.  Working  capital  advances  under the
revolving  credit  facility  are  limited  to the  lesser of  $2,000,000  or the
Borrowing Base, primarily composed of current accounts receivable from unrelated
parties. Amounts outstanding under the revolving credit facility mature December
31, 1997.

     The Credit  Agreement also has an acquisition loan facility with a sublimit
of $5,000,000.  Draws under the acquisition loan facility are available  through
June 5, 1998, and are repayable in 36 equal monthly instalments from starting on
June 5, 1998.  The  Company  is  charged  fees of .25% to .375% per annum on any
unused portion of the acquisition loan facility.

     The Credit Agreement is  collateralized  by substantially all of the assets
of the  Company  and  $4,100,959  in  letters of credit  issued by an  insurance
company in connection with the Company's reinsurance of prior years' claims (see
Note 7). The Credit Agreement contains customary events of default and covenants
which prohibit,  among other things, incurring additional indebtedness in excess
of a specified amount, paying dividends,  creating liens and engaging in certain
mergers or  combinations  without the prior written  consent of the lender.  The
Credit Agreement also contains certain financial  covenants  relating to current
ratio,  debt and  interest  coverage,  net  worth and  other  financial  ratios.

     Interest  under  the  Credit  Agreement  accrues  at  rates  based,  at the
Company's  option,  on the bank's prime rate plus a margin of as much as .25% or
its Eurodollar Rate (as defined in the Credit  Agreement) plus a margin of 1.50%
to 2.00%, depending on certain financial covenants.

                                       15
<PAGE>


     Under the revolving credit facility, the Company had outstanding $6,250,000
in standby letters of credit at December 31, 1996 which guarantee the payment of
claims to the Company's  workers'  compensation  insurance  carrier.  As of that
date,  there were no amounts  outstanding  under the working  capital advance or
under the acquisition loan  facilities.  All amounts under these facilities were
available at December 31, 1996.

     The  Company  also has  $1,200,000  in  standby  letters  of credit  with a
separate  bank at December 31, 1996,  which  guarantee  the payment of workers'
compensation claims acquired upon the SAI Acquisition.

     As of December 31, 1996, the scheduled  annual  maturities of the Company's
long term debt are summarized as follows:


                     1997............. $  89,167
                     1998.............   807,883
                                       ----------
                                       $ 897,050
                                       ==========

Note 9 - Mandatorily Redeemable Preferred Stock

     The Company has authorized  20,000,000 shares of preferred stock with a par
value of $.01 per share. These shares can be issued from time to time, in one or
more series as authorized by the Company's Board of Directors.

     During  February  1995,  the Company and its  stockholders  entered into an
Agreement  and  Plan of  Recapitalization  whereby  the  Company's  stockholders
exchanged  1,043,933 (after adjusting for the effect of the Stock Splits) shares
of  common  stock for  165.376  shares  of  Series A  Participating  Convertible
Preferred Stock (Series A Preferred Stock).


     The Series A Preferred Stock was recorded at $6,263,610 in the accompanying
balance sheet as of December 31, 1995 based on its fair market value on the date
of  issuance,  as  evidenced  by the  sale of  Series A  Preferred  Stock by the
Company's principal  stockholders to an unaffiliated party. Both the fair market
value and the costs incurred of  approximately  $445,000 in connection  with the
recapitalization   were  charged  to  retained  earnings  at  the  time  of  the
transaction.

     In accordance with the Recapitalization  Agreement,  the Series A Preferred
Stock was converted upon  completion of the Company's  initial  public  offering
into 1,043,933  shares of common stock,  after adjusting  retroactively  for the
effects of the Stock Splits (see Note 3).

Note 10 - Stockholders' Equity

     During June 1995, the Company  increased its  authorized  common stock from
500,000 shares to 39,500,000 shares and  simultaneously  effected an approximate
8,417 for 1 stock split.  On February 21, 1996,  the Company  effected a 3 for 4
reverse  stock split.  After the  completion  of the  Company's  initial  public
offering,  the Company  amended and restated its  Articles of  Incorporation  to
increase  the  authorized  number of shares of the  Company's  common stock from
39,500,000 to  60,000,000,  and to increase the  authorized  number of shares of
preferred  stock from 500,000 to  20,000,000.  All  references  in the financial
statements to per share amounts have been retroactively  restated to reflect the
change  in the  number  of common  shares  outstanding  as a result of the Stock
Splits.

     In  connection  with the stock  split and  increase  in  authorized  shares
effected in June 1995, the Company  reduced the par value of its common stock to
$.001 from $1.00.

     In June 1993, CP Investments,  Inc., an entity  controlled by the Company's
principal  stockholders,  assigned to the Company an option which CP Investments
held to  purchase,  from a third  party for $ 1 million,  the land and  building
which is owned by the Company and where the Company's  headquarters are located.
In October  1993,  the Company  exercised  the option and purchased the land and
building.  As part of the assignment of the option, CP Investments  retained the
right to purchase the land and building  from the Company for  $1,000,000  for a
ten year period.

                                       16
<PAGE>


     Based on two independent appraisals of the land and building subject to the
previously described option, the Company valued the option at $700,000 (based on
the  difference  between the market value of the building and its November  1993
purchase  price) and recorded a distribution  to its principal  stockholders  in
June 1993. Because the transaction was entered into between commonly  controlled
entities,  the value of the option was not  considered  additional  basis in the
building. Amounts due in connection with this distribution have been recorded as
distribution  payable at December 31, 1995 and paid in 1996 upon  completion  of
the initial public offering.

     In January 1995, the Company entered into an agreement to reacquire certain
of its outstanding  shares from a minority  shareholder.  Under the terms of the
agreement, the Company acquired and canceled 249,342 shares of its common stock,
after  adjusting for the effect of the Stock Splits,  for $300,000 in cash and a
subordinated  note for $1,200,000  (see Note 8).  Simultaneously,  the Company's
principal  shareholders  acquired  66,281  outstanding  shares of the  Company's
common stock, after adjusting for the effect of the Stock Splits, for $400,000.

Note 11 - Stock Option Plan

     In February  1996,  the Company  adopted the 1996 Long Term  Incentive Plan
(the "1996 Plan") under which 800,000  shares of common stock,  after  adjusting
for the effect of the Stock Splits,  were reserved for issuance upon exercise of
or in connection  with stock options,  stock  appreciation  rights,  performance
awards,  grants  of  restricted  stock and other  stock  based or stock  related
awards. The 1996 Plan provides for the grant of both incentive stock options and
nonqualified  stock  options,  as  well  as  other  stock-based  awards,  to the
Company's  directors,  employees and consultants as determined in the discretion
of the Stock Option Committee.  Under the 1996 Plan, incentive stock options and
nonqualified  stock  options may not be granted with an exercise  price which is
less than 100% of the fair market value of the Company's  shares of common stock
at the date of grant of the option.

     In May 1995,  the  Company  adopted  the 1995 Stock  Option Plan (the "1995
Plan") under which  666,665  shares of common  stock,  after  adjusting  for the
effect of the Stock  Splits,  were  reserved for issuance upon exercise of stock
options.  The 1995 Plan provides for the grant of both  incentive  stock options
intended  to qualify as such under  Section  422 of the  Internal  Revenue  Code
("incentive  stock  options") and  nonqualified  stock options to the directors,
officers, key employees,  consultants and other individual contributors of or to
the Company and its  subsidiaries,  as determined in the discretion of the Stock
Option Committee.  Under the 1995 Plan, incentive stock options and nonqualified
stock options may not be granted with an exercise  price which is less than 100%
and 85%,  respectively,  of the fair  market  value of the  Company's  shares of
common stock at the date of grant of the option.

                                       17
<PAGE>


     Stock  options  normally  have a term of ten  years  and  generally  become
exercisable  40% after the second year from the date of grant and in instalments
of 5% quarterly thereafter.


         The following table summarizes stock option activity:

<TABLE>
<CAPTION>

                                                                                                      Weighted
                                                                                   Exercise            Average
                                                           Stock Option              Price          Exercise Price
                                                          --------------        ---------------     --------------
<S>                                                       <C>                   <C>                 <C>

         Outstanding at January 1, 1995............                --                        --                --
              Granted..............................            514,997          $ 3.00 - $ 3.33           $  3.05
              Canceled.............................                --                        --                --
              Exercised............................                --                        --                --
                                                          --------------        ---------------     --------------
         Outstanding at December 31, 1995..........            514,997          $ 3.00 - $ 3.33           $  3.05
              Granted..............................            311,499          $ 4.67 - $33.13           $ 20.62
              Canceled.............................            (44,999)         $ 3.00 - $ 8.05           $  5.81
              Exercised............................            (13,333)                  $ 3.00           $  3.00
                                                          --------------        ---------------     --------------
         Outstanding at December 31, 1996..........            768,164           $3.00 - $33.13           $  9.81
                                                          ==============        ===============     ==============
         Exercisable at:
              December 31, 1995....................                  0                                         --
              December 31, 1996....................             40,000                                    $  3.00

         Available for grant at:
              December 31, 1995....................            951,668
              December 31, 1996....................            702,390

</TABLE>


     The  Company  has  adopted  the  disclosure  provisions  of SFAS  123.  The
assumptions used in the calculation of the fair value of the options,  using the
Black-Scholes  method,  issued to employees and directors of the Company  during
1995 and 1996 were as follows:


                                               1995       1996
                                             -------    -------
Expected life (years).......................   6.5        6.5
Interest rate...............................  6.20%      6.20%
Volatility..................................    55%        55%
Dividend yield..............................     0%         0%


     Had  compensation  cost for the Company's two option plans been  determined
based on fair  market  value at the grant date for awards in 1995 and 1996 using
the straight  line method to recognize  such cost,  the Company's net income and
net income per common  equivalent share would have been reduced to the pro forma
amounts indicated below:

                                            1995         1996
                                        -----------  -----------

Pro forma net income                    $  190,097   $1,379,222
                                        ===========  ===========
Pro forma net income per common
   and common equivalent share          $     0.03   $     0.17
                                        ===========  ===========

     Weighted-average  fair  value of options  granted  during the year 1995 and
1996 was $1.86 and $14.05, respectively.

                                       18
<PAGE>


     The following table  summarizes stock option average grant date fair value,
and weighted average remaining contract life for options outstanding at December
31, 1996:

<TABLE>
<CAPTION>

                                                                       Weighted Average          Remaining
                                    Range of          Number of           Grant Date            Contractual
                                 Exercise Price         Options           Fair Value               Life
                              --------------------- --------------- ----------------------- -------------------
<S>                           <C>                   <C>             <C>                     <C>

                                $ 3.00 - $ 3.33          481,665            $ 1.87                 7.5
                                $ 4.67 - $ 8.05          103,999            $ 5.46                 9.5
                                $21.00 - $28.50           63,500            $16.23                 9.5
                                #33.13 - $37.13          119,000            $24.17                10.0
                                                    ---------------
Stock options outstanding as
     of December 31, 1996                                768,164
                                                    ===============

</TABLE>

Note 12 - Income Taxes

     The provision for federal and state income taxes consists of the following:

                                1994                1995                1996
                            -------------       -------------      -------------
Current
     Federal..............  $  1,354,671        $    776,777       $  1,205,859
     State................        33,724              36,251             61,000
                            -------------       -------------      -------------
                               1,388,395             813,028          1,266,859
                            -------------       -------------      -------------
Deferred
     Federal..............      (408,781)           (545,870)            75,363
     State...... .........        (6,733)            (27,741)           (25,909)
                            -------------       -------------      -------------
                                (415,514)           (573,611)            49,454
                            -------------       -------------      -------------
Provision for income taxes  $    972,881        $    239,417       $  1,316,313
                            =============       =============      =============

     Subsequent  to December  31,  1994,  the Company  requested  and obtained a
change,  for income tax purposes,  in the method of accounting  for its workers'
compensation  loss reserves.  As a result,  the Company  recorded a deferred tax
asset  relating  to the  reserves  and an increase  in income  taxes  payable of
approximately $1,386,000. Also in December 1996, the Company requested a change,
for  income  tax  purposes,  in the  method  of  accounting  used by SAI for its
workers'  compensation  loss  reserves.  As a result,  the  Company  recorded  a
deferred  tax asset  relating to the  reserves  and an increase in income  taxes
payable of approximately $775,000.  Under the provisions of the Internal Revenue
Code ("IRC"), the Company can amortize over three years the payment of taxes due
for changes resulting in taxable income and can recognize  currently  deductions
resulting  from the change in method.  The Company has  classified  as long term
those taxes  resulting from this change which it expects to pay in more than one
year.

                                       19
<PAGE>


     The gross  amounts of deferred tax assets and  liabilities  recorded in the
accompanying  consolidated  balance  sheets at December 31, 1995 and 1996 are as
follows:

                                                            1995           1996

Current deferred tax assets:
     Allowance for doubtful accounts .............   $    59,361    $   167,301
     Accrued health care claims ..................       222,422        315,897
     Reserve for workers' compensation claims,
       net of reinsurance recoverable ............       963,035        805,983
     Accrued bonuses .............................        47,088           --
     Net operating losses ........................          --          142,826
     Deferred compensation .......................        89,420           --
     Other .......................................        59,356         25,273
                                                     ------------   ------------
                                                     $ 1,440,682    $ 1,457,280
                                                     ============   ============
Long term deferred tax assets and (liabilities):
     Deferred compensation .......................   $   100,062          8,878
     Reserve for workers' compensation claims,
       net of reinsurance recoverable ............       557,708        632,353
     Depreciation and amortization ...............       (20,498)       (26,948)
     Other .......................................        57,406         14,343
                                                     ------------   ------------
                                                     $   694,678    $   628,626
                                                     ============   ============

     Realization  of the above  deferred tax assets is  dependent on  generating
sufficient  taxable  income in the  future to offset  the  deductible  temporary
differences  generating  the deferred tax assets.  Although  realization  is not
assured,  management  believes  that it is more  likely than not that all of the
deferred  tax asset  will be  realized.  The  amount of the  deferred  tax asset
considered realizable,  however, could be reduced if estimates of future taxable
income are reduced.

     A  reconciliation  of the differences  between income taxes computed at the
federal  statutory  tax rate and the  income  tax  provisions  reflected  in the
accompanying consolidated statements of income is as follows:

<TABLE>
<CAPTION>

                                                          1994           1995           1996
                                                       ------------   ------------   ------------
<S>                                                    <C>            <C>            <C>

Income taxes computed at federal statutory
   rate of 34% .....................................   $   961,151    $   167,350    $ 1,390,290
State income taxes, net of federal income tax effect        19,599        (12,766)        (3,675)
Other, net .........................................        (7,869)        84,833        (70,302)
                                                       ------------   ------------   ------------
Provision for income taxes .........................   $   972,881    $   239,417    $ 1,316,313
                                                       ============   ============   ============

</TABLE>

                                       20
<PAGE>


Note 13 - Employee Benefit Plans

     The Company  maintains a defined  contribution plan covering certain of its
worksite employees for a number of client companies. The Company contributes, on
behalf of each  participating  client,  varying  amounts based on client company
elections.  Total Company  contributions  for the years ended December 31, 1994,
1995 and 1996 were $416,922, $550,776 and $1,065,072, respectively.

     In August 1996, the Company received a favorable  determination letter from
the Internal  Revenue  Service  ("IRS")  regarding the  qualified  status of its
defined contribution plan under Section 401(k) of the IRC. In its application to
the IRS,  the  Company  informed  the IRS that the  Company is  involved  in the
business  of leasing  employees  to client  companies  and that the 401(k)  plan
covered  worksite  or leased  employees  who  satisfied  the plan's  eligibility
requirements.

     The Company sponsors an unfunded deferred  compensation plan (the "Deferred
Plan").  The Deferred Plan covers a selected group of employees as determined by
the Company's  Board of  Directors.  The amounts due under the Deferred Plan are
based on bonuses  granted by the Board of Directors,  at its  discretion at each
year  end for that  year's  performance  by the  employee.  Based on the  awards
granted,  the Company recorded  compensation  expense of $41,200 during 1994. No
deferred compensation expense was recognized during 1995 and 1996.

     The amount of  compensation  subject to the  Deferred  Plan and the vesting
period for  individual  grants,  or any changes  thereto,  is established by the
Company's Board of Directors.  Deferred  compensation  amounts generally vest at
the end of three  years  from the date of award,  provided  the  participant  is
employed by the Company on such date. At December 31, 1996 the vesting  schedule
under the Plan is as follows:

                  1997.........................   $   242,013
                  1998.........................        41,200
                                                  ------------
                                                  $   283,213
                                                  ============

     The Company has included  these  amounts  within other  liabilities  in the
accompanying  balance  sheets as short term or long term based on the applicable
vesting  dates.  Of the above  amounts,  approximately  $200,000 at December 31,
1996, relate to deferred  compensation to the Company's principal  stockholders.
All deferred compensation is expected to be paid in cash.

                                       21
<PAGE>

Note 14 - Commitments and Contingencies

     The Company has entered into  non-compete  agreements with its Chairman and
Vice-Chairman, who are also the Company's principal stockholders. The agreements
are for a term to be specified by the Company,  not to exceed two years,  in the
event  of  the  Chairman's  or  Vice-Chairman's   termination.  The  non-compete
agreements  require  payment to the  Chairman  and  Vice-Chairman  of their full
salary and benefits during the term of the agreement.

     The Company leases certain office space,  automobiles and office  equipment
under non-cancelable operating leases expiring on various dates through the year
2000.  Total  rent  expense  charged  to  operations   during  the  years  ended
December 31,  1994,  1995 and  1996 was  approximately  $224,000,  $385,000  and
$427,100, respectively.

     At December 31,  1996,  the minimum  annual  rental  commitments  under the
previously described operating leases are as follows:

                                              For the Year Ending
                                                 December 31,
                                                --------------

                  1997......................... $     605,884
                  1998.........................       434,319
                  1999.........................       220,072
                  2000.........................        62,183
                  2001.........................        28,497
                                                --------------
                  Total                         $   1,350,955
                                                ==============


     The Company is a  defendant  in a lawsuit  related to a wrongful  death and
premises liability claim involving a worksite employee. The plaintiff's original
complaint sought damages in excess of $10,000,000;  however,  such complaint was
dismissed  in part and amended to seek  damages in excess of $15,000.  The court
has sustained  plaintiff's amended complaint alleging premises liability against
both the Company  and its client as a result of a worksite  accident at client's
premises.  The Company is asserting that its liability under this claim, if any,
should be limited to  $100,000  due to the  immunity  provisions  of the Florida
workers'  compensation  statute involving worksite  accidents.  Discovery in the

                                       22
<PAGE>


proceeding continues.  While there can be no assurance that the ultimate outcome
of this  lawsuit  will not  have a  material  adverse  effect  on the  Company's
financial  condition or results of  operations,  management  believes,  based on
consultations  with the  Company's  counsel,  that the ultimate  outcome of this
lawsuit should not have such an effect.

     The Company is a  defendant  in a lawsuit  brought in Dade  County  Circuit
Court in November  1995 by an  individual  who alleges  that he was injured by a
worksite  employee of a client of the  Company,  which owns and operates a hotel
and  is a  co-defendant  in the  litigation.  The  plaintiff  alleges  that  the
employee,  while he was working as a valet parking attendant, was negligent in a
motor vehicle collision and severely and permanently injured the plaintiff.  The
plaintiff  alleged  damages in excess of $50,000 in his amended  complaint  for,
among other things, bodily injury,  medical costs, pain and suffering,  and lost
ability to earn  income.  Based on  consultations  with the  Company's  counsel,
management  of the  Company  believes  that it has  meritorious  defenses to the
plaintiff's claims and that if the lawsuit is adversely determined,  the Company
may be  entitled  to  indemnification  from  its  client  and/or  its  liability
insurance  carrier.  Although  management  believes that the Company's  ultimate
liability in this matter should not be material,  there can be no assurance that
the  Company  will  prevail  in  the   litigation,   in  a  related   claim  for
indemnification,  or that the liability of the Company, if any, would not have a
material  adverse  effect on the  Company's  financial  condition and results of
operations.

