ZenPayroll raises seed round from the Mt. Rushmore of Valley entrepreneurs
pandodaily.com
pandodaily.com
The last sentence is why I have not added PandoDaily to my feed subscription list. The fact that they list three companies competing in a market means they are unlikely to be "disincentivized to pursue innovation." In fact, Intuit has regularly been acknowledged by the likes of Forbes[1], Inc and Fast Company and Eric Ries's Lean Startup book as being one of the most innovative public companies. Not only does it show a lack of critical thinking on the subject at hand, but it's passing that lack of knowledge onto the reader.
ZenPayroll is tackling a huge and highly profitable market. They're probably attacking it faster than their public counterparts. But to say a company like Intuit, along with Paychex and ADP, are not innovating because they're "disincentivized" does a disservice to ZenPayroll and its competitors.
I'm just guessing, but I don't think ZenPayroll takes any of its competition lightly and is working as hard as it can to break into this market precisely because it has formidable competitors.
[1]: Why Intuit is More Innovative Than Your Startup: http://www.forbes.com/sites/bruceupbin/2012/09/04/intuit-the...
I can't speak for the others, but there's very much a "it works, lets not mess with it" vibe from Intuit's offering.
All I can say is that you are correct, that is an untrue statement.
It has been a constant inconvenience of mine since I incorporated myself 6 years ago.
"I setup payroll awhile ago and it took me a long time to find a provider. I remember looking at Intuit, ADP (for a second), and SurePayroll; I think I'm also on the ZenPayroll invite list.
After going through some of the threads on HN I decided to use BOA -- which is essentially Intuit -- and although it was a pain to setup, it does seem to be working. (Total cost: $30/month)
However, the Wave Accounting team reached out to me recently to let me know that they'll begin a full service payroll SAAS in January with pricing at $5/person. You can bet I'll be trying it out.
Sadly we're too small for ZenPayroll's pricing to make sense at this time."
So calculating gross->net scales nicely