     In  October  1996,  the  Company  received  a notice of  assessment  in the
discounted  amount of  approximately  $53,500 from The Treasurer of the State of
Florida  Department of Insurance as Receiver of United States Employer  Consumer
Self Insurance Fund of Florida, a workers compensation  insurance fund which was
declared insolvent (the "Fund").  The Company paid the discounted  assessment in
January 1997.  The Company had certain  worksite  employees  covered by the Fund
during  fiscal years ended  December 31,  1992,  1993 and 1994.  The court order
authorizing the assessment  provides that the Company,  by paying the discounted
assessment,  is deemed to have paid its assessment in full and is not subject to
any further  assessment for policyholder loss claims. The Company may be subject
to additional  liability for the assessments of other Fund members.  The Company
believes  that there are  approximately  700 members of the Fund which have been
assessed  $37.0 million in the  aggregate.  Although the amount of the potential
exposure,  if any,  for  such  additional  liability  is not  yet  determinable,
management believes that the Company has meritorious  defenses to the assessment
and that its ultimate  liability in this matter will not have a material adverse
effect on the  Company's  financial  condition or results of  operations.  There
cannot,  however,  be any assurance  that any such  liability will not have such
material adverse effect.

     The Company is also involved in other legal and administrative  proceedings
arising in the ordinary  course of business.  The outcomes of these  actions are
not expected to have a material  effect on the Company's  financial  position or
results of operations.

     See also Notes 1 and 7.



                                       23
<PAGE>


Note 15 - Quarterly Information (Unaudited)

     The following table presents unaudited  quarterly operating results for the
two years ended  December 31, 1996.  The  Company  believes  that all  necessary
adjustments have been included in the amounts stated below to present fairly the
quarterly  results  when read in  conjunction  with the  Consolidated  Financial
Statements  and Notes  thereto for the years ended  December  31, 1995 and 1996.
Results of operations for any particular quarter are not necessarily  indicative
of results of operations for a full year or predictive of future periods.

<TABLE>
<CAPTION>

                                                   1995                                       1996
                                               Quarter Ended                              Quarter Ended
                                 -------------------------------------------------------------------------------
                                 March 31  June 30   Sept. 30  Dec. 31   March 31  June 30   Sept. 30  Dec. 31
                                 --------- --------- --------- --------- --------- --------- --------- ---------
<S>                              <C>       <C>        <C>      <C>       <C>       <C>       <C>       <C>
                                                      (in thousands, except per share data)
Statement of Income Data:
Revenues.....................    $ 66,481  $ 70,051  $ 72,940  $ 85,761  $ 96,970  $108,574  $118,794  $149,258
                                 ========= ========= ========= ========= ========= ========= ========= =========
Gross profit.................       3,585     3,735     3,537     4,801     5,696     6,330     7,454     9,315
                                 ========= ========= ========= ========= ========= ========= ========= =========
Operating income (loss)......         226         1      (148)      272       554       610       786     1,364
                                 ========= ========= ========= ========= ========= ========= ========= =========
Net income (loss)............    $    305  $    (71) $   (170) $    189  $    370  $    666  $    594  $  1,062
                                 ========= ========= ========= ========= ========= ========= ========= =========
Net Income Per Common and
 Common Equivalent Share.....    $   0.04  $  (0.01) $  (0.02) $   0.03  $   0.05  $   0.08  $   0.07  $   0.12
                                 ========= ========= ========= ========= ========= ========= ========= =========

</TABLE>


Note 16 - Subsequent Events (Unaudited)

     In April  1997,  the  Company  entered  into a new  three-year  $50 million
revolving credit facility with a group banks.

     In March 1997, the Company entered into agreements with national  insurance
companies to reinsure  substantially  all of the  Company's  responsibility  for
remaining claims acquired upon the SAI Acquisition  under SAI's large deductible
workers' compensation  insurance policies for the years 1994, 1995, and 1996 for
an  aggregate  premium of  $1,870,000.  As a result,  the Company has recorded a
deferred gain in the amount of  approximately  $600,000 which will be recognized
to income in future periods based on the proportion of cumulative claims paid to
the total estimated liability for claims.



                                   * * * * * *

                                       24
<PAGE>


MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

     The following  discussion and analysis  should be read in conjunction  with
the Consolidated  Financial  Statements and Notes thereto contained herein,  the
Consolidated Financial Statements and Notes thereto and Management's  Discussion
and Analysis of Financial  Condition and Results of  Operations  appering in the
1996 Annual Report on Form 10-K,  filed by The Vincam Group,  Inc.  ("Vincam" or
the "Company").

     The following discussion contains forward-looking statements. The Company's
actual   results  could  differ   materially   from  those   discussed  in  such
forward-looking  statements.  Factors  that could  cause or  contribute  to such
differences  include those  discussed below and elsewhere in this Current Report
on Form 8-K and the  Company's  1996 Annual  Report on Form 10-K.  In connection
with the safe harbor provisions of the Private Securities  Litigation Reform Act
of  1995  (the  "Reform  Act"),  the  Company  is  hereby  providing  cautionary
statements  identifying  important factors that could cause the Company's actual
results to differ materially from those projected in forward-looking  statements
(as such term is defined in the Reform  Act) made by or on behalf of the Company
herein or  orally,  whether  in  presentations,  in  response  to  questions  or
otherwise.   Any  statements  that  express,   or  involve  discussions  as  to,
expectations,  beliefs,  plans,  objectives,  assumptions  or  future  events or
performance (often, but not always,  through the use of words or phrases such as
"will   result,"  "are  expected  to,"  "will   continue,"   "is   anticipated,"
"estimated,"  "projection"  and "outlook")  are not historical  facts and may be
forward-looking   and,   accordingly,   such   statements   involve   estimates,
assumptions,  and  uncertainties  which  could  cause  actual  results to differ
materially  from  those  expressed  in  the  forward-looking   statements.  Such
uncertainties   include,   among  others,  the  following:   (i)  potential  for
unfavorable  interpretation of government  regulations relating to labor, taxes,
insurance,  employment matters and the provision of managed care services;  (ii)
the  Company's   ability  to  obtain  or  maintain  all  required   licenses  or
certifications  required to further expand the range of specialized managed care
services  offered by the Company;  (iii)  potential  increases in the  Company's
costs,  such as health care  costs,  that the Company may not be able to reflect
immediately  in its  service  fees;  (iv) the  Company's  ability  to offer  its
services to  prospective  clients in  additional  states where it has less or no
market penetration;  (v) the level of acquisition opportunities available to the
Company  and the  Company's  ability to  efficiently  price and  negotiate  such
acquisitions on a favorable basis; (vi) the financial condition of the Company's
clients; (vii) additional regulatory  requirements affecting the Company; (viii)
the  impact  of  competition  from  existing  and  new   professional   employer
organizations;  (ix) the  failure to  properly  manage  growth and  successfully
integrate  acquired  companies and  operations;  and (x) other factors which are
described in further  detail in the Company's  filings with the  Securities  and
Exchange Commission.

     The Company  cautions that the factors  described  above could cause actual
results  or  outcomes  to  differ   materially   from  those  expressed  in  any
forward-looking   statements   made  by  or  on  behalf  of  the  Company.   Any
forward-looking  statement speaks only as of the date on which such statement is
made,  and the Company  undertakes no  obligation to update any  forward-looking
statement or statements  to reflect  events or  circumstances  after the date on
which such  statement  is made or to reflect  the  occurrence  of  unanticipated
events.  New  factors  emerge  from  time to time,  and it is not  possible  for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.


Overview

     Vincam, one of the largest professional employer  organizations ("PEOs") in
the industry,  provides small and  medium-sized  businesses  with an outsourcing
solution  to  the  complexities  and  costs  related  to  employment  and  human
resources.  The Company's  continuum of integrated  employment-related  services
consists of human  resource  administration,  employment  regulatory  compliance
management,  workers'  compensation  coverage,  health  care and other  employee
benefits.  The Company  establishes a co-employer  relationship with its clients
and contractually assumes substantial employer  responsibilities with respect to
worksite  employees.  In addition,  the Company offers certain specialty managed
care  services  on a  stand-alone  basis to  health  and  workers'  compensation
insurance  companies,  HMOs,  managed  care  providers  and large,  self-insured
employers.

                                       25
<PAGE>


     The Company's  standard PEO services  agreement provides for an initial one
year  term,  subject  to  termination  by the  Company or the client at any time
during  the first  year upon 30 days'  prior  written  notice.  Thereafter,  the
contract may be terminated upon 30 days' notice given prior to the expiration of
the renewal term or immediately for cause.  Revenues from professional  employer
services  are based on a pricing  model that takes into account the gross pay of
each  employee and a mark-up which  includes the estimated  costs of federal and
state employment taxes, workers'  compensation,  employee benefits and the human
resource  administrative  services,  as  well as a  provision  for  profit.  The
specific   mark-up   varies  by  client  based  on  the  workers'   compensation
classification  of the worksite  employees and their eligibility for health care
benefits.  Accordingly,  the Company's average mark-up percentage will fluctuate
based on client mix,  which  cannot be predicted  with any degree of  certainty.
Specialty  managed care revenues are generated  from a variety of  risk-bearing,
capitated, and fee-based arrangements.

     The  Company's  revenues  include all  amounts  billed to clients for gross
salaries  and wages,  related  employment  taxes,  and health care and  workers'
compensation coverage of worksite employees. The Company is obligated to pay the
gross salaries and wages,  related employment taxes and health care and workers'
compensation  costs  of its  worksite  employees  whether  or not the  Company's
clients pay the Company on a timely basis or at all. The Company  believes  that
including  such amounts as revenues  appropriately  reflects the  responsibility
which the  Company  bears  for such  amounts  and is  consistent  with  industry
practice. In addition, the Company's revenues are subject to fluctuations as the
result of (i)  changes  in the  volume of  worksite  employees  serviced  by the
Company;  (ii)  changes in the wage base and  employment  tax rates of  worksite
employees;  and (iii)  changes in the  mark-up  charged by the  Company  for its
services.

     The Company's primary direct costs are (i) salaries,  wages, the employer's
portion of social security,  Medicare premiums,  federal  unemployment taxes and
the  compensation  portion of the Michigan Single Business Tax, (ii) health care
and workers'  compensation  costs, and (iii) state  unemployment taxes and other
direct costs.  The Company can  significantly  impact its gross profit margin by
actively  managing  the  direct  costs  described  in  clauses  (ii) and  (iii).

     The  Company's  health care costs  consist of medical  insurance  premiums,
payments of and  reserves  for claims  subject to  deductibles  and the costs of
vision care,  disability,  employee  assistance and other similar benefit plans.
The Company's  health care benefit plans consist of a mixture of fully  insured,
minimum premium arrangements,  partially  self-insured plans and guaranteed cost
programs.  Under minimum premium arrangements and partially  self-insured plans,
liabilities  for health care claims are recorded  based on the Company's  health
care loss history.  The Company  maintains  reserves for medical and  behavioral
health  claims which  reserves are estimates  based on periodic  reviews of open
claims,  past claims experience and other factors deemed relevant by management.
See Notes 1 and 7 of the Notes to Consolidated  Financial Statements.  While the
Company  believes that such reserves are adequate,  the Company  cannot  predict
with certainty the ultimate liability associated with health care costs and past
claims  experience  may not be indicative  of future  results.  Accordingly,  if
estimated  reserve  amounts  prove to be less than the ultimate  liability  with
respect to such claims, the Company's financial condition, results of operations
and liquidity could be materially adversely affected.

     Workers'  compensation  costs include medical costs and indemnity  payments
for lost  wages,  administrative  costs and  insurance  premiums  related to the
Company's workers' compensation coverage. Prior to 1997, the Company was insured
under a large  deductible  insurance  plan.  Under  this  plan the  Company  was
obligated to reimburse its insurance carrier for a portion of the insurance risk
related to workers'  compensation  claims up to a  predetermined  deductible per
occurrence of $500,000. Workers' compensation costs for 1994, 1995 and 1996 also
include  reserves for claims  which have been  incurred but not reported and for
anticipated  loss  development.   The  Company  has  recently  entered  into  an
arrangement with an insurance company under which  substantially all of the cost
of the Company's  workers'  compensation  coverage for the years 1997 to 1999 is
fixed.  Additionally,  the Company entered into  agreements  whereby the Company
reinsured  substantially  all of the remaining  claims under the Company's large
deductible  workers'  compensation  insurance policies for the years 1994, 1995,
and 1996. See "Recent Developments" below.

                                       26
<PAGE>


     State unemployment taxes are based on rates which vary from state to state.
Generally  they are subject to certain  minimum rates,  but the aggregate  rates
payable by an  employer  are  affected by the  employer's  claims  history.  The
Company controls unemployment claims by aggressively contesting unfounded claims
and, when possible,  quickly returning  employees to work by reassigning them to
other worksites.

     The  Company's  primary  operating  expenses are  administrative  personnel
expenses,  other general and  administrative  expenses,  and sales and marketing
expenses.   Administrative  personnel  expenses  include  compensation,   fringe
benefits  and  other  personnel  expenses  related  to  internal  administrative
employees.  Other  general and  administrative  expenses  include  rent,  office
supplies and expenses,  legal and accounting fees, insurance and other operating
expenses.  Sales and marketing expenses include compensation of sales executives
and the marketing staff, as well as marketing and advertising expenses.

     The  Company's  profitability  is  largely  dependent  upon its  success in
managing its  controllable  direct costs.  The Company manages its  controllable
direct costs through its use of (i) its proprietary  managed care system,  which
includes  provider  networks,  utilization  review  and  case  management,  (ii)
educational  programs designed to reduce the severity and frequency of workplace
accidents,  and (iii) a variety of other  techniques,  including  return to work
programs, drug-free workplace programs,  involvement in hiring, disciplinary and
termination decisions,  adjudication of unemployment claims, and reassignment of
laid off workers.

Recent Developments

     In December  1996, the Company  entered into an  arrangement  with Reliance
National   Insurance   Company   ("Reliance   National")  to  provide   workers'
compensation  insurance coverage for 1997 through 1999, at a substantially fixed
cost, subject to a deductible of only $2,000 per medical only claim.  Management
believes that under this policy, the Company's workers'  compensation costs will
be at a rate which is lower than that historically incurred by the Company under
its large deductible workers'  compensation  insurance policy. In addition,  the
policy is anticipated to enhance the  predictability  of the Company's  workers'
compensation  costs because it substantially  eliminates the sensitivity of such
costs to the ongoing  loss  development  and  payment of  workers'  compensation
claims and related reserve  adjustments beyond the $2,000 deductible per medical
only claim.

     The Company's  premium for 1997 is estimated at $5.5 million without giving
effect to the SAI Acquisition, subject to adjustment depending on changes in the
Company's payroll and other factors. The premium paid by the Company in December
1996 is  reflected as prepaid  workers'  compensation  insurance  premium in the
Company's balance sheet at December 31, 1996 and will be amortized over the 1997
policy year. The Company intends to continue to manage its workers' compensation
costs in order to  permit it to take  advantage  of its right to elect to assume
Reliance National's  responsibility for claims up to the first $250,000.  In the
event of such  assumption,  the Company would be paid the excess of a loss fund,
if any, which is calculated  each year,  over amounts paid by Reliance  National
with respect to such  claims.  The amount of the loss fund for 1997 is currently
estimated at $4.2  million.  Also in December  1996 and March 1997,  the Company
entered into agreements with Reliance  National and Commercial Risk Re-Insurance
Company  to  reinsure  substantially  all of the  Company's  responsibility  for
remaining  claims under the Company's  large  deductible  workers'  compensation
insurance  policies for the years 1994, 1995, and 1996 (other than claims of SMG
prior to the date of its acquisition by the Company) for an aggregate premium of
$5.1  million.  As a result,  the  Company has  recorded a deferred  gain in the
amount of  approximately  $1.2  million  which will be  recognized  to income in
future  periods based on the  proportion of cumulative  claims paid to the total
estimated  liability  for claims.  Effective  January 1, 1997,  the Company will
record workers'  compensation  costs based primarily on the fixed portion of the
cost of the policy with Reliance National. See Notes 1, 7 and 16 of the Notes to
Consolidated Financial Statements.

                                       27
<PAGE>


     During  1996,  the  Company  acquired  substantially  all of the assets and
liabilities of SMG in an acquisition accounted for as a purchase, and in January
1997 the Company  acquired SAI by merger in an  acquisition  accounted  for as a
pooling of interests. See Item 1, "Business--Recent Acquisitions," and Note 2 of
Notes to Consolidated Financial Statements.  The financial condition and results
of operations  discussed below include the results of operations since September
1,  1996  of the  business  acquired  from  SMG  and  accordingly,  affects  the
comparability  of the  Company's  1996 results of  operations  to those of prior
years. The financial  information discussed below in "Results of Operations" and
"Liquidity and Capital Resources" has been retroactively restated to include the
assets  and  liabilities  and  results  of  operations  of SAI for  the  periods
presented herein. The Company recognized  nonrecurring  transaction  expenses of
approximately  $165,000  in the first  quarter  of 1997  resulting  from the SAI
Acquisition.

Results of Operations

     The following table sets forth,  for each of 1994,  1995 and 1996,  certain
selected income statement data expressed as a percentage of revenues:

                                                       
                                                        Year Ended December 31,
                                                       1994      1995     1996
                                                     -------- -------- --------
Revenues ............................................ 100.0%   100.0%   100.0%
                                                     -------- -------- --------
Direct costs:
   Salaries, wages and employment taxes of
     worksite employees .............................  88.1%    88.8%    88.2%
   Health care and workers' compensation ............   5.4%     5.2%     4.8%
   State unemployment taxes and other ...............   0.9%     0.7%     0.9%
                                                     -------- -------- --------
     Total direct costs .............................  94.4%    94.7%    93.9%
                                                     -------- -------- --------
Gross profit ........................................   5.6%     5.3%     6.1%
                                                     -------- -------- --------
Operating expenses:
   Administrative personnel .........................   2.1%     2.6%     2.8%
   Other general and administrative, including
     provision for doubtful accounts ................   1.2%     1.4%     1.3%
   Sales and marketing ..............................   0.9%     1.1%     1.1%
   Depreciation and amortization ....................   0.1%     0.1%     0.2%
                                                     -------- -------- --------
     Total operating expenses .......................   4.3%     5.2%     5.4%
                                                     -------- -------- --------
Operating income ....................................   1.3%     0.1%     0.7%
Interest income (expense), net ......................     0%     0.1%     0.2%
                                                     -------- -------- --------
Income before taxes .................................   1.3%     0.2%     0.9%
Provision for income taxes ..........................   0.5%     0.1%     0.3%
                                                     -------- -------- --------
Net income ..........................................   0.8%     0.1%     0.6%
                                                     ======== ======== ========

Year Ended  December  31,  1996  Compared to Year Ended  December  31, 1995
---------------------------------------------------------------------------

     The  Company's  revenues  for the year ended  December 31, 1996 were $473.6
million  compared  to $295.2  million  for the year  ended  December  31,  1995,
representing  an increase of $178.4  million,  or 60.4%.  This  increase was due
primarily  to an  increased  number of PEO clients and  worksite  employees.  In
addition,  $16.1 million of the increase is  attributable  to the  operations of
SMG.  Between December 31, 1995 and December 31, 1996, the number of PEO clients
increased by 72.2%,  from 528 to 909, of which 137 were  acquired  from SMG. The
number of worksite employees  increased 74.8% over the same period,  from 14,060
worksite  employees  to  24,570,  of which  1,987  were  acquired  from SMG.  In
addition,  the Company  earned  approximately  $3.7 million of revenues from its
workers'   compensation   managed  care  services   during  1996,   compared  to
approximately  $570,000  during  1995.  This  increase in workers'  compensation
managed  care  service  revenues  from year to year  resulted  from an increased
number of workers'  compensation managed care clients. Of the Company's workers'
compensation  managed care service revenues of $3.7 million,  approximately $2.6
million resulted from services provided to one new client in 1996.

                                       28
<PAGE>


     Salaries,  wages and  employment  taxes of worksite  employees  were $417.7
million for 1996, compared to $262.2 million for 1995,  representing an increase
of $155.5 million,  or 59.3%.  Salaries,  wages and employment taxes of worksite
employees  were 88.2% of  revenues  for 1996,  compared  to 88.8% for 1995.  The
decrease of  salaries,  wages and  employment  taxes of worksite  employees as a
percentage of revenues was due mainly to incremental revenues from the Company's
specialty managed care services.

     Health care and workers'  compensation  costs were $22.9  million for 1996,
compared to $15.3 million for 1995, representing an increase of $7.5 million, or
49.1%.  This  increase  was due mainly to the higher  volume of health  care and
workers' compensation claims paid and/or reserved during 1996 which was a direct
function of the increase of PEO clients and worksite employees.  Health care and
workers' compensation costs were 4.8% of revenues for 1996, compared to 5.2% for
1995.  The  decrease  of  health  care  and  workers'  compensation  costs  as a
percentage of revenues was due mainly to improved  effectiveness in managing the
frequency  and  severity  of  workers'  compensation  and health  care costs and
incremental revenues from the Company's specialty managed care services.

     State unemployment taxes and other direct costs were $4.2 million for 1996,
compared to $2.1 million for 1995,  representing  an increase of $2.2 million or
105.2%.  This increase was due mainly to the higher volume of salaries and wages
paid during 1996 which was a direct  function of the increase of PEO clients and
worksite employees, an increased number of client companies using other services
and products (e.g.,  401(k), the drug free workplace program,  etc.), as well as
an increase in other direct costs  related to the  Compan's  specialty  managed
care  services.  State  unemployment  taxes and other  direct costs were 0.9% of
revenues  for 1996,  compared to 0.7% for 1995,  primarily  due to  increases in
other direct costs.

     Gross  profit was $28.8  million for 1996,  compared  to $15.7  million for
1995,  representing  an increase of $13.1 million,  or 83.9%,  due mainly to the
increase in revenues resulting from an increase in the number of PEO clients and
worksite employees. Gross profit was 6.1% of revenues for 1996, compared to 5.3%
for 1995.  This  increase  was due  mainly  to the  Company's  effectiveness  in
managing the  frequency  and severity of workers'  compensation  and health care
costs and an increase in revenues  from the  Company's  specialty  managed  care
services which carry a higher margin than the Company's PEO services.

     Administrative  personnel expenses were $13.1 million for 1996, compared to
$7.6 million for 1995,  representing an increase of $5.5 million, or 72.2%. This
increase  was  primarily  attributable  to  increased  staffing  to support  the
Company's  growth,  including  management and senior  executive  personnel.  The
Company  anticipates that this trend in administrative  personnel  expenses will
continue in future periods as a result of the Company's growth and the expansion
of its  service  offerings.  Administrative  personnel  expenses  were  2.8%  of
revenues for the 1996, compared to 2.6% for 1995.

     Other  general and  administrative  expenses,  including  the provision for
doubtful  accounts,  were $6.3  million for 1996,  compared to $4.1  million for
1995, representing an increase of $2.2 million, or 54.3%. This increase in other
general and administrative  expenses was primarily attributable to the growth of
the Company's  business and the addition of workers'  compensation  managed care
services,  which the Company made  available  to external  clients for the first
time in 1995. Other general and administrative expenses, including the provision
for  doubtful  accounts,  were 1.3% of revenues  for 1996,  compared to 1.4% for
1995.

     Sales and  marketing  costs were $5.3  million  for 1996,  compared to $3.3
million  for 1995,  representing  an  increase of $2.0  million,  or 62.3%.  The
increase  reflects the addition of sales  executives  and  marketing  personnel,
consistent  with the  Company's  strategy  to  increase  its client  base in its
existing  markets.  Sales and  marketing  costs were 1.1% of revenues  for 1996,
compared to 1.1% for 1995.

     Net income was $2.7  million for 1996,  compared to $0.3  million for 1995,
representing  an increase of $2.4  million,  or 965.2%.  Earnings per share were
$0.32 for 1996,  compared to $0.04 for 1995,  representing an increase of $0.28,
or 700.0%.

                                       29
<PAGE>


Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
---------------------------------------------------------------------

     The Company's  revenues were $295.2 million for the year ended December 31,
1995,  compared  to  $224.8  million  for the  year  ended  December  31,  1994,
representing  an increase of $70.4  million,  or 31.3%.  This  increase  was due
primarily to an increased number of PEO clients and worksite employees.  Between
December 31, 1994 and December  31,  1995,  the number of PEO clients  increased
31.0%,  from 403 to 528. The number of worksite  employees  increased 32.6% over
the same period,  from 10,207  worksite  employees to 14,060.  In addition,  the
Company earned approximately $570,000 of revenues from its workers' compensation
managed care services in 1995, the first year such services were offered.

     Salaries,  wages and  employment  taxes of worksite  employees  were $262.2
million for 1995, compared to $198.2 million for 1994,  representing an increase
of $64.0 million,  or 32.3%.  Salaries,  wages and employment  taxes of worksite
employees were 88.8% of revenues for 1995, compared to 88.1% for 1994. Salaries,
wages and employment  taxes of worksite  employees  increased as a percentage of
revenues as a result of a change in the  Company's  client mix  towards  clients
having more  favorable  workers'  compensation  risk  profiles  which allows the
Company to charge a lower markup.

     Health care and workers'  compensation  costs were $15.3  million for 1995,
compared to $12.2 million for 1994, representing an increase of $3.1 million, or
25.5%.  Health care and  workers'  compensation  costs were 5.2% of revenues for
1995,  compared to 5.4% for 1994.  This  decrease was due  primarily to improved
efficiency  in managing  the  frequency  and  severity of workers' compensation
claims.

     State unemployment  taxes and other direct costs were relatively  unchanged
from 1994 to 1995. State  unemployment taxes and other direct costs were 0.7% of
revenues for 1995,  compared to 0.9% for 1994. This decrease is due primarily to
improved efficiency in managing state unemployment insurance claims.

     Gross  profit was $15.7  million for 1995,  compared  to $12.6  million for
1994,  representing an increase of $3.1 million, or 24.7%. Gross profit was 5.3%
of revenues for 1995, compared to 5.6% for 1994. This decrease was due primarily
to the loss of a high  margin  contract  with a  significant  behavioral  health
client in the third quarter of 1994 as a result of that client's  acquisition by
a third party.  This contract  represented  approximately  $0.8 million in gross
profit during 1994.

     Administrative  personnel expenses were $7.6 million for 1995,  compared to
$4.7 million for 1994,  representing  an increase of $2.9 million,  or 62.4%. Of
this  increase,   approximately  $1.4  million  was  primarily  attributable  to
increased  staffing  for  the  Company's  workers'   compensation  managed  care
services,  which were made  available to external  clients for the first time in
1995.  The  balance was  primarily  attributable  to an  increase  in  corporate
management  personnel and other general and  administrative  expenses related to
the growth  described  above.  Administrative  personnel  expenses  were 2.6% of
revenues for 1995, compared to 2.1% for 1994.

     Other general and administrative expenses, including provision for doubtful
accounts,  were  $4.1  million  for 1995,  compared  to $2.7  million  for 1994,
representing  an  increase  of  $1.5  million,   or  54.8%.  Other  general  and
administrative  expenses  were 1.4% of revenues  for 1995,  compared to 1.2% for
1994.

     Sales and  marketing  costs were $3.2  million  for 1995,  compared to $2.2
million for 1994,  representing an increase of $1.1 million, or 48.2%. Sales and
marketing costs were 1.1% of revenues for 1995, compared to 0.9% of revenues for
1994. The increase  reflects the addition of sales  executives and a senior vice
president of sales and marketing.

     Net income was $0.3  million for 1995,  compared to $1.9  million for 1994,
representing a decrease of $1.6 million, or 86.4%. Earnings per share were $0.04
for 1995,  compared  to $0.26 for 1994,  representing  a decrease  of $0.22,  or
84.6%.

                                       30
<PAGE>


Liquidity and Capital Resources
-------------------------------

     At December 31,  1996,  the Company had working  capital of $22.2  million,
compared to $1.3 million at December 31, 1995. The increase was primarily due to
the Company's  initial public offering in May 1996 of 2,000,000 shares of Common
Stock from which the Company  received  proceeds of $26.9  million,  net of $3.1
million of  underwriting  discounts,  commissions  and  offering  expenses.  The
Company had $18.7  million in cash at  December 31, 1996.  Of this amount,  $2.3
million  was  restricted  (see  Note  2  of  Notes  to  Consolidated  Financial
Statements).

     The Company's  Amended and Restated  Credit  Agreement  with Fleet National
Bank ("Fleet  Bank")  provided for a $13.0 million  revolving  line of credit of
which (i) an  aggregate  of $8.0  million is  available  for standby  letters of
credit and revolving  credit loans for working  capital  purposes (which working
capital  loans  were  limited to the  lesser of $2.0  million or the  "borrowing
base," an amount  equal to 85% of current  accounts  receivable  from  unrelated
parties),  and (ii) $5.0  million was  available  to finance  acquisitions.  The
Company uses letters of credit  primarily to secure its obligations to reimburse
its former workers'  compensation  insurance  carrier for workers'  compensation
payments  subject to the policy  deductible.  Borrowings  bore interest at rates
based on  Fleet  Bank's  Prime  Rate  plus a  margin  of as much as 0.25% or its
Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) plus a
margin of 1.50% to 2.00%,  depending  on  certain  financial  covenants,  at the
Company's option. The facility was secured by substantially all of the Company's
assets other than the Company's  headquarters  building.  Revolving credit loans
and standby  letters of credit were scheduled to mature on December 31, 1997 and
acquisition  loans  were  to be  repayable  in  36  equal  monthly  installments
commencing June 5, 1998.  Draws against the acquisition  line of credit could be
made  through  June 5, 1998 and were  scheduled to mature not later than June 5,
2001. The credit facility contained covenants that, among other things,  limited
the amount of total  consolidated  debt and liens,  required the  maintenance of
certain  consolidated   financial  ratios,   prohibited  dividends  and  similar
payments, and restricted capital expenditures,  mergers,  dispositions of assets
and certain  business  acquisitions.  The Company was  required to pay an unused
facility fee ranging from .25% to .375% per annum on the facilities.  See Note 8
of Notes to  Consolidated  Financial  Statements.  Under  the  revolving  credit
facility,  the Company had  outstanding  approximately  $6.3  million in standby
letters of credit at December 31, 1996 which guaranteed the payment of claims to
the Company's previous workers' compensation  insurance carrier. As of that date
there were no amounts  outstanding  for  working  capital  advances or under the
acquisition loan facility, and all amounts under these facilities were available
at December 31, 1996.

     In April 1997, the Company entered into a new credit facility providing for
a $50.0 million revolving line of credit. For more information regarding the new
credit  facility,  see the Company's  Form 10-Q for the  quarterly  period ended
March 31, 1997.

     Under  the  Company's  large  deductible  workers'  compensation  insurance
policies for 1994,  1995 and 1996, the Company is required to provide its former
insurance  carriers  with $7.2  million in letters of credit,  of which $6.3 has
been issued by the lenders under the Credit  Agreement.  In connection  with the
reinsurance of the Company's responsibility for remaining claims (the "Remaining
Claims"),  Commercial Risk Re-Insurance Company ("Commercial Risk") has provided
a $4.1  million  letter of credit in favor of the  Company  to secure  Comercial
Risk's obligation for the payment of Remaining Claims. As a result,  the Company
obtained a release of $4.0 million in restricted  cash  previously held by Fleet
Bank as collateral.

     The  Company's  primary  short-term  liquidity  requirements  relate to the
Company's insurance premium requirements under its workers' compensation policy,
software  development,  acquisition of office and computer  equipment to support
its growth,  and the payment of current tax obligations  and other  expenditures
related to the  Company's  growth.  The  Company  currently  has no  significant
capital  commitments for 1997, except for the amounts due to SMG shareholders in
connection with the SMG Acquisition;  however, the Company currently anticipates
capital  expenditures  for 1997 of  approximately  $7.0  million,  primarily for
software  development and computer and office equipment,  and approximately $9.0
million for the prepayment of the workers'  compensation  insurance  premium for
1998.  The Company's  long-term  liquidity  needs are currently  limited to debt
service on the Company's outstanding long-term obligations and income taxes. See
Notes 8 and 12 of Notes to the Consolidated  Financial  Statements.  The Company
continually evaluates potential  acquisitions and the entrance into new markets,
and is considering the possible relocation of its corporate headquarters, any of
which,  if undertaken,  could require  significant  capital  expenditures by the
Company.

                                       31
<PAGE>


     The Company anticipates that available cash, cash flows from operations and
borrowing  availability  under the Amended and Restated Credit Agreement will be
sufficient to satisfy the Company's  liquidity and working capital  requirements
for the  foreseeable  future;  however,  to the extent that the  Company  should
desire to increase its financial flexibility and capital resources or require or
choose to fund future capital commitments from sources other than operating cash
or from borrowings  under its revolving line of credit or its  acquisition  loan
facility,  the Company may  consider  raising  capital  through the  offering of
equity and/or debt securities in the public or private markets,  as well as from
banks.

     Net cash used in operating activities was $4.2 million for 1996 compared to
cash provided by operating  activities of $2.1 million for 1995.  The difference
between the Company's 1996 net income of $2.7 million and its negative operating
cash flow was due primarily to a $12.1 million increase in accounts  receivable,
a $5.5 million increase in prepaid workers'  compensation  insurance premium, an
increase in reinsurance  recoverable of $3.2 million, and an increase in prepaid
expenses and other current assets of $292,000,  partially reduced by an increase
in accrued  salaries,  wages,  and payroll taxes of $6.1 million,  a decrease in
restricted  cash of $4.2 million,  and an increase in reserve for claims of $2.4
million.  The increase in accounts receivable resulted from both a higher number
of PEO clients and worksite  employee  served  during 1996 and the timing of the
payroll cycle. The Company's  accounts  receivable and accrued salaries,  wages,
and payroll taxes are subject to fluctuations  depending on the proximity of the
closing date of the reporting  period to that of the payroll cycle. The increase
in reinsurance  recoverable was due mainly to the transfer of substantially  all
of the Company's  responsibility for remaining claims under its large deductible
workers'   compensation   policies  for  1994,   1995  and  1996.   See  "Recent
Developments" above.

     Net cash used in investing activities was $5.1 million for 1996 compared to
$1.2 million in 1995.  This reflects $2.2 million of the SMG purchase price paid
in cash,  net of cash acquired from SMG of $137,000,  and $1.2 million placed in
escrow in  accordance  with an escrow  agreement for  potential  purchase  price
adjustments,  $2.0 million in expenditures for property and equipment to support
the Company's  growth,  partially offset by redemption of short term investments
of $490,000.

     Net cash  provided  by  financing  activities  was $24.5  million  for 1996
compared to $850,000 used in financing  activities  in 1995.  The 1996 cash flow
reflects the Company's  initial  public  offering  which  generated net offering
proceeds of $26.9  million,  partially  offset by retirement  of a  subordinated
promissory  note in the amount of $1.2  million,  payment of $311,000 of capital
lease obligation (see Note 8 of the Notes to Consolidated  Financial Statements)
and the  funding of a $700,000  distribution  payable  related to the  Company's
repurchase of an option to purchase the Company's headquarters.

New Accounting Pronouncements
-----------------------------

     In March 1995, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of"
("SFAS  No.  121").  SFAS  No.  121  establishes  accounting  standards  for the
impairment of long-lived assets, certain identifiable intangibles,  and goodwill
related  to those  assets to be held and used,  and for  long-lived  assets  and
certain  identifiable  intangibles to be disposed of. SFAS No. 121 requires that
long-lived  assets and  certain  identifiable  intangibles,  held and used by an
entity,  be reviewed for impairment  whenever  events or changes in circumstance
indicate that the carrying amounts of an asset may not be recoverable.  SFAS No.
121 has been adopted by the Company for the year ended  December  31, 1996.  The
adoption of SFAS No. 121 has not had,  and is not  expected to have,  a material
impact on the Company's financial position or results of operations. The Company
reviews the carrying value of its long-lived and intangible assets on an ongoing
basis. If such review  indicates that these values may not be  recoverable,  the
carrying value will be reduced to estimated fair value.

     The FASB has also issued  Statement of Financial  Accounting  Standards No.
123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123"). This statement
defines a fair value based method of accounting for employee stock options. This
statement also permits a company to continue to measure  compensation  costs for
their stock option plans using the  intrinsic  value based method of  accounting
prescribed by Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock  Issued to  Employees."  SFAS No. 123 requires  disclosure  of the pro
forma net income and earnings per share that would be recorded if the fair value
method was utilized.  The Company has adopted the disclosure  provisions of SFAS
No. 123, and retained the intrinsic  value method of accounting  for stock based
compensation. See Note 11 of the Notes to Consolidated Financial Statements.

Inflation
---------
     The Company  believes the effects of inflation  have not had a  significant
impact on its results of operations or financial condition.

                                       32
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

         (c)  Exhibits

Exhibit
   No.                                            Description

11            Statement re Computation of Per Share Earnings.
23            Consent of Price Waterhouse LLP.
27            Financial Data Schedule

                                       33
<PAGE>


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its  behalf by the  undersigned,  thereunto  duly  authorized,  as of the 8th of
March, 1997.

                          THE VINCAM GROUP, INC.


May 8, 1997             By:/s/ STEPHEN L. WAECHTER
Date                       ------------------------------------------------
                           Stephen L. Waechter, Chief Financial Officer,
                           Senior Vice President Finance and Administration
                           (Principal Financial Officer)



May 8, 1997             By:/s/ MARTINIANO J. PEREZ
Date                       --------------------------------------------------
                           Martiniano J. Perez, Vice President and Controller
                           (Principal Accounting Officer)



                                       34

<PAGE>


                             THE VINCAM GROUP, INC.

                                    FORM 8-K

                                  EXHIBIT INDEX



Exhibit
   No.       Description
-------      -----------

  11     Statement re Computation of Per Share Earnings
  23     Consent of Price Waterhouse LLP
  27     Financial Data Schedule



<PAGE>

                                                                   EXHIBIT 11


               STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

                           THE VINCAM GROUP, INC.
                    CALCULATION OF NET INCOME PER COMMON
                        AND COMMON EQUIVALENT SHARE

<TABLE>
<CAPTION>

                                                    
                                                     1994          1995          1996
                                                ------------  ------------  ------------
<S>                                             <C>           <C>           <C>

Net income                                      $ 1,854,036   $   252,789   $ 2,692,782
                                                ============  ============  ============
Weighted average number of common shares
  outstanding during the period                   6,769,341     5,606,288     7,359,893

Assumed exercise of stock options, net of
  treasury shares acquired                          460,316       460,316       516,164

Issuance of mandatorily redeemable preferred
  stock deemed a common stock equivalent              --          927,414       454,754
                                                ------------  ------------  ------------
Weighted average number of shares used in
  earnings per share calculation                  7,229,657     6,994,018     8,330,811
                                                ============  ============  ============
Net income per common and common
  equivalent share                              $      0.26   $      0.04   $      0.32
                                                ============  ============  ============
Fully diluted net income per common
  and common equivalent share *                 $      0.26   $      0.04   $      0.32
                                                ============  ============  ============
</TABLE>


------------------------------  

   * In  accordance  with the  provisions  of the  Accounting  Principles  Board
     Opinion No. 15, Earnings per Share, fully diluted net income per common and
     common  equivalent  share is not  presented in the  Company's  consolidated
     statements of income due to the fact that the aggregated  dilution from the
     Company's common stock equivalents  outstanding  during each of the periods
     presented is less than 3%.


<PAGE>


                                                                   EXHIBIT 23


              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



     We hereby  consent to the  incorporation  by reference in the  Registration
Statement  on Form S-8 (File No.  333-08003)  of The Vincam  Group,  Inc. of our
report dated  February 21, 1997,  which  appears on page 3 of The Vincam  Group,
Inc.'s  Current  Report  on Form 8-K  dated  May 8,  1997  (Commission  File No.
0-28148), relating to the pooled consolidated financial statements of The Vincam
Group, Inc.


/s/  PRICE WATERHOUSE LLP

Miami, Florida
May 8, 1997




<PAGE>
[{"type": "8-K", "sequence": "1", "description": "POOLED CONSOLIDATED FINANCIAL STATEMENTS", "secsgml_size_bytes": 135918}]
{"company-data": {"conformed-name": "VINCAM GROUP INC", "cik": "0001008896", "assigned-sic": "7363", "irs-number": "592452823", "state-of-incorporation": "FL", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-28148", "film-number": "97600005"}, "business-address": {"street1": "2850 DOUGLAS RD", "city": "CORAL GABLES", "state": "FL", "zip": "33134", "phone": "3054602350"}, "mail-address": {"street1": "2850 DOUGLAS RD", "city": "CORAL GABLES", "state": "FL", "zip": "33134"}}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

          Date of Report (Date of earliest event reported): May 8,1996
                                                           ------------

                             THE VINCAM GROUP, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Florida                        0-28148                 59-2452823
-------------------------------   ------------------------   -------------------
(State or other jurisdiction of   (Commission File Number)    (I.R.S. Employer
incorporation or organization)                               Identification No.)

                 2850 Douglas Road Coral Gables, Florida 33134
              ---------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                                 (305) 460-2350
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not applicable
         --------------------------------------------------------------
         (Former name and former address, if changed since last report)

                                       1
ITEM 5.  OTHER EVENTS

     On January 7, 1997, The Vincam Group,  Inc. (the "Company")  acquired Staff
Administrators,   Inc.   ("SAI"),   a  privately  held   professional   employer
organization ("PEO") headquartered in Denver,  Colorado (the "SAI Acquisition").
The Company issued 500,000 shares of its common stock in exchange for all of the
outstanding  shares of common stock of SAI. The  transaction  has been accounted
for  in  accordance  with  the  pooling  of  interests   accounting   treatment;
accordingly,  all prior period financial  statements  presented herein have been
retroactively  restated  to include  the assets and  liabilities  and results of
operations of SAI. In connection  with the  acquisition of SAI, the Company also
acquired,  in a transaction accounted for as a purchase, a 49% minority interest
in Staff Administrators of Western Colorado, Inc. ("SAWCI"), a 51% subsidiary of
SAI (the "SAWCI  Acquisition").  The Company  issued 20,000 shares of its common
stock for the 49% interest in SAWCI.

     The following  information presents the audited pooled consolidated results
of  operations  for the years ended  December 31, 1994,  1995 and 1996,  and the
pooled  consolidated  balance  sheets as of  December  31,  1995 and 1996 of the
Company and SAI.

              INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
                                                                           Page
The Vincam Group, Inc.

Report of Independent Certified Public Accountants...........................3

Balance Sheets as of December 31, 1995 and 1996..............................4

Consolidated Statements of Income for the Years Ended
 December 31, 1994, 1995 and 1996............................................5

Consolidated Statement of Changes in Stockholders'
 (Deficit) Equity for the Years Ended December 31, 1994,
 1995 and 1996...............................................................6

Consolidated Statements of Cash Flows for the Years
 Ended December 31, 1994, 1995 and 1996......................................7

Notes to Consolidated Financial Statements...................................9

                                       2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
The Vincam Group, Inc.

     In  our  opinion,  the  consolidated  financial  statements  listed  in the
accompanying  index  present  fairly,  in all material  respects,  the financial
position of The Vincam Group, Inc. and its subsidiaries at December 31, 1995 and
1996 and the  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity  with generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial  statements based on our audits. We did not audit the
financial  statements of Staff  Administrators,  Inc. which  statements  reflect
total  assets of  $4,791,571  and  $5,723,717  at  December  31,  1995 and 1996,
respectively, and total revenues of $33,310,475, $55,824,216 and $77,975,919 for
each of the three years in the period ended December 31, 1996.  Those statements
were audited by other  auditors  whose report  thereon has been furnished to us,
and our opinion expressed herein,  insofar as it relates to the amounts included
for Staff  Administrators,  Inc.,  is based  solely  on the  report of the other
auditors.  We  conducted  our  audits of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

PRICE WATERHOUSE LLP

Miami, Florida
February 21, 1997

                                       3
THE VINCAM GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                  December  31,     December 31,
                                                     1995              1996
                                                  -------------    -------------
                    Assets
Current assets:
  Cash and cash equivalents....................   $  1,169,570     $ 16,374,288
  Investments..................................        639,232          149,626
  Restricted cash..............................      5,290,955        2,331,917
  Accounts receivable  ........................      9,569,376       22,111,756
  Due from affiliates..........................        187,323          235,927
  Deferred taxes...............................      1,440,682        1,457,280
  Reinsurance recoverable......................         --            1,728,000
  Prepaid worker' compensation insurance 
   premium.....................................         --            5,483,972
  Prepaid expenses and other current assets....        489,834          784,159
                                                   ------------    -------------
         Total current assets..................     18,786,972       50,656,925

  Property and equipment, net..................      2,686,977        4,164,596
  Deferred taxes...............................        694,678          628,626
  Reinsurance recoverable......................         --            1,472,000
  Client contracts and other assets............        441,735        1,686,176
  Goodwill, net of accumulated amortization 
   of $64,228..................................         --            4,791,836
                                                  -------------    -------------
                                                  $ 22,610,362     $ 63,400,159
                                                  =============    =============

                 Liabilities and Stockholders' (Deficit) Equity

Current liabilities:
  Accounts payable and accrued expenses........   $  2,857,208     $  3,406,633
  Accrued salaries, wages and payroll taxes....      8,054,486       15,364,364
  Amounts due under acquisition agreement .....         --            2,623,437
  Reserve for claims...........................      3,562,876        5,085,016
  Income taxes payable.........................        638,487        1,307,576
  Current portion of long term borrowings......      1,412,121           89,167
  Distribution payable.........................        700,000            --
  Deferred compensation........................        263,000          242,013
  Deferred gain................................         --              323,157
                                                  -------------    -------------
         Total current liabilities.............     17,488,178       28,441,363
                                        
Long term borrowings, less current portion.....      1,243,610          807,883
Reserve for claims.............................      1,556,615        2,846,188
Income taxes payable...........................      1,386,323          672,818
Deferred compensation, due principally 
 to stockholders...............................        294,300           41,200
Deferred gain..................................         --              275,275
Other liabilities..............................         45,338           45,338
                                                  -------------    -------------
         Total liabilities.....................     22,014,364       33,130,065
                                                  -------------    -------------
Preferred stock, $.01 par value, 20,000,000 
 shares authoized, 165.376 shares mandatorily 
 redeemable Series A Preferred Stock issued 
 and outstanding in 1995.......................      6,263,610            --
                                                  -------------    -------------
Commitments and contingencies (Note 14)........         --                --
                                                  -------------    -------------
Stockholders' (deficit) equity:
Common stock, $.001 par value, 60,000,000 
 shares authorized, 4,956,066 and 8,013,332
 and shares issued and outstanding in 1995 
 and 1996, respectively........................          4,956            8,013
Additional paid in capital.....................           --         33,241,867
Accumulated deficit............................     (5,672,568)      (2,979,786)
                                                  -------------    -------------
         Total stockholders' (deficit) equity..     (5,667,612)      30,270,094
                                                  -------------    -------------
                                                  $ 22,610,362     $ 63,400,159
                                                  =============    =============
                                       4
THE VINCAM GROUP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
                                                  -----------------------------------------------
                                                      1994             1995             1996
                                                  -------------    -------------    -------------
Revenues......................................... $224,843,043     $295,231,926     $473,595,457
                                                  -------------    -------------    -------------
Direct costs:
    Salaries, wages and employment
      taxes of worksite employees................  198,162,489      262,186,958      417,718,271
    Health care and workers' compensation........   12,212,883       15,330,888       22,861,174
    State unemployment taxes and other...........    1,911,734        2,056,824        4,220,633
                                                  -------------    -------------    -------------
           Total direct costs....................  212,287,106      279,574,670      444,800,078
                                                  -------------    -------------    -------------
Gross profit.....................................   12,555,937       15,657,256       28,795,379
                                                  -------------    -------------    -------------
Operating expenses:
    Administrative personnel.....................    4,663,598        7,571,833       13,041,095
    Other general and administrative.............    2,617,433        3,924,233        5,911,572
    Sales and marketing..........................    2,190,923        3,247,650        5,290,693
    Provision for doubtful accounts..............       40,000          189,090          434,300
    Depreciation and amortization................      217,977          375,078          805,331
                                                  -------------    -------------    -------------
           Total operating expenses..............    9,729,931       15,307,884       25,482,991
                                                  -------------    -------------    -------------
Operating income.................................    2,826,006          349,372        3,312,388
Interest (expense) income, net...................          911          142,834          696,707
                                                  -------------    -------------    -------------
Income before taxes..............................    2,826,917          492,206        4,009,095
Provision for income taxes.......................     (972,881)        (239,417)      (1,316,313)
                                                  -------------    -------------    -------------
Net income ...................................... $  1,854,036     $    252,789     $  2,692,782
                                                  =============    =============    =============
Net income per common and common
    equivalent share............................. $       0.26     $       0.04     $       0.32
                                                  =============    =============    =============
Weighted average number of shares
    outstanding used in earnings per
    share calculation............................    7,229,657        6,994,018        8,330,811
                                                  ============     =============    =============
5
THE VINCAM GROUP, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Retained
                                                        Common Stock             Additional        Earnings
                                                   -------------------------      Paid in        (Accumulated
                                                     Shares       Par Value       Capital          Deficit)           Total
                                                   -----------   -----------   --------------   ---------------   -------------
Balance at January 1, 1994.......................   6,249,341    $    6,249    $      42,156    $      385,918    $    434,323

Net income.......................................          --            --               --         1,854,036       1,854,036
                                                   -----------   -----------   --------------   ---------------   -------------
Balance at December 31, 1994.....................   6,249,341         6,249           42,156         2,239,954       2,288,359

Acquisition of shares............................    (249,342)         (249)         (42,156)       (1,457,595)     (1,500,000)

Recapitalization, including
 transaction costs of $445,150 charged
 to retained earnings............................  (1,043,933)       (1,044)              --        (6,707,716)     (6,708,760)

Net income.......................................          --            --               --           252,789         252,789
                                                   -----------   -----------   --------------   ---------------   -------------
Balance at December 31, 1995.....................   4,956,066         4,956               --        (5,672,568)     (5,667,612)

Issuance of common stock, net of
   transaction costs of $3,058,685
   charged to paid in capital....................   2,000,000         2,000       26,939,315                --      26,941,315

Conversion of preferred stock into
   common stock..................................   1,043,933         1,044        6,262,566                --       6,263,610

Issuance of common stock to
   employees under stock option plans............      13,333            13           39,986                --          39,999

Net income.......................................          --            --               --         2,692,782       2,692,782
                                                  ------------   -----------   --------------   ---------------   -------------
Balance at December 31, 1996.....................   8,013,332    $    8,013    $  33,241,867    $   (2,979,786)   $ 30,270,094
                                                  ============   ===========   ==============   ===============   =============
6
THE VINCAM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
                                                                  ------------------------------------------------
                                                                       1994             1995              1996
                                                                  -------------     -------------    -------------
Cash flows from operating activities:
   Net income.................................................    $  1,854,036      $    252,789     $  2,692,782
   Adjustments to reconcile net income to net cash
     provided by  (used in) operating activities:
     Depreciation and amortization............................         217,977           375,078          805,331
     Provision for doubtful accounts..........................          40,000           189,090          434,300
     Deferred gain............................................              --                --          598,432
     Deferred income tax (benefit) expense....................        (415,514)         (573,611)          49,454
     Changes in assets and liabilities:
       (Increase) decrease in restricted cash.................      (2,952,582)           79,579        4,209,038
       Increase in accounts receivable........................      (2,312,498)       (2,946,817)     (12,093,493)
       Increase in due from affiliates........................         (68,504)           (8,350)         (48,604)
       Increase in reinsurance recoverable....................              --                --       (3,200,000)
       Increase in prepaid workers' compensation
         insurance premium....................................              --                --       (5,483,972)
       Increase in prepaid expenses and  other
         current assets.......................................         (51,204)         (314,716)        (292,369)
       Increase in other assets...............................         (81,658)          (41,361)        (197,460)
       Increase in accounts payable and
         accrued expenses.....................................         434,120         1,297,576          187,204
       Increase in accrued salaries, wages and payroll  taxes.       1,792,881         1,811,101        6,085,090
       Increase in reserve for claims.........................       2,212,782         1,688,475        2,381,243
       Increase (decrease) in income taxes payable............         189,096           345,593          (44,416)
       Decrease in deferred compensation......................              --                --         (274,087)
       Increase (decrease) in other liabilities...............          25,104           (40,000)              --
                                                                  -------------     -------------    -------------
Net cash provided by (used in) operating activities...........         884,036         2,114,426       (4,191,527)
                                                                  -------------     -------------    -------------
Cash flows from investing activities:
   Purchases of property and equipment........................        (797,592)         (519,775)      (2,117,133)
   Acquisition of client contracts............................              --          (117,440)         (29,295)
   (Issuance) collection of notes receivable from stockholders        (123,078)          123,078               --
   Cash placed in escrow in connection with acquisition of SMG              --                --       (1,250,000)
   Cash paid in acquisition of SMG, net of cash
     acquired of $137,748.....................................              --                --       (2,219,566)
   Cash paid in acquisition of minority interest..............          (8,105)               --               --
   (Purchase) redemption of short term investments............        (271,166)         (639,232)         489,606
                                                                  -------------     -------------    -------------
Net cash used in investing activities.........................      (1,199,941)       (1,153,369)      (5,126,388)
                                                                  -------------     -------------    -------------
Cash flows from financing activities:
   Principal payments on borrowings...........................        (215,716)         (107,157)      (1,758,681)
   Recapitalization costs.....................................              --          (445,150)              --
   Cash paid in connection with acquisition of stock..........              --          (300,000)              --
   Issuance of common stock, net of transaction
     costs of $3,058,685......................................              --                --       26,941,315
   Payment of distribution payable............................              --                --         (700,000)
   Issuance of common stock to employees under stock plans....              --                --           39,999
                                                                  -------------     -------------    -------------
Net cash (used in) provided by financing activities...........        (215,716)         (852,307)      24,522,633
                                                                  -------------     -------------    -------------
Net (decrease) increase in cash and cash equivalents..........        (531,621)          108,750       15,204,718
Cash and cash equivalents, beginning of year..................       1,592,441         1,060,820        1,169,570
                                                                  -------------     -------------    -------------
Cash and cash equivalents, end of year........................    $  1,060,820      $  1,169,570     $ 16,374,288
                                                                  =============     =============    =============
Supplemental disclosures of cash flow information:
Cash paid during the year for
       Interest...............................................    $     91,941      $    183,242     $    138,101
                                                                  =============     =============    =============
       Income taxes...........................................    $  1,017,438      $    473,010     $  1,155,366
                                                                  =============     =============    =============
7
THE VINCAM GROUP, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Supplemental disclosure of non-cash financing activities:

Acquisition of assets and liabilities of The Stone Mountain Group, Inc.

     On August 30, 1996, the Company  acquired  substantially  all of the assets
and  liabilities of The Stone Mountain  Group,  Inc.  ("SMG"),  in a transaction
accounted  for as a  purchase.  The  fair  value  of  the  assets  acquired  and
liabilities assumed, and the consideration paid were as follows:

Fair value of net assets acquired:
Client contracts....................................        $   1,300,000
Accounts receivable.................................              883,187
Property and equipment..............................               10,231
                                                            --------------
Fair value of non-cash assets acquired..............            2,193,418
                                                            --------------
Accounts payable and accrued expenses...............              362,221
Accrued salaries, wages and payroll taxes...........            1,224,788
Other liabilities...................................              430,470
                                                            --------------
Fair value of liabilities assumed...................            2,017,479
                                                            --------------
Fair value of net assets acquired, excluding cash...              175,939
Cash acquired.......................................              137,748
                                                            --------------
Fair value of net assets acquired...................        $     313,687
                                                            ==============

Promissory notes payable to SMG shareholders........        $   1,373,437
Cash placed in escrow...............................            1,250,000
Cash paid for acquisition of SMG....................            2,357,314
                                                            --------------
Purchase price......................................        $   4,980,751
                                                            ==============

     The following is a  reconciliation  of the purchase  price to the excess of
costs  associated  with the  acquisition  over the  estimated  fair value of net
assets acquired allocated to goodwill:

Purchase price......................................        $   4,980,751
Net assets acquired.................................             (313,687)
Costs associated with the acquisition...............              189,000
                                                            --------------
Amount allocated to goodwill........................        $   4,856,064
                                                            ==============

     In connection with the acquisition of the assets of SMG, the Company issued
promissory notes for $1,373,437 due in 1997 and placed in escrow $1,250,000,  in
accordance with an escrow agreement for potential  purchase price adjustments in
the event that,  among other  things,  client  retention  fails to meet  certain
targets.

     In January  1995,  the  Company  issued a  subordinated  note  payable  for
$1,200,000 as partial consideration for shares reacquired by the Company.

     During  February  1995,  the Company and its  stockholders  entered into an
Agreement  and  Plan of  Recapitalization  whereby  the  Company's  stockholders
exchanged a portion of their shares of common stock for approximately 166 shares
of Series A Participating  Convertible  Preferred Stock valued at  approximately
$6,264,000.

     During  1995,  the  Company  acquired  $334,054 of  computer  hardware  and
software under a capital lease agreement.

                                       8
THE VINCAM GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1994, 1995 and 1996

NOTE 1- NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Vincam Group, Inc. and its subsidiaries ("Vincam" or the "Company") are
a professional  employer organization ("PEO") engaged primarily in the provision
of human resource management and personnel administration services. In addition,
the Company provides certain managed care services, including managed behavioral
health  care,  employee  assistance  programs,   drug-free  workplace  programs,
utilization review services,  comprehensive  workers' compensation managed care,
risk management and loss containment services.

     The Company  provides  PEO  services  primarily  to small and medium  sized
companies  in a variety of  industries,  including  manufacturing,  retail,  and
hospitality. Managed care services are provided to PEO clients and to health and
workers'  compensation  insurance companies,  health maintenance  organizations,
other managed care providers and large, self insured employers.

     PEO service  contracts  with client  companies  are  generally for one year
terms with  automatic  renewal  options and subject to termination on a 30 days'
notice by either party during the first year and  annually  thereafter.  Managed
care  contracts  with clients are for terms of one or more years and are subject
to  cancellation  by either party upon 30 to 180 days'  notice  depending on the
nature of the services provided.

     The Company does not have a concentration of customers in any one industry;
however,  during 1994,  1995 and 1996, a  significant  portion of the  Company's
revenues were generated in South Florida.  The Company's  revenues are generated
predominantly by PEO services.

     A  summary  of  the  significant   accounting   policies  followed  in  the
preparation of the accompanying  consolidated  financial statements is presented
below:

     Principles of consolidation.  The accompanying financial statements include
the accounts of The Vincam Group,  Inc. and its principal  subsidiaries,  Vincam
Human  Resources,  Inc.  ("VHR"),  Vincam/Staff  Administrators,  Inc.  ("SAI"),
Psych/Care,  Inc.  ("Psych/Care") and Vincam Occupational Health Services,  Inc.
("VOHS").   All  material  intercompany  balances  and  transactions  have  been
eliminated.

     Revenue recognition. Revenues and the related costs of wages, salaries, and
employment  taxes  from  professional  employer  services  related  to  worksite
employees  are  recognized  in the  period in which the  employee  performs  the
service.  Because  the  Company  is  at  risk  for  all  of  its  direct  costs,
independently  of whether  payment is received from its clients,  and consistent
with industry  practice,  all amounts  billed to clients for gross  salaries and
wages,  related  employment  taxes,  and health care and  workers'  compensation
coverage are  recognized  as revenue by the Company.  The Company  establishes a
reserve for doubtful  accounts when it determines  that collection from a client
is unlikely.

     Revenues from behavioral  health services are recognized  during the period
in which the  Company is  obligated  to provide  behavioral  health  services to
participants.  Revenues  from risk  management,  loss  containment  and workers'
compensation  managed care  services are  recognized  in the period in which the
services are performed.

     Accounting  estimates.  The  preparation of financial  statements  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting period.  The more significant  estimates relate to
the  Company's  reserve  for  claims.  Actual  results  could  differ from those
estimates.

                                       9
Reserve  for claims.  The  Company's  workers'  compensation  benefits  and
certain of its health care benefits are provided under large deductible  insured
plans.  The Company records  reserves for workers'  compensation and health care
claims costs based on actuarial calculations using the Company's loss history of
workers'  compensation and health care claims,  including  estimates of incurred
but not reported  claims.  Prior to 1994,  the Company's  workers'  compensation
insurance was under a loss-sensitive  retrospectively  rated plan which provided
for retroactive premium adjustments based on actual loss experience.

     In December  1996,  the Company  entered into an agreement  with a national
insurance  company  to  provide  guaranteed  fixed  cost  workers'  compensation
insurance  coverage for 1997 through 1999, subject to a deductible of $2,000 per
medical only claim.  Accordingly,  effective  January 1, 1997,  the Company will
record workers'  compensation  costs based primarily on the fixed portion of the
premium of its workers' compensation insurance policy.

     In addition,  in December  1996,  the Company  entered into an agreement to
reinsure  its  remaining  claims,   other  than  those  acquired  upon  the  SAI
Acquisition  (see  Note  2),  under  the  Company's  large  deductible  workers'
compensation  insurance  policies  for the years 1994,  1995,  and 1996,  for an
aggregate  premium of  $3,200,000.  As a result,  the Company has  recorded  the
premium as a reinsurance  recoverable  at December 31, 1996,  and has recorded a
deferred gain in the amount of  approximately  $600,000 which will be recognized
to income in future periods based on the proportion of cumulative claims paid to
the total estimated liability for claims.

     At December 31, 1995 and 1996,  the Company has  classified  as current the
estimated amounts of reserves established for claims and reinsurance recoverable
expected to be paid and to be collected,  respectively, within one year, as well
as the related deferred gain expected to be recognized within one year.

     Property  and  equipment.  Property  and  equipment  are  recorded at cost.
Depreciation  and  amortization are computed using the straight line method over
the estimated useful lives of the respective assets. Repairs and maintenance are
charged to expense as incurred, while expenditures which extend the useful lives
of the assets are capitalized.

     Goodwill.  Assets and  liabilities  acquired in  connection  with  business
combinations  accounted  for under the  purchase  method are  recorded  at their
respective estimated fair values. Goodwill represents the excess of the purchase
price over the fair value of net assets  acquired,  including the recognition of
applicable  deferred taxes, and is amortized on a straight-line  basis over a 25
year period. The Company reviews long-lived assets, identifiable intangibles and
goodwill and reserves for impairment whenever events or changes in circumstances
indicate the carrying amount of the assets may not be fully recoverable.

     Advertising  costs.  Advertising  expenditures are charged to operations as
incurred.  Advertising  expense  amounted to $333,600,  $386,123 and $547,698 in
1994, 1995 and 1996, respectively.

     Client  contracts.  Costs  incurred in connection  with the  acquisition of
client contracts from other professional employer organizations,  as well as the
fair market value of contracts  acquired in connection  with  purchase  business
combinations,  are capitalized and amortized using the straight line method over
a period of 5 to 15 years,  based on the term of the client contracts and/or the
previous  professional  employer organization client retention rate. The Company
periodically  assesses the status of contracts  acquired to determine the future
realizability  of the  capitalized  costs.  At December  31, 1995 and 1996,  the
Company had recorded client  contracts of $117,440 and $1,430,951,  respectively
(net of accumulated amortization of $0 in 1995 and $59,183 in 1996).

     Cash  and cash  equivalents.  Cash  equivalents  include  investments  with
original  maturities  of three  months  or less  and are  stated  at cost  which
approximates market value.

     Income taxes.  The Company  records  income tax expense using the liability
method of  accounting  for deferred  income taxes.  Under the liability  method,
deferred tax assets and  liabilities  are recognized for the expected future tax
consequences of temporary differences between the financial statement and income

                                       10
tax bases of the Company's assets and liabilities. An allowance is recorded when
it is more likely  than not that any or all of a deferred  tax asset will not be
realized.  The provision for income taxes includes taxes currently  payable plus
the net change during the year in deferred tax assets and  liabilities  recorded
by the Company.

     The  Company is subject to certain  state  taxes  based on gross  receipts,
payroll and taxable income within that state.  Taxes based on gross receipts and
payroll are  classified  as  salaries,  wages and  employment  taxes of worksite
employees in the  accompanying  consolidated  statements of income,  while taxes
based on income are included in the provision for income taxes.

     Net income per common and common  equivalent  share.  Net income per common
and common  equivalent  share has been  computed  based on the weighted  average
number of shares of common stock and common stock equivalents outstanding during
each of the three years ended  December 31, 1996.  The Company has considered as
outstanding  common  stock  equivalents  during  each of the three  years  ended
December 31, 1996,  options  awarded to employees  and  directors of the Company
(see Notes 10 and 11). For purposes of the  calculation of net income per common
and common equivalent share, the mandatorily  redeemable preferred stock is also
considered a common stock equivalent.

     Net income per common and common  equivalent  share amounts for each of the
years presented have been calculated giving retroactive effect to an approximate
8,417 for 1 stock split effected by the Company in June 1995 and a 3 for 4 split
effected on February 21, 1996  (jointly,  the "Stock  Splits," see Note 10). All
common and common equivalent share amounts have also been retroactively adjusted
to reflect the Stock Splits.

     Stock  based   compensation.   Effective  1996,  the  Company  adopted  the
disclosure  provisions  of Statement of Financial  Accounting  Standard No. 123,
Accounting for Stock Based Compensation  ("SFAS 123") and retained the intrinsic
value method of accounting for such stock based compensation (see Note 11).

     Fair value of financial instruments.  The Company estimates the fair market
value of financial  instruments through the use of public market prices,  quotes
from  financial  institutions  and  other  available  information.  Considerable
judgment is required in interpreting  data to develop  estimates of market value
and, accordingly, amounts are not necessarily indicative of the amounts that the
Company could  realize in a current  market  exchange.  At December 31, 1995 and
1996,  the Company's  financial  instruments  consist  primarily of  instruments
without  extended  maturities,  the fair value of which,  based on  management's
estimates, equaled their carrying values.

NOTE 2 - ACQUISITIONS

     On August 30, 1996, the Company  acquired  substantially  all of the assets
and liabilities of The Stone Mountain Group, Inc. ("SMG"),  a PEO in Snellville,
Georgia  for  $4,980,751  in cash and  notes  (the  "SMG  Acquisition").  Of the
$4,980,751  purchase price,  $2,357,314 was paid at closing,  $1,373,437 will be
payable in 1997,  and  $1,250,000  was placed in escrow for  potential  purchase
price adjustments in the event that, among other things,  client retention fails
to meet certain  targets.  The SMG  Acquisition was accounted for by the Company
using the purchase method of accounting. Excess of costs over the estimated fair
value of net assets  acquired of $4,856,064  associated with the SMG Acquisition
was allocated to goodwill, and is being amortized over a period of 25 years. The
most  significant  adjustments  to the  balance  sheet  resulting  from  the SMG
Acquisition are disclosed in the supplemental  disclosure of non-cash  investing
and financing activities in the accompanying statement of cash flows.

     The following  information  presents the  unaudited pro forma  consolidated
results of operations  of the Company for the years ended  December 31, 1995 and
1996 as if the SMG  Acquisition  had  occurred on January 1, 1995,  after giving
effect to certain adjustments.

                                       December 31,              December 31,
                                           1995                      1996
                                     ---------------           ---------------
                                        
Revenues.........................    $  337,148,831            $  505,567,360
                                     ===============           ===============
Net income.......................    $      710,498            $    2,508,064
                                     ===============           ===============
Net income per common and
  common equivalent share........    $         0.06            $         0.30
                                     ===============           ===============

     These  results are presented  for  informational  purposes only and are not
necessarily indicative of the future results of operations or financial position
of the Company or the results of operations or financial position of the Company
that would have been achieved had the acquisition  actually  occurred on January
1, 1995.
                                       11
On  January  7, 1997,  the  Company  acquired  Staff  Administrators,  Inc.
("SAI"),  a privately held PEO  headquartered in Denver,  Colorado.  The Company
issued 500,000 shares of its common stock in exchange for all of the outstanding
shares  of  common  stock of SAI.  The  transaction  has been  accounted  for in
accordance with the pooling of interests accounting treatment;  accordingly, all
prior  period  financial  statements  presented  herein have been  retroactively
restated to include the assets and liabilities and results of operations of SAI.
In  connection  with the  acquisition  of SAI, the Company also  acquired,  in a
transaction  accounted  for as a  purchase,  a 49%  minority  interest  in Staff
Administrators of Western Colorado, Inc. ("SAWCI"), a 51% subsidiary of SAI (the
"SAWCI Acquisition").  The Company also issued 20,000 shares of its common stock
for the 49% interest in SAWCI. The most  significant  adjustments to the balance
sheet  resulting from the SAWCI  Acquisition  include an increase in goodwill of
$566,641 and an increase in client contracts of $301,848.

     The following combines audited selected historical financial information of
SAI and  Vincam  for the years  ended  December  31,  1994,  1995 and 1996,  and
reflects the most significant adjustments resulting from the SAI Acquisition.
DECEMBER 31, 1994
                              -------------------------------------------------------------
                                                                                 POOLED
                                 VINCAM            SAI         ADJUSTMENTS       RESULTS
                              -------------   -------------   -------------   -------------
Revenues..................... $191,532,568    $ 33,310,475    $       --      $224,843,043
                              =============   =============   =============   =============
Net income................... $  1,799,950    $     54,086    $       --      $  1,854,036
                              =============   =============   =============   =============
Net income per common and
  common equivalent share.... $       0.27    $       --      $       --       $       0.26
                              =============   =============   =============   =============

                                                      DECEMBER 31, 1995
                              -------------------------------------------------------------
                                                                                 POOLED
                                 VINCAM            SAI         ADJUSTMENTS       RESULTS
                              -------------   -------------   -------------   -------------
                                        
Revenues..................... $239,407,710    $ 55,824,216    $       --      $295,231,926
                              =============   =============   =============   =============
Net income................... $    809,837    $   (557,048)   $       --      $    252,789
                              =============   =============   =============   =============
Net income per common and
  common equivalent share.... $       0.13    $       --      $       --      $       0.04
                              =============   =============   =============   =============

                                                      DECEMBER 31, 1996
                              -------------------------------------------------------------
                                                                                 POOLED
                                 VINCAM            SAI         ADJUSTMENTS       RESULTS
                              -------------   -------------   -------------   -------------
                                        
Revenues..................... $395,619,538    $ 77,9754,919   $       --      $473,595,457
                              =============   =============   =============   =============
Net income................... $  3,585,976    $   (893,194)   $       --      $  2,692,782
                              =============   =============   =============   =============
Net income per common and
  common equivalent share.... $       0.46    $       --      $       --      $       0.32
                              =============   =============   =============   =============
12
NOTE 3 - INITIAL PUBLIC OFFERING

     In May 1996, the Company completed its initial public offering and received
proceeds of approximately $27,900,000,  net of $2,100,000 underwriting discounts
and  commissions,  from the sale of  2,000,000  shares  of  common  stock of the
Company.  The Company  used a portion of the  proceeds to retire a  subordinated
promissory  note in the amount of $1,200,000  (see Note 8) and to pay a $700,000
distribution  payable  related  to the  Company's  repurchase  of an  option  to
purchase  the  Company's   headquarters.   In  addition,  the  Company  incurred
approximately   $960,000  in  other  costs  in  connection  with  the  offering.
Simultaneously with the completion of the initial public offering, the Company's
mandatorily  redeemable Series A Participating  Convertible Preferred Stock (the
"Series A Preferred Stock") was converted into 1,043,933 shares of the Company's
common stock (see Note 9).

     Also in connection  with the  completion of the  Company's  initial  public
offering,  the Company  amended and restated its  Articles of  Incorporation  to
increase  the  authorized  number of shares of the  Company's  common stock from
39,500,000 to  60,000,000,  and to increase the  authorized  number of shares of
preferred stock from 500,000 to 20,000,000.

NOTE 4 - RESTRICTED CASH

     The Company had cash  deposits at December 31, 1995 and 1996 of  $5,290,955
and  $1,081,917,  respectively,  which served as collateral  on certain  standby
letters of credit issued in connection with the Company's workers'  compensation
insurance plan (see Notes 7 and 8).

     In  connection  with  the  SMG  Acquisition,  the  Company  has  in  escrow
$1,250,000.  At December 31,  1996,  the escrow  funds have been  classified  as
restricted  cash in the  accompanying  consolidated  balance sheet (see Note 2).

NOTE 5 - ACCOUNTS RECEIVABLE

     At  December  31,  1995 and  1996,  accounts  receivable  consisted  of the
following:

                                                 1995           1996
                                            ------------   ------------
Billed to clients ........................  $ 3,188,922    $ 7,935,584
Unbilled revenues ........................    6,565,045     14,752,822
                                            ------------   ------------
                                              9,753,967     22,688,406
Less:  allowance for doubtful accounts....     (184,591)      (576,650)
                                            ------------   ------------
                                            $ 9,569,376    $22,111,756
                                            ============   ============

                                       13
NOTE 6 - PROPERTY AND EQUIPMENT

     Property  and  equipment  consist  of  the  following  as of  December  31:

                                                                       Estimated
                                                                        Useful
                                                                        Lives
                                             1995            1996     (In Years)
                                        ------------    ------------  ----------
Land................................    $   284,374     $   284,374
Building............................        775,158         775,158        30
Building improvements...............        529,146         551,012         7
Furniture and fixtures..............        369,782         747,227         5
Office and computer equipment.......      1,512,077       3,240,515        3-5
Vehicles............................         43,188          20,249         3
                                        ------------    ------------
                                          3,513,725       5,618,535
Less: accumulated depreciation
      and amortization                     (826,748)     (1,453,939)
                                        ------------    ------------
                                        $ 2,686,977     $ 4,164,596
                                        ============    ============

     At December 31, 1995 and 1996, gross fixed assets included  $346,690 and $0
of office and computer  equipment under capital lease  obligations.  The Company
purchased these assets during 1996. See Notes 8, 10 and 14.

NOTE 7 - RESERVE FOR CLAIMS

     In December  1996,  the Company  entered into an agreement  with a national
insurance company to provide workers'  compensation  insurance coverage for 1997
through  1999,  subject  to a  deductible  of $2,000  per  medical  only  claim.
Accordingly,  effective  January 1,  1997,  the  Company  will  record  workers'
compensation  costs based  primarily on the fixed  portion of its premium  under
such policy,  rather than through the  previous  practice of applying  actuarial
estimates.

     In addition,  in December  1996,  the Company  entered into  agreements  to
reinsure  substantially all of the remaining  claims,  other than those acquired
upon  the  SAI  Acquisition,  under  the  Company's  large  deductible  workers'
compensation  insurance  policies  for the years  1994,  1995 and  1996,  for an
aggregate premium of $3,200,000.  Since reserves for claims for these years have
been previously provided,  the Company has recorded the premium as a reinsurance
recoverable  at December 31, 1996 and has recorded a deferred gain in the amount
of  approximately  $600,000 which will be recognized to income in future periods
based  on the  proportion  of  cumulative  claims  paid to the  total  estimated
liability for claims.

     In connection  with the  reinsurance of claims  exposure from 1994 to 1996,
the  insurance  carrier has agreed to provide  letters of credit in favor of the
Company's  lender to guarantee  outstanding  letters of credit to the  Company's
previous  workers'  compensation  insurance  provider under the Company's credit
agreement (see Note 8).

     As a consequence of the reinsurance  agreement described above, at December
31,  1996,  the  Company has  classified  as current  the  estimated  amounts of
reserves established for claims and reinsurance  recoverable expected to be paid
and to be  collected,  respectively,  within  one year,  as well as the  related
deferred gain expected to be recognized within one year.

     At December 31, 1995 and 1996, the Company's  reserves for claims costs are
as follows:

                                                           1995         1996
                                                        -----------  -----------
Accrued workers' compensation claims..................  $4,168,924   $6,476,630
Accrued health care claims............................     654,182      929,109
Reserve for behavioral health care claims.............     296,385      525,465
                                                        -----------  -----------
                                                         5,119,491    7,931,204
Less: workers' compensation claims expected
  to be settled in more than one year                   (1,556,615)  (2,846,188)
                                                        -----------  -----------
Reserve for claims--current                             $3,562,876   $5,085,016
                                                        ===========  ===========
                                       14
Note 8 - Borrowings

Borrowings at December 31, 1995 and 1996 are as follows:
1995               1996
                                                                                --------------     --------------
Subordinated note payable in quarterly installments of $150,000
beginning in March 1998, interest due quarterly at the quoted
rate for 1 year U.S. Treasury Bills (7% at December 31, 1996),
paid in June 1996............................................................   $   1,200,000                 --

Note payable to bank, original amount of $1 million, repayable
in monthly instalments of $4,167, plus interest at 8.5% per
annum, through November 1998 when a balloon payment of
$750,000 is due, secured by land and building................................         895,732            841,561

Note payable for state unemployment taxes, maturing in 1998
with monthly payments of $3,264..............................................         207,647             55,489

Notes payable to an affiliate................................................          41,750                 --

Capital lease obligation for computer hardware and software,
payable in monthly instalments of $7,479 through May 2000,
interest imputed at 12.3% per annum, paid in September 1996..................         310,602                 --
                                                                                --------------     --------------
                                                                                    2,655,731            897,050

Less: current portion                                                              (1,412,121)           (89,167)
                                                                                --------------     --------------
                                                                                $   1,243,610      $     807,883
                                                                                ==============     ==============
The Company incurred  interest expense of approximately  $97,000,  $205,000
and $142,000 during 1994, 1995 and 1996, respectively.

     In June 1996, the Company amended its existing credit agreement with a bank
(as amended,  the "Credit  Agreement") and increased the amount  available under
the Credit  Agreement  to  $13,000,000.  The  Credit  Agreement  provides  for a
revolving  credit facility with a sublimit of $8,000,000 to fund working capital
advances  and standby  letters of credit.  Working  capital  advances  under the
revolving  credit  facility  are  limited  to the  lesser of  $2,000,000  or the
Borrowing Base, primarily composed of current accounts receivable from unrelated
parties. Amounts outstanding under the revolving credit facility mature December
31, 1997.

     The Credit  Agreement also has an acquisition loan facility with a sublimit
of $5,000,000.  Draws under the acquisition loan facility are available  through
June 5, 1998, and are repayable in 36 equal monthly instalments from starting on
June 5, 1998.  The  Company  is  charged  fees of .25% to .375% per annum on any
unused portion of the acquisition loan facility.

     The Credit Agreement is  collateralized  by substantially all of the assets
of the  Company  and  $4,100,959  in  letters of credit  issued by an  insurance
company in connection with the Company's reinsurance of prior years' claims (see
Note 7). The Credit Agreement contains customary events of default and covenants
which prohibit,  among other things, incurring additional indebtedness in excess
of a specified amount, paying dividends,  creating liens and engaging in certain
mergers or  combinations  without the prior written  consent of the lender.  The
Credit Agreement also contains certain financial  covenants  relating to current
ratio,  debt and  interest  coverage,  net  worth and  other  financial  ratios.

     Interest  under  the  Credit  Agreement  accrues  at  rates  based,  at the
Company's  option,  on the bank's prime rate plus a margin of as much as .25% or
its Eurodollar Rate (as defined in the Credit  Agreement) plus a margin of 1.50%
to 2.00%, depending on certain financial covenants.

                                       15
Under the revolving credit facility, the Company had outstanding $6,250,000
in standby letters of credit at December 31, 1996 which guarantee the payment of
claims to the Company's  workers'  compensation  insurance  carrier.  As of that
date,  there were no amounts  outstanding  under the working  capital advance or
under the acquisition loan  facilities.  All amounts under these facilities were
available at December 31, 1996.

     The  Company  also has  $1,200,000  in  standby  letters  of credit  with a
separate  bank at December 31, 1996,  which  guarantee  the payment of workers'
compensation claims acquired upon the SAI Acquisition.

     As of December 31, 1996, the scheduled  annual  maturities of the Company's
long term debt are summarized as follows:

                     1997............. $  89,167
                     1998.............   807,883
                                       ----------
                                       $ 897,050
                                       ==========

Note 9 - Mandatorily Redeemable Preferred Stock

     The Company has authorized  20,000,000 shares of preferred stock with a par
value of $.01 per share. These shares can be issued from time to time, in one or
more series as authorized by the Company's Board of Directors.

     During  February  1995,  the Company and its  stockholders  entered into an
Agreement  and  Plan of  Recapitalization  whereby  the  Company's  stockholders
exchanged  1,043,933 (after adjusting for the effect of the Stock Splits) shares
of  common  stock for  165.376  shares  of  Series A  Participating  Convertible
Preferred Stock (Series A Preferred Stock).

     The Series A Preferred Stock was recorded at $6,263,610 in the accompanying
balance sheet as of December 31, 1995 based on its fair market value on the date
of  issuance,  as  evidenced  by the  sale of  Series A  Preferred  Stock by the
Company's principal  stockholders to an unaffiliated party. Both the fair market
value and the costs incurred of  approximately  $445,000 in connection  with the
recapitalization   were  charged  to  retained  earnings  at  the  time  of  the
transaction.

     In accordance with the Recapitalization  Agreement,  the Series A Preferred
Stock was converted upon  completion of the Company's  initial  public  offering
into 1,043,933  shares of common stock,  after adjusting  retroactively  for the
effects of the Stock Splits (see Note 3).

Note 10 - Stockholders' Equity

     During June 1995, the Company  increased its  authorized  common stock from
500,000 shares to 39,500,000 shares and  simultaneously  effected an approximate
8,417 for 1 stock split.  On February 21, 1996,  the Company  effected a 3 for 4
reverse  stock split.  After the  completion  of the  Company's  initial  public
offering,  the Company  amended and restated its  Articles of  Incorporation  to
increase  the  authorized  number of shares of the  Company's  common stock from
39,500,000 to  60,000,000,  and to increase the  authorized  number of shares of
preferred  stock from 500,000 to  20,000,000.  All  references  in the financial
statements to per share amounts have been retroactively  restated to reflect the
change  in the  number  of common  shares  outstanding  as a result of the Stock
Splits.

     In  connection  with the stock  split and  increase  in  authorized  shares
effected in June 1995, the Company  reduced the par value of its common stock to
$.001 from $1.00.

     In June 1993, CP Investments,  Inc., an entity  controlled by the Company's
principal  stockholders,  assigned to the Company an option which CP Investments
held to  purchase,  from a third  party for $ 1 million,  the land and  building
which is owned by the Company and where the Company's  headquarters are located.
In October  1993,  the Company  exercised  the option and purchased the land and
building.  As part of the assignment of the option, CP Investments  retained the
right to purchase the land and building  from the Company for  $1,000,000  for a
ten year period.

                                       16
Based on two independent appraisals of the land and building subject to the
previously described option, the Company valued the option at $700,000 (based on
the  difference  between the market value of the building and its November  1993
purchase  price) and recorded a distribution  to its principal  stockholders  in
June 1993. Because the transaction was entered into between commonly  controlled
entities,  the value of the option was not  considered  additional  basis in the
building. Amounts due in connection with this distribution have been recorded as
distribution  payable at December 31, 1995 and paid in 1996 upon  completion  of
the initial public offering.

     In January 1995, the Company entered into an agreement to reacquire certain
of its outstanding  shares from a minority  shareholder.  Under the terms of the
agreement, the Company acquired and canceled 249,342 shares of its common stock,
after  adjusting for the effect of the Stock Splits,  for $300,000 in cash and a
subordinated  note for $1,200,000  (see Note 8).  Simultaneously,  the Company's
principal  shareholders  acquired  66,281  outstanding  shares of the  Company's
common stock, after adjusting for the effect of the Stock Splits, for $400,000.

Note 11 - Stock Option Plan

     In February  1996,  the Company  adopted the 1996 Long Term  Incentive Plan
(the "1996 Plan") under which 800,000  shares of common stock,  after  adjusting
for the effect of the Stock Splits,  were reserved for issuance upon exercise of
or in connection  with stock options,  stock  appreciation  rights,  performance
awards,  grants  of  restricted  stock and other  stock  based or stock  related
awards. The 1996 Plan provides for the grant of both incentive stock options and
nonqualified  stock  options,  as  well  as  other  stock-based  awards,  to the
Company's  directors,  employees and consultants as determined in the discretion
of the Stock Option Committee.  Under the 1996 Plan, incentive stock options and
nonqualified  stock  options may not be granted with an exercise  price which is
less than 100% of the fair market value of the Company's  shares of common stock
at the date of grant of the option.

     In May 1995,  the  Company  adopted  the 1995 Stock  Option Plan (the "1995
Plan") under which  666,665  shares of common  stock,  after  adjusting  for the
effect of the Stock  Splits,  were  reserved for issuance upon exercise of stock
options.  The 1995 Plan provides for the grant of both  incentive  stock options
intended  to qualify as such under  Section  422 of the  Internal  Revenue  Code
("incentive  stock  options") and  nonqualified  stock options to the directors,
officers, key employees,  consultants and other individual contributors of or to
the Company and its  subsidiaries,  as determined in the discretion of the Stock
Option Committee.  Under the 1995 Plan, incentive stock options and nonqualified
stock options may not be granted with an exercise  price which is less than 100%
and 85%,  respectively,  of the fair  market  value of the  Company's  shares of
common stock at the date of grant of the option.

                                       17
Stock  options  normally  have a term of ten  years  and  generally  become
exercisable  40% after the second year from the date of grant and in instalments
of 5% quarterly thereafter.

         The following table summarizes stock option activity:
Weighted
                                                                                   Exercise            Average
                                                           Stock Option              Price          Exercise Price
                                                          --------------        ---------------     --------------
Outstanding at January 1, 1995............                --                        --                --
              Granted..............................            514,997          $ 3.00 - $ 3.33           $  3.05
              Canceled.............................                --                        --                --
              Exercised............................                --                        --                --
                                                          --------------        ---------------     --------------
         Outstanding at December 31, 1995..........            514,997          $ 3.00 - $ 3.33           $  3.05
              Granted..............................            311,499          $ 4.67 - $33.13           $ 20.62
              Canceled.............................            (44,999)         $ 3.00 - $ 8.05           $  5.81
              Exercised............................            (13,333)                  $ 3.00           $  3.00
                                                          --------------        ---------------     --------------
         Outstanding at December 31, 1996..........            768,164           $3.00 - $33.13           $  9.81
                                                          ==============        ===============     ==============
         Exercisable at:
              December 31, 1995....................                  0                                         --
              December 31, 1996....................             40,000                                    $  3.00

         Available for grant at:
              December 31, 1995....................            951,668
              December 31, 1996....................            702,390
The  Company  has  adopted  the  disclosure  provisions  of SFAS  123.  The
assumptions used in the calculation of the fair value of the options,  using the
Black-Scholes  method,  issued to employees and directors of the Company  during
1995 and 1996 were as follows:

                                               1995       1996
                                             -------    -------
Expected life (years).......................   6.5        6.5
Interest rate...............................  6.20%      6.20%
Volatility..................................    55%        55%
Dividend yield..............................     0%         0%

     Had  compensation  cost for the Company's two option plans been  determined
based on fair  market  value at the grant date for awards in 1995 and 1996 using
the straight  line method to recognize  such cost,  the Company's net income and
net income per common  equivalent share would have been reduced to the pro forma
amounts indicated below:

                                            1995         1996
                                        -----------  -----------

Pro forma net income                    $  190,097   $1,379,222
                                        ===========  ===========
Pro forma net income per common
   and common equivalent share          $     0.03   $     0.17
                                        ===========  ===========

     Weighted-average  fair  value of options  granted  during the year 1995 and
1996 was $1.86 and $14.05, respectively.

                                       18
The following table  summarizes stock option average grant date fair value,
and weighted average remaining contract life for options outstanding at December
31, 1996:
Weighted Average          Remaining
                                    Range of          Number of           Grant Date            Contractual
                                 Exercise Price         Options           Fair Value               Life
                              --------------------- --------------- ----------------------- -------------------
$ 3.00 - $ 3.33          481,665            $ 1.87                 7.5
                                $ 4.67 - $ 8.05          103,999            $ 5.46                 9.5
                                $21.00 - $28.50           63,500            $16.23                 9.5
                                #33.13 - $37.13          119,000            $24.17                10.0
                                                    ---------------
Stock options outstanding as
     of December 31, 1996                                768,164
                                                    ===============
Note 12 - Income Taxes

     The provision for federal and state income taxes consists of the following:

                                1994                1995                1996
                            -------------       -------------      -------------
Current
     Federal..............  $  1,354,671        $    776,777       $  1,205,859
     State................        33,724              36,251             61,000
                            -------------       -------------      -------------
                               1,388,395             813,028          1,266,859
                            -------------       -------------      -------------
Deferred
     Federal..............      (408,781)           (545,870)            75,363
     State...... .........        (6,733)            (27,741)           (25,909)
                            -------------       -------------      -------------
                                (415,514)           (573,611)            49,454
                            -------------       -------------      -------------
Provision for income taxes  $    972,881        $    239,417       $  1,316,313
                            =============       =============      =============

     Subsequent  to December  31,  1994,  the Company  requested  and obtained a
change,  for income tax purposes,  in the method of accounting  for its workers'
compensation  loss reserves.  As a result,  the Company  recorded a deferred tax
asset  relating  to the  reserves  and an increase  in income  taxes  payable of
approximately $1,386,000. Also in December 1996, the Company requested a change,
for  income  tax  purposes,  in the  method  of  accounting  used by SAI for its
workers'  compensation  loss  reserves.  As a result,  the  Company  recorded  a
deferred  tax asset  relating to the  reserves  and an increase in income  taxes
payable of approximately $775,000.  Under the provisions of the Internal Revenue
Code ("IRC"), the Company can amortize over three years the payment of taxes due
for changes resulting in taxable income and can recognize  currently  deductions
resulting  from the change in method.  The Company has  classified  as long term
those taxes  resulting from this change which it expects to pay in more than one
year.

                                       19
The gross  amounts of deferred tax assets and  liabilities  recorded in the
accompanying  consolidated  balance  sheets at December 31, 1995 and 1996 are as
follows:

                                                            1995           1996

Current deferred tax assets:
     Allowance for doubtful accounts .............   $    59,361    $   167,301
     Accrued health care claims ..................       222,422        315,897
     Reserve for workers' compensation claims,
       net of reinsurance recoverable ............       963,035        805,983
     Accrued bonuses .............................        47,088           --
     Net operating losses ........................          --          142,826
     Deferred compensation .......................        89,420           --
     Other .......................................        59,356         25,273
                                                     ------------   ------------
                                                     $ 1,440,682    $ 1,457,280
                                                     ============   ============
Long term deferred tax assets and (liabilities):
     Deferred compensation .......................   $   100,062          8,878
     Reserve for workers' compensation claims,
       net of reinsurance recoverable ............       557,708        632,353
     Depreciation and amortization ...............       (20,498)       (26,948)
     Other .......................................        57,406         14,343
                                                     ------------   ------------
                                                     $   694,678    $   628,626
                                                     ============   ============

     Realization  of the above  deferred tax assets is  dependent on  generating
sufficient  taxable  income in the  future to offset  the  deductible  temporary
differences  generating  the deferred tax assets.  Although  realization  is not
assured,  management  believes  that it is more  likely than not that all of the
deferred  tax asset  will be  realized.  The  amount of the  deferred  tax asset
considered realizable,  however, could be reduced if estimates of future taxable
income are reduced.

     A  reconciliation  of the differences  between income taxes computed at the
federal  statutory  tax rate and the  income  tax  provisions  reflected  in the
accompanying consolidated statements of income is as follows:
1994           1995           1996
                                                       ------------   ------------   ------------
Income taxes computed at federal statutory
   rate of 34% .....................................   $   961,151    $   167,350    $ 1,390,290
State income taxes, net of federal income tax effect        19,599        (12,766)        (3,675)
Other, net .........................................        (7,869)        84,833        (70,302)
                                                       ------------   ------------   ------------
Provision for income taxes .........................   $   972,881    $   239,417    $ 1,316,313
                                                       ============   ============   ============
20
Note 13 - Employee Benefit Plans

     The Company  maintains a defined  contribution plan covering certain of its
worksite employees for a number of client companies. The Company contributes, on
behalf of each  participating  client,  varying  amounts based on client company
elections.  Total Company  contributions  for the years ended December 31, 1994,
1995 and 1996 were $416,922, $550,776 and $1,065,072, respectively.

     In August 1996, the Company received a favorable  determination letter from
the Internal  Revenue  Service  ("IRS")  regarding the  qualified  status of its
defined contribution plan under Section 401(k) of the IRC. In its application to
the IRS,  the  Company  informed  the IRS that the  Company is  involved  in the
business  of leasing  employees  to client  companies  and that the 401(k)  plan
covered  worksite  or leased  employees  who  satisfied  the plan's  eligibility
requirements.

     The Company sponsors an unfunded deferred  compensation plan (the "Deferred
Plan").  The Deferred Plan covers a selected group of employees as determined by
the Company's  Board of  Directors.  The amounts due under the Deferred Plan are
based on bonuses  granted by the Board of Directors,  at its  discretion at each
year  end for that  year's  performance  by the  employee.  Based on the  awards
granted,  the Company recorded  compensation  expense of $41,200 during 1994. No
deferred compensation expense was recognized during 1995 and 1996.

     The amount of  compensation  subject to the  Deferred  Plan and the vesting
period for  individual  grants,  or any changes  thereto,  is established by the
Company's Board of Directors.  Deferred  compensation  amounts generally vest at
the end of three  years  from the date of award,  provided  the  participant  is
employed by the Company on such date. At December 31, 1996 the vesting  schedule
under the Plan is as follows:

                  1997.........................   $   242,013
                  1998.........................        41,200
                                                  ------------
                                                  $   283,213
                                                  ============

     The Company has included  these  amounts  within other  liabilities  in the
accompanying  balance  sheets as short term or long term based on the applicable
vesting  dates.  Of the above  amounts,  approximately  $200,000 at December 31,
1996, relate to deferred  compensation to the Company's principal  stockholders.
All deferred compensation is expected to be paid in cash.

                                       21
Note 14 - Commitments and Contingencies

     The Company has entered into  non-compete  agreements with its Chairman and
Vice-Chairman, who are also the Company's principal stockholders. The agreements
are for a term to be specified by the Company,  not to exceed two years,  in the
event  of  the  Chairman's  or  Vice-Chairman's   termination.  The  non-compete
agreements  require  payment to the  Chairman  and  Vice-Chairman  of their full
salary and benefits during the term of the agreement.

     The Company leases certain office space,  automobiles and office  equipment
under non-cancelable operating leases expiring on various dates through the year
2000.  Total  rent  expense  charged  to  operations   during  the  years  ended
December 31,  1994,  1995 and  1996 was  approximately  $224,000,  $385,000  and
$427,100, respectively.

     At December 31,  1996,  the minimum  annual  rental  commitments  under the
previously described operating leases are as follows:

                                              For the Year Ending
                                                 December 31,
                                                --------------

                  1997......................... $     605,884
                  1998.........................       434,319
                  1999.........................       220,072
                  2000.........................        62,183
                  2001.........................        28,497
                                                --------------
                  Total                         $   1,350,955
                                                ==============

     The Company is a  defendant  in a lawsuit  related to a wrongful  death and
premises liability claim involving a worksite employee. The plaintiff's original
complaint sought damages in excess of $10,000,000;  however,  such complaint was
dismissed  in part and amended to seek  damages in excess of $15,000.  The court
has sustained  plaintiff's amended complaint alleging premises liability against
both the Company  and its client as a result of a worksite  accident at client's
premises.  The Company is asserting that its liability under this claim, if any,
should be limited to  $100,000  due to the  immunity  provisions  of the Florida
workers'  compensation  statute involving worksite  accidents.  Discovery in the

                                       22
proceeding continues.  While there can be no assurance that the ultimate outcome
of this  lawsuit  will not  have a  material  adverse  effect  on the  Company's
financial  condition or results of  operations,  management  believes,  based on
consultations  with the  Company's  counsel,  that the ultimate  outcome of this
lawsuit should not have such an effect.

     The Company is a  defendant  in a lawsuit  brought in Dade  County  Circuit
Court in November  1995 by an  individual  who alleges  that he was injured by a
worksite  employee of a client of the  Company,  which owns and operates a hotel
and  is a  co-defendant  in the  litigation.  The  plaintiff  alleges  that  the
employee,  while he was working as a valet parking attendant, was negligent in a
motor vehicle collision and severely and permanently injured the plaintiff.  The
plaintiff  alleged  damages in excess of $50,000 in his amended  complaint  for,
among other things, bodily injury,  medical costs, pain and suffering,  and lost
ability to earn  income.  Based on  consultations  with the  Company's  counsel,
management  of the  Company  believes  that it has  meritorious  defenses to the
plaintiff's claims and that if the lawsuit is adversely determined,  the Company
may be  entitled  to  indemnification  from  its  client  and/or  its  liability
insurance  carrier.  Although  management  believes that the Company's  ultimate
liability in this matter should not be material,  there can be no assurance that
the  Company  will  prevail  in  the   litigation,   in  a  related   claim  for
indemnification,  or that the liability of the Company, if any, would not have a
material  adverse  effect on the  Company's  financial  condition and results of
operations.

     In  October  1996,  the  Company  received  a notice of  assessment  in the
discounted  amount of  approximately  $53,500 from The Treasurer of the State of
Florida  Department of Insurance as Receiver of United States Employer  Consumer
Self Insurance Fund of Florida, a workers compensation  insurance fund which was
declared insolvent (the "Fund").  The Company paid the discounted  assessment in
January 1997.  The Company had certain  worksite  employees  covered by the Fund
during  fiscal years ended  December 31,  1992,  1993 and 1994.  The court order
authorizing the assessment  provides that the Company,  by paying the discounted
assessment,  is deemed to have paid its assessment in full and is not subject to
any further  assessment for policyholder loss claims. The Company may be subject
to additional  liability for the assessments of other Fund members.  The Company
believes  that there are  approximately  700 members of the Fund which have been
assessed  $37.0 million in the  aggregate.  Although the amount of the potential
exposure,  if any,  for  such  additional  liability  is not  yet  determinable,
management believes that the Company has meritorious  defenses to the assessment
and that its ultimate  liability in this matter will not have a material adverse
effect on the  Company's  financial  condition or results of  operations.  There
cannot,  however,  be any assurance  that any such  liability will not have such
material adverse effect.

     The Company is also involved in other legal and administrative  proceedings
arising in the ordinary  course of business.  The outcomes of these  actions are
not expected to have a material  effect on the Company's  financial  position or
results of operations.

     See also Notes 1 and 7.

                                       23
Note 15 - Quarterly Information (Unaudited)

     The following table presents unaudited  quarterly operating results for the
two years ended  December 31, 1996.  The  Company  believes  that all  necessary
adjustments have been included in the amounts stated below to present fairly the
quarterly  results  when read in  conjunction  with the  Consolidated  Financial
Statements  and Notes  thereto for the years ended  December  31, 1995 and 1996.
Results of operations for any particular quarter are not necessarily  indicative
of results of operations for a full year or predictive of future periods.
1995                                       1996
                                               Quarter Ended                              Quarter Ended
                                 -------------------------------------------------------------------------------
                                 March 31  June 30   Sept. 30  Dec. 31   March 31  June 30   Sept. 30  Dec. 31
                                 --------- --------- --------- --------- --------- --------- --------- ---------
(in thousands, except per share data)
Statement of Income Data:
Revenues.....................    $ 66,481  $ 70,051  $ 72,940  $ 85,761  $ 96,970  $108,574  $118,794  $149,258
                                 ========= ========= ========= ========= ========= ========= ========= =========
Gross profit.................       3,585     3,735     3,537     4,801     5,696     6,330     7,454     9,315
                                 ========= ========= ========= ========= ========= ========= ========= =========
Operating income (loss)......         226         1      (148)      272       554       610       786     1,364
                                 ========= ========= ========= ========= ========= ========= ========= =========
Net income (loss)............    $    305  $    (71) $   (170) $    189  $    370  $    666  $    594  $  1,062
                                 ========= ========= ========= ========= ========= ========= ========= =========
Net Income Per Common and
 Common Equivalent Share.....    $   0.04  $  (0.01) $  (0.02) $   0.03  $   0.05  $   0.08  $   0.07  $   0.12
                                 ========= ========= ========= ========= ========= ========= ========= =========
Note 16 - Subsequent Events (Unaudited)

     In April  1997,  the  Company  entered  into a new  three-year  $50 million
revolving credit facility with a group banks.

     In March 1997, the Company entered into agreements with national  insurance
companies to reinsure  substantially  all of the  Company's  responsibility  for
remaining claims acquired upon the SAI Acquisition  under SAI's large deductible
workers' compensation  insurance policies for the years 1994, 1995, and 1996 for
an  aggregate  premium of  $1,870,000.  As a result,  the Company has recorded a
deferred gain in the amount of  approximately  $600,000 which will be recognized
to income in future periods based on the proportion of cumulative claims paid to
the total estimated liability for claims.

                                   * * * * * *

                                       24
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

     The following  discussion and analysis  should be read in conjunction  with
the Consolidated  Financial  Statements and Notes thereto contained herein,  the
Consolidated Financial Statements and Notes thereto and Management's  Discussion
and Analysis of Financial  Condition and Results of  Operations  appering in the
1996 Annual Report on Form 10-K,  filed by The Vincam Group,  Inc.  ("Vincam" or
the "Company").

     The following discussion contains forward-looking statements. The Company's
actual   results  could  differ   materially   from  those   discussed  in  such
forward-looking  statements.  Factors  that could  cause or  contribute  to such
differences  include those  discussed below and elsewhere in this Current Report
on Form 8-K and the  Company's  1996 Annual  Report on Form 10-K.  In connection
with the safe harbor provisions of the Private Securities  Litigation Reform Act
of  1995  (the  "Reform  Act"),  the  Company  is  hereby  providing  cautionary
statements  identifying  important factors that could cause the Company's actual
results to differ materially from those projected in forward-looking  statements
(as such term is defined in the Reform  Act) made by or on behalf of the Company
herein or  orally,  whether  in  presentations,  in  response  to  questions  or
otherwise.   Any  statements  that  express,   or  involve  discussions  as  to,
expectations,  beliefs,  plans,  objectives,  assumptions  or  future  events or
performance (often, but not always,  through the use of words or phrases such as
"will   result,"  "are  expected  to,"  "will   continue,"   "is   anticipated,"
"estimated,"  "projection"  and "outlook")  are not historical  facts and may be
forward-looking   and,   accordingly,   such   statements   involve   estimates,
assumptions,  and  uncertainties  which  could  cause  actual  results to differ
materially  from  those  expressed  in  the  forward-looking   statements.  Such
uncertainties   include,   among  others,  the  following:   (i)  potential  for
unfavorable  interpretation of government  regulations relating to labor, taxes,
insurance,  employment matters and the provision of managed care services;  (ii)
the  Company's   ability  to  obtain  or  maintain  all  required   licenses  or
certifications  required to further expand the range of specialized managed care
services  offered by the Company;  (iii)  potential  increases in the  Company's
costs,  such as health care  costs,  that the Company may not be able to reflect
immediately  in its  service  fees;  (iv) the  Company's  ability  to offer  its
services to  prospective  clients in  additional  states where it has less or no
market penetration;  (v) the level of acquisition opportunities available to the
Company  and the  Company's  ability to  efficiently  price and  negotiate  such
acquisitions on a favorable basis; (vi) the financial condition of the Company's
clients; (vii) additional regulatory  requirements affecting the Company; (viii)
the  impact  of  competition  from  existing  and  new   professional   employer
organizations;  (ix) the  failure to  properly  manage  growth and  successfully
integrate  acquired  companies and  operations;  and (x) other factors which are
described in further  detail in the Company's  filings with the  Securities  and
Exchange Commission.

     The Company  cautions that the factors  described  above could cause actual
results  or  outcomes  to  differ   materially   from  those  expressed  in  any
forward-looking   statements   made  by  or  on  behalf  of  the  Company.   Any
forward-looking  statement speaks only as of the date on which such statement is
made,  and the Company  undertakes no  obligation to update any  forward-looking
statement or statements  to reflect  events or  circumstances  after the date on
which such  statement  is made or to reflect  the  occurrence  of  unanticipated
events.  New  factors  emerge  from  time to time,  and it is not  possible  for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

Overview

     Vincam, one of the largest professional employer  organizations ("PEOs") in
the industry,  provides small and  medium-sized  businesses  with an outsourcing
solution  to  the  complexities  and  costs  related  to  employment  and  human
resources.  The Company's  continuum of integrated  employment-related  services
consists of human  resource  administration,  employment  regulatory  compliance
management,  workers'  compensation  coverage,  health  care and other  employee
benefits.  The Company  establishes a co-employer  relationship with its clients
and contractually assumes substantial employer  responsibilities with respect to
worksite  employees.  In addition,  the Company offers certain specialty managed
care  services  on a  stand-alone  basis to  health  and  workers'  compensation
insurance  companies,  HMOs,  managed  care  providers  and large,  self-insured
employers.

                                       25
The Company's  standard PEO services  agreement provides for an initial one
year  term,  subject  to  termination  by the  Company or the client at any time
during  the first  year upon 30 days'  prior  written  notice.  Thereafter,  the
contract may be terminated upon 30 days' notice given prior to the expiration of
the renewal term or immediately for cause.  Revenues from professional  employer
services  are based on a pricing  model that takes into account the gross pay of
each  employee and a mark-up which  includes the estimated  costs of federal and
state employment taxes, workers'  compensation,  employee benefits and the human
resource  administrative  services,  as  well as a  provision  for  profit.  The
specific   mark-up   varies  by  client  based  on  the  workers'   compensation
classification  of the worksite  employees and their eligibility for health care
benefits.  Accordingly,  the Company's average mark-up percentage will fluctuate
based on client mix,  which  cannot be predicted  with any degree of  certainty.
Specialty  managed care revenues are generated  from a variety of  risk-bearing,
capitated, and fee-based arrangements.

     The  Company's  revenues  include all  amounts  billed to clients for gross
salaries  and wages,  related  employment  taxes,  and health care and  workers'
compensation coverage of worksite employees. The Company is obligated to pay the
gross salaries and wages,  related employment taxes and health care and workers'
compensation  costs  of its  worksite  employees  whether  or not the  Company's
clients pay the Company on a timely basis or at all. The Company  believes  that
including  such amounts as revenues  appropriately  reflects the  responsibility
which the  Company  bears  for such  amounts  and is  consistent  with  industry
practice. In addition, the Company's revenues are subject to fluctuations as the
result of (i)  changes  in the  volume of  worksite  employees  serviced  by the
Company;  (ii)  changes in the wage base and  employment  tax rates of  worksite
employees;  and (iii)  changes in the  mark-up  charged by the  Company  for its
services.

     The Company's primary direct costs are (i) salaries,  wages, the employer's
portion of social security,  Medicare premiums,  federal  unemployment taxes and
the  compensation  portion of the Michigan Single Business Tax, (ii) health care
and workers'  compensation  costs, and (iii) state  unemployment taxes and other
direct costs.  The Company can  significantly  impact its gross profit margin by
actively  managing  the  direct  costs  described  in  clauses  (ii) and  (iii).

     The  Company's  health care costs  consist of medical  insurance  premiums,
payments of and  reserves  for claims  subject to  deductibles  and the costs of
vision care,  disability,  employee  assistance and other similar benefit plans.
The Company's  health care benefit plans consist of a mixture of fully  insured,
minimum premium arrangements,  partially  self-insured plans and guaranteed cost
programs.  Under minimum premium arrangements and partially  self-insured plans,
liabilities  for health care claims are recorded  based on the Company's  health
care loss history.  The Company  maintains  reserves for medical and  behavioral
health  claims which  reserves are estimates  based on periodic  reviews of open
claims,  past claims experience and other factors deemed relevant by management.
See Notes 1 and 7 of the Notes to Consolidated  Financial Statements.  While the
Company  believes that such reserves are adequate,  the Company  cannot  predict
with certainty the ultimate liability associated with health care costs and past
claims  experience  may not be indicative  of future  results.  Accordingly,  if
estimated  reserve  amounts  prove to be less than the ultimate  liability  with
respect to such claims, the Company's financial condition, results of operations
and liquidity could be materially adversely affected.

     Workers'  compensation  costs include medical costs and indemnity  payments
for lost  wages,  administrative  costs and  insurance  premiums  related to the
Company's workers' compensation coverage. Prior to 1997, the Company was insured
under a large  deductible  insurance  plan.  Under  this  plan the  Company  was
obligated to reimburse its insurance carrier for a portion of the insurance risk
related to workers'  compensation  claims up to a  predetermined  deductible per
occurrence of $500,000. Workers' compensation costs for 1994, 1995 and 1996 also
include  reserves for claims  which have been  incurred but not reported and for
anticipated  loss  development.   The  Company  has  recently  entered  into  an
arrangement with an insurance company under which  substantially all of the cost
of the Company's  workers'  compensation  coverage for the years 1997 to 1999 is
fixed.  Additionally,  the Company entered into  agreements  whereby the Company
reinsured  substantially  all of the remaining  claims under the Company's large
deductible  workers'  compensation  insurance policies for the years 1994, 1995,
and 1996. See "Recent Developments" below.

                                       26
State unemployment taxes are based on rates which vary from state to state.
Generally  they are subject to certain  minimum rates,  but the aggregate  rates
payable by an  employer  are  affected by the  employer's  claims  history.  The
Company controls unemployment claims by aggressively contesting unfounded claims
and, when possible,  quickly returning  employees to work by reassigning them to
other worksites.

     The  Company's  primary  operating  expenses are  administrative  personnel
expenses,  other general and  administrative  expenses,  and sales and marketing
expenses.   Administrative  personnel  expenses  include  compensation,   fringe
benefits  and  other  personnel  expenses  related  to  internal  administrative
employees.  Other  general and  administrative  expenses  include  rent,  office
supplies and expenses,  legal and accounting fees, insurance and other operating
expenses.  Sales and marketing expenses include compensation of sales executives
and the marketing staff, as well as marketing and advertising expenses.

     The  Company's  profitability  is  largely  dependent  upon its  success in
managing its  controllable  direct costs.  The Company manages its  controllable
direct costs through its use of (i) its proprietary  managed care system,  which
includes  provider  networks,  utilization  review  and  case  management,  (ii)
educational  programs designed to reduce the severity and frequency of workplace
accidents,  and (iii) a variety of other  techniques,  including  return to work
programs, drug-free workplace programs,  involvement in hiring, disciplinary and
termination decisions,  adjudication of unemployment claims, and reassignment of
laid off workers.

Recent Developments

     In December  1996, the Company  entered into an  arrangement  with Reliance
National   Insurance   Company   ("Reliance   National")  to  provide   workers'
compensation  insurance coverage for 1997 through 1999, at a substantially fixed
cost, subject to a deductible of only $2,000 per medical only claim.  Management
believes that under this policy, the Company's workers'  compensation costs will
be at a rate which is lower than that historically incurred by the Company under
its large deductible workers'  compensation  insurance policy. In addition,  the
policy is anticipated to enhance the  predictability  of the Company's  workers'
compensation  costs because it substantially  eliminates the sensitivity of such
costs to the ongoing  loss  development  and  payment of  workers'  compensation
claims and related reserve  adjustments beyond the $2,000 deductible per medical
only claim.

     The Company's  premium for 1997 is estimated at $5.5 million without giving
effect to the SAI Acquisition, subject to adjustment depending on changes in the
Company's payroll and other factors. The premium paid by the Company in December
1996 is  reflected as prepaid  workers'  compensation  insurance  premium in the
Company's balance sheet at December 31, 1996 and will be amortized over the 1997
policy year. The Company intends to continue to manage its workers' compensation
costs in order to  permit it to take  advantage  of its right to elect to assume
Reliance National's  responsibility for claims up to the first $250,000.  In the
event of such  assumption,  the Company would be paid the excess of a loss fund,
if any, which is calculated  each year,  over amounts paid by Reliance  National
with respect to such  claims.  The amount of the loss fund for 1997 is currently
estimated at $4.2  million.  Also in December  1996 and March 1997,  the Company
entered into agreements with Reliance  National and Commercial Risk Re-Insurance
Company  to  reinsure  substantially  all of the  Company's  responsibility  for
remaining  claims under the Company's  large  deductible  workers'  compensation
insurance  policies for the years 1994, 1995, and 1996 (other than claims of SMG
prior to the date of its acquisition by the Company) for an aggregate premium of
$5.1  million.  As a result,  the  Company has  recorded a deferred  gain in the
amount of  approximately  $1.2  million  which will be  recognized  to income in
future  periods based on the  proportion of cumulative  claims paid to the total
estimated  liability  for claims.  Effective  January 1, 1997,  the Company will
record workers'  compensation  costs based primarily on the fixed portion of the
cost of the policy with Reliance National. See Notes 1, 7 and 16 of the Notes to
Consolidated Financial Statements.

                                       27
During  1996,  the  Company  acquired  substantially  all of the assets and
liabilities of SMG in an acquisition accounted for as a purchase, and in January
1997 the Company  acquired SAI by merger in an  acquisition  accounted  for as a
pooling of interests. See Item 1, "Business--Recent Acquisitions," and Note 2 of
Notes to Consolidated Financial Statements.  The financial condition and results
of operations  discussed below include the results of operations since September
1,  1996  of the  business  acquired  from  SMG  and  accordingly,  affects  the
comparability  of the  Company's  1996 results of  operations  to those of prior
years. The financial  information discussed below in "Results of Operations" and
"Liquidity and Capital Resources" has been retroactively restated to include the
assets  and  liabilities  and  results  of  operations  of SAI for  the  periods
presented herein. The Company recognized  nonrecurring  transaction  expenses of
approximately  $165,000  in the first  quarter  of 1997  resulting  from the SAI
Acquisition.

Results of Operations

     The following table sets forth,  for each of 1994,  1995 and 1996,  certain
selected income statement data expressed as a percentage of revenues:

                                                       
                                                        Year Ended December 31,
                                                       1994      1995     1996
                                                     -------- -------- --------
Revenues ............................................ 100.0%   100.0%   100.0%
                                                     -------- -------- --------
Direct costs:
   Salaries, wages and employment taxes of
     worksite employees .............................  88.1%    88.8%    88.2%
   Health care and workers' compensation ............   5.4%     5.2%     4.8%
   State unemployment taxes and other ...............   0.9%     0.7%     0.9%
                                                     -------- -------- --------
     Total direct costs .............................  94.4%    94.7%    93.9%
                                                     -------- -------- --------
Gross profit ........................................   5.6%     5.3%     6.1%
                                                     -------- -------- --------
Operating expenses:
   Administrative personnel .........................   2.1%     2.6%     2.8%
   Other general and administrative, including
     provision for doubtful accounts ................   1.2%     1.4%     1.3%
   Sales and marketing ..............................   0.9%     1.1%     1.1%
   Depreciation and amortization ....................   0.1%     0.1%     0.2%
                                                     -------- -------- --------
     Total operating expenses .......................   4.3%     5.2%     5.4%
                                                     -------- -------- --------
Operating income ....................................   1.3%     0.1%     0.7%
Interest income (expense), net ......................     0%     0.1%     0.2%
                                                     -------- -------- --------
Income before taxes .................................   1.3%     0.2%     0.9%
Provision for income taxes ..........................   0.5%     0.1%     0.3%
                                                     -------- -------- --------
Net income ..........................................   0.8%     0.1%     0.6%
                                                     ======== ======== ========

Year Ended  December  31,  1996  Compared to Year Ended  December  31, 1995
---------------------------------------------------------------------------

     The  Company's  revenues  for the year ended  December 31, 1996 were $473.6
million  compared  to $295.2  million  for the year  ended  December  31,  1995,
representing  an increase of $178.4  million,  or 60.4%.  This  increase was due
primarily  to an  increased  number of PEO clients and  worksite  employees.  In
addition,  $16.1 million of the increase is  attributable  to the  operations of
SMG.  Between December 31, 1995 and December 31, 1996, the number of PEO clients
increased by 72.2%,  from 528 to 909, of which 137 were  acquired  from SMG. The
number of worksite employees  increased 74.8% over the same period,  from 14,060
worksite  employees  to  24,570,  of which  1,987  were  acquired  from SMG.  In
addition,  the Company  earned  approximately  $3.7 million of revenues from its
workers'   compensation   managed  care  services   during  1996,   compared  to
approximately  $570,000  during  1995.  This  increase in workers'  compensation
managed  care  service  revenues  from year to year  resulted  from an increased
number of workers'  compensation managed care clients. Of the Company's workers'
compensation  managed care service revenues of $3.7 million,  approximately $2.6
million resulted from services provided to one new client in 1996.

                                       28
Salaries,  wages and  employment  taxes of worksite  employees  were $417.7
million for 1996, compared to $262.2 million for 1995,  representing an increase
of $155.5 million,  or 59.3%.  Salaries,  wages and employment taxes of worksite
employees  were 88.2% of  revenues  for 1996,  compared  to 88.8% for 1995.  The
decrease of  salaries,  wages and  employment  taxes of worksite  employees as a
percentage of revenues was due mainly to incremental revenues from the Company's
specialty managed care services.

     Health care and workers'  compensation  costs were $22.9  million for 1996,
compared to $15.3 million for 1995, representing an increase of $7.5 million, or
49.1%.  This  increase  was due mainly to the higher  volume of health  care and
workers' compensation claims paid and/or reserved during 1996 which was a direct
function of the increase of PEO clients and worksite employees.  Health care and
workers' compensation costs were 4.8% of revenues for 1996, compared to 5.2% for
1995.  The  decrease  of  health  care  and  workers'  compensation  costs  as a
percentage of revenues was due mainly to improved  effectiveness in managing the
frequency  and  severity  of  workers'  compensation  and health  care costs and
incremental revenues from the Company's specialty managed care services.

     State unemployment taxes and other direct costs were $4.2 million for 1996,
compared to $2.1 million for 1995,  representing  an increase of $2.2 million or
105.2%.  This increase was due mainly to the higher volume of salaries and wages
paid during 1996 which was a direct  function of the increase of PEO clients and
worksite employees, an increased number of client companies using other services
and products (e.g.,  401(k), the drug free workplace program,  etc.), as well as
an increase in other direct costs  related to the  Compan's  specialty  managed
care  services.  State  unemployment  taxes and other  direct costs were 0.9% of
revenues  for 1996,  compared to 0.7% for 1995,  primarily  due to  increases in
other direct costs.

     Gross  profit was $28.8  million for 1996,  compared  to $15.7  million for
1995,  representing  an increase of $13.1 million,  or 83.9%,  due mainly to the
increase in revenues resulting from an increase in the number of PEO clients and
worksite employees. Gross profit was 6.1% of revenues for 1996, compared to 5.3%
for 1995.  This  increase  was due  mainly  to the  Company's  effectiveness  in
managing the  frequency  and severity of workers'  compensation  and health care
costs and an increase in revenues  from the  Company's  specialty  managed  care
services which carry a higher margin than the Company's PEO services.

     Administrative  personnel expenses were $13.1 million for 1996, compared to
$7.6 million for 1995,  representing an increase of $5.5 million, or 72.2%. This
increase  was  primarily  attributable  to  increased  staffing  to support  the
Company's  growth,  including  management and senior  executive  personnel.  The
Company  anticipates that this trend in administrative  personnel  expenses will
continue in future periods as a result of the Company's growth and the expansion
of its  service  offerings.  Administrative  personnel  expenses  were  2.8%  of
revenues for the 1996, compared to 2.6% for 1995.

     Other  general and  administrative  expenses,  including  the provision for
doubtful  accounts,  were $6.3  million for 1996,  compared to $4.1  million for
1995, representing an increase of $2.2 million, or 54.3%. This increase in other
general and administrative  expenses was primarily attributable to the growth of
the Company's  business and the addition of workers'  compensation  managed care
services,  which the Company made  available  to external  clients for the first
time in 1995. Other general and administrative expenses, including the provision
for  doubtful  accounts,  were 1.3% of revenues  for 1996,  compared to 1.4% for
1995.

     Sales and  marketing  costs were $5.3  million  for 1996,  compared to $3.3
million  for 1995,  representing  an  increase of $2.0  million,  or 62.3%.  The
increase  reflects the addition of sales  executives  and  marketing  personnel,
consistent  with the  Company's  strategy  to  increase  its client  base in its
existing  markets.  Sales and  marketing  costs were 1.1% of revenues  for 1996,
compared to 1.1% for 1995.

     Net income was $2.7  million for 1996,  compared to $0.3  million for 1995,
representing  an increase of $2.4  million,  or 965.2%.  Earnings per share were
$0.32 for 1996,  compared to $0.04 for 1995,  representing an increase of $0.28,
or 700.0%.

                                       29
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
---------------------------------------------------------------------

     The Company's  revenues were $295.2 million for the year ended December 31,
1995,  compared  to  $224.8  million  for the  year  ended  December  31,  1994,
representing  an increase of $70.4  million,  or 31.3%.  This  increase  was due
primarily to an increased number of PEO clients and worksite employees.  Between
December 31, 1994 and December  31,  1995,  the number of PEO clients  increased
31.0%,  from 403 to 528. The number of worksite  employees  increased 32.6% over
the same period,  from 10,207  worksite  employees to 14,060.  In addition,  the
Company earned approximately $570,000 of revenues from its workers' compensation
managed care services in 1995, the first year such services were offered.

     Salaries,  wages and  employment  taxes of worksite  employees  were $262.2
million for 1995, compared to $198.2 million for 1994,  representing an increase
of $64.0 million,  or 32.3%.  Salaries,  wages and employment  taxes of worksite
employees were 88.8% of revenues for 1995, compared to 88.1% for 1994. Salaries,
wages and employment  taxes of worksite  employees  increased as a percentage of
revenues as a result of a change in the  Company's  client mix  towards  clients
having more  favorable  workers'  compensation  risk  profiles  which allows the
Company to charge a lower markup.

     Health care and workers'  compensation  costs were $15.3  million for 1995,
compared to $12.2 million for 1994, representing an increase of $3.1 million, or
25.5%.  Health care and  workers'  compensation  costs were 5.2% of revenues for
1995,  compared to 5.4% for 1994.  This  decrease was due  primarily to improved
efficiency  in managing  the  frequency  and  severity of workers' compensation
claims.

     State unemployment  taxes and other direct costs were relatively  unchanged
from 1994 to 1995. State  unemployment taxes and other direct costs were 0.7% of
revenues for 1995,  compared to 0.9% for 1994. This decrease is due primarily to
improved efficiency in managing state unemployment insurance claims.

     Gross  profit was $15.7  million for 1995,  compared  to $12.6  million for
1994,  representing an increase of $3.1 million, or 24.7%. Gross profit was 5.3%
of revenues for 1995, compared to 5.6% for 1994. This decrease was due primarily
to the loss of a high  margin  contract  with a  significant  behavioral  health
client in the third quarter of 1994 as a result of that client's  acquisition by
a third party.  This contract  represented  approximately  $0.8 million in gross
profit during 1994.

     Administrative  personnel expenses were $7.6 million for 1995,  compared to
$4.7 million for 1994,  representing  an increase of $2.9 million,  or 62.4%. Of
this  increase,   approximately  $1.4  million  was  primarily  attributable  to
increased  staffing  for  the  Company's  workers'   compensation  managed  care
services,  which were made  available to external  clients for the first time in
1995.  The  balance was  primarily  attributable  to an  increase  in  corporate
management  personnel and other general and  administrative  expenses related to
the growth  described  above.  Administrative  personnel  expenses  were 2.6% of
revenues for 1995, compared to 2.1% for 1994.

     Other general and administrative expenses, including provision for doubtful
accounts,  were  $4.1  million  for 1995,  compared  to $2.7  million  for 1994,
representing  an  increase  of  $1.5  million,   or  54.8%.  Other  general  and
administrative  expenses  were 1.4% of revenues  for 1995,  compared to 1.2% for
1994.

     Sales and  marketing  costs were $3.2  million  for 1995,  compared to $2.2
million for 1994,  representing an increase of $1.1 million, or 48.2%. Sales and
marketing costs were 1.1% of revenues for 1995, compared to 0.9% of revenues for
1994. The increase  reflects the addition of sales  executives and a senior vice
president of sales and marketing.

     Net income was $0.3  million for 1995,  compared to $1.9  million for 1994,
representing a decrease of $1.6 million, or 86.4%. Earnings per share were $0.04
for 1995,  compared  to $0.26 for 1994,  representing  a decrease  of $0.22,  or
84.6%.

                                       30
Liquidity and Capital Resources
-------------------------------

     At December 31,  1996,  the Company had working  capital of $22.2  million,
compared to $1.3 million at December 31, 1995. The increase was primarily due to
the Company's  initial public offering in May 1996 of 2,000,000 shares of Common
Stock from which the Company  received  proceeds of $26.9  million,  net of $3.1
million of  underwriting  discounts,  commissions  and  offering  expenses.  The
Company had $18.7  million in cash at  December 31, 1996.  Of this amount,  $2.3
million  was  restricted  (see  Note  2  of  Notes  to  Consolidated  Financial
Statements).

     The Company's  Amended and Restated  Credit  Agreement  with Fleet National
Bank ("Fleet  Bank")  provided for a $13.0 million  revolving  line of credit of
which (i) an  aggregate  of $8.0  million is  available  for standby  letters of
credit and revolving  credit loans for working  capital  purposes (which working
capital  loans  were  limited to the  lesser of $2.0  million or the  "borrowing
base," an amount  equal to 85% of current  accounts  receivable  from  unrelated
parties),  and (ii) $5.0  million was  available  to finance  acquisitions.  The
Company uses letters of credit  primarily to secure its obligations to reimburse
its former workers'  compensation  insurance  carrier for workers'  compensation
payments  subject to the policy  deductible.  Borrowings  bore interest at rates
based on  Fleet  Bank's  Prime  Rate  plus a  margin  of as much as 0.25% or its
Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) plus a
margin of 1.50% to 2.00%,  depending  on  certain  financial  covenants,  at the
Company's option. The facility was secured by substantially all of the Company's
assets other than the Company's  headquarters  building.  Revolving credit loans
and standby  letters of credit were scheduled to mature on December 31, 1997 and
acquisition  loans  were  to be  repayable  in  36  equal  monthly  installments
commencing June 5, 1998.  Draws against the acquisition  line of credit could be
made  through  June 5, 1998 and were  scheduled to mature not later than June 5,
2001. The credit facility contained covenants that, among other things,  limited
the amount of total  consolidated  debt and liens,  required the  maintenance of
certain  consolidated   financial  ratios,   prohibited  dividends  and  similar
payments, and restricted capital expenditures,  mergers,  dispositions of assets
and certain  business  acquisitions.  The Company was  required to pay an unused
facility fee ranging from .25% to .375% per annum on the facilities.  See Note 8
of Notes to  Consolidated  Financial  Statements.  Under  the  revolving  credit
facility,  the Company had  outstanding  approximately  $6.3  million in standby
letters of credit at December 31, 1996 which guaranteed the payment of claims to
the Company's previous workers' compensation  insurance carrier. As of that date
there were no amounts  outstanding  for  working  capital  advances or under the
acquisition loan facility, and all amounts under these facilities were available
at December 31, 1996.

     In April 1997, the Company entered into a new credit facility providing for
a $50.0 million revolving line of credit. For more information regarding the new
credit  facility,  see the Company's  Form 10-Q for the  quarterly  period ended
March 31, 1997.

     Under  the  Company's  large  deductible  workers'  compensation  insurance
policies for 1994,  1995 and 1996, the Company is required to provide its former
insurance  carriers  with $7.2  million in letters of credit,  of which $6.3 has
been issued by the lenders under the Credit  Agreement.  In connection  with the
reinsurance of the Company's responsibility for remaining claims (the "Remaining
Claims"),  Commercial Risk Re-Insurance Company ("Commercial Risk") has provided
a $4.1  million  letter of credit in favor of the  Company  to secure  Comercial
Risk's obligation for the payment of Remaining Claims. As a result,  the Company
obtained a release of $4.0 million in restricted  cash  previously held by Fleet
Bank as collateral.

     The  Company's  primary  short-term  liquidity  requirements  relate to the
Company's insurance premium requirements under its workers' compensation policy,
software  development,  acquisition of office and computer  equipment to support
its growth,  and the payment of current tax obligations  and other  expenditures
related to the  Company's  growth.  The  Company  currently  has no  significant
capital  commitments for 1997, except for the amounts due to SMG shareholders in
connection with the SMG Acquisition;  however, the Company currently anticipates
capital  expenditures  for 1997 of  approximately  $7.0  million,  primarily for
software  development and computer and office equipment,  and approximately $9.0
million for the prepayment of the workers'  compensation  insurance  premium for
1998.  The Company's  long-term  liquidity  needs are currently  limited to debt
service on the Company's outstanding long-term obligations and income taxes. See
Notes 8 and 12 of Notes to the Consolidated  Financial  Statements.  The Company
continually evaluates potential  acquisitions and the entrance into new markets,
and is considering the possible relocation of its corporate headquarters, any of
which,  if undertaken,  could require  significant  capital  expenditures by the
Company.

                                       31
The Company anticipates that available cash, cash flows from operations and
borrowing  availability  under the Amended and Restated Credit Agreement will be
sufficient to satisfy the Company's  liquidity and working capital  requirements
for the  foreseeable  future;  however,  to the extent that the  Company  should
desire to increase its financial flexibility and capital resources or require or
choose to fund future capital commitments from sources other than operating cash
or from borrowings  under its revolving line of credit or its  acquisition  loan
facility,  the Company may  consider  raising  capital  through the  offering of
equity and/or debt securities in the public or private markets,  as well as from
banks.

     Net cash used in operating activities was $4.2 million for 1996 compared to
cash provided by operating  activities of $2.1 million for 1995.  The difference
between the Company's 1996 net income of $2.7 million and its negative operating
cash flow was due primarily to a $12.1 million increase in accounts  receivable,
a $5.5 million increase in prepaid workers'  compensation  insurance premium, an
increase in reinsurance  recoverable of $3.2 million, and an increase in prepaid
expenses and other current assets of $292,000,  partially reduced by an increase
in accrued  salaries,  wages,  and payroll taxes of $6.1 million,  a decrease in
restricted  cash of $4.2 million,  and an increase in reserve for claims of $2.4
million.  The increase in accounts receivable resulted from both a higher number
of PEO clients and worksite  employee  served  during 1996 and the timing of the
payroll cycle. The Company's  accounts  receivable and accrued salaries,  wages,
and payroll taxes are subject to fluctuations  depending on the proximity of the
closing date of the reporting  period to that of the payroll cycle. The increase
in reinsurance  recoverable was due mainly to the transfer of substantially  all
of the Company's  responsibility for remaining claims under its large deductible
workers'   compensation   policies  for  1994,   1995  and  1996.   See  "Recent
Developments" above.

     Net cash used in investing activities was $5.1 million for 1996 compared to
$1.2 million in 1995.  This reflects $2.2 million of the SMG purchase price paid
in cash,  net of cash acquired from SMG of $137,000,  and $1.2 million placed in
escrow in  accordance  with an escrow  agreement for  potential  purchase  price
adjustments,  $2.0 million in expenditures for property and equipment to support
the Company's  growth,  partially offset by redemption of short term investments
of $490,000.

     Net cash  provided  by  financing  activities  was $24.5  million  for 1996
compared to $850,000 used in financing  activities  in 1995.  The 1996 cash flow
reflects the Company's  initial  public  offering  which  generated net offering
proceeds of $26.9  million,  partially  offset by retirement  of a  subordinated
promissory  note in the amount of $1.2  million,  payment of $311,000 of capital
lease obligation (see Note 8 of the Notes to Consolidated  Financial Statements)
and the  funding of a $700,000  distribution  payable  related to the  Company's
repurchase of an option to purchase the Company's headquarters.

New Accounting Pronouncements
-----------------------------

     In March 1995, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of"
("SFAS  No.  121").  SFAS  No.  121  establishes  accounting  standards  for the
impairment of long-lived assets, certain identifiable intangibles,  and goodwill
related  to those  assets to be held and used,  and for  long-lived  assets  and
certain  identifiable  intangibles to be disposed of. SFAS No. 121 requires that
long-lived  assets and  certain  identifiable  intangibles,  held and used by an
entity,  be reviewed for impairment  whenever  events or changes in circumstance
indicate that the carrying amounts of an asset may not be recoverable.  SFAS No.
121 has been adopted by the Company for the year ended  December  31, 1996.  The
adoption of SFAS No. 121 has not had,  and is not  expected to have,  a material
impact on the Company's financial position or results of operations. The Company
reviews the carrying value of its long-lived and intangible assets on an ongoing
basis. If such review  indicates that these values may not be  recoverable,  the
carrying value will be reduced to estimated fair value.

     The FASB has also issued  Statement of Financial  Accounting  Standards No.
123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123"). This statement
defines a fair value based method of accounting for employee stock options. This
statement also permits a company to continue to measure  compensation  costs for
their stock option plans using the  intrinsic  value based method of  accounting
prescribed by Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock  Issued to  Employees."  SFAS No. 123 requires  disclosure  of the pro
forma net income and earnings per share that would be recorded if the fair value
method was utilized.  The Company has adopted the disclosure  provisions of SFAS
No. 123, and retained the intrinsic  value method of accounting  for stock based
compensation. See Note 11 of the Notes to Consolidated Financial Statements.

Inflation
---------
     The Company  believes the effects of inflation  have not had a  significant
impact on its results of operations or financial condition.

                                       32
ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

         (c)  Exhibits

Exhibit
   No.                                            Description

11            Statement re Computation of Per Share Earnings.
23            Consent of Price Waterhouse LLP.
27            Financial Data Schedule

                                       33
SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its  behalf by the  undersigned,  thereunto  duly  authorized,  as of the 8th of
March, 1997.

                          THE VINCAM GROUP, INC.

May 8, 1997             By:/s/ STEPHEN L. WAECHTER
Date                       ------------------------------------------------
                           Stephen L. Waechter, Chief Financial Officer,
                           Senior Vice President Finance and Administration
                           (Principal Financial Officer)

May 8, 1997             By:/s/ MARTINIANO J. PEREZ
Date                       --------------------------------------------------
                           Martiniano J. Perez, Vice President and Controller
                           (Principal Accounting Officer)

                                       34
THE VINCAM GROUP, INC.

                                    FORM 8-K

                                  EXHIBIT INDEX

Exhibit
   No.       Description
-------      -----------

  11     Statement re Computation of Per Share Earnings
  23     Consent of Price Waterhouse LLP
  27     Financial Data Schedule
EXHIBIT 11

               STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

                           THE VINCAM GROUP, INC.
                    CALCULATION OF NET INCOME PER COMMON
                        AND COMMON EQUIVALENT SHARE
1994          1995          1996
                                                ------------  ------------  ------------
Net income                                      $ 1,854,036   $   252,789   $ 2,692,782
                                                ============  ============  ============
Weighted average number of common shares
  outstanding during the period                   6,769,341     5,606,288     7,359,893

Assumed exercise of stock options, net of
  treasury shares acquired                          460,316       460,316       516,164

Issuance of mandatorily redeemable preferred
  stock deemed a common stock equivalent              --          927,414       454,754
                                                ------------  ------------  ------------
Weighted average number of shares used in
  earnings per share calculation                  7,229,657     6,994,018     8,330,811
                                                ============  ============  ============
Net income per common and common
  equivalent share                              $      0.26   $      0.04   $      0.32
                                                ============  ============  ============
Fully diluted net income per common
  and common equivalent share *                 $      0.26   $      0.04   $      0.32
                                                ============  ============  ============
------------------------------  

   * In  accordance  with the  provisions  of the  Accounting  Principles  Board
     Opinion No. 15, Earnings per Share, fully diluted net income per common and
     common  equivalent  share is not  presented in the  Company's  consolidated
     statements of income due to the fact that the aggregated  dilution from the
     Company's common stock equivalents  outstanding  during each of the periods
     presented is less than 3%.
EXHIBIT 23

              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

     We hereby  consent to the  incorporation  by reference in the  Registration
Statement  on Form S-8 (File No.  333-08003)  of The Vincam  Group,  Inc. of our
report dated  February 21, 1997,  which  appears on page 3 of The Vincam  Group,
Inc.'s  Current  Report  on Form 8-K  dated  May 8,  1997  (Commission  File No.
0-28148), relating to the pooled consolidated financial statements of The Vincam
Group, Inc.

/s/  PRICE WATERHOUSE LLP

Miami, Florida
May 8, 1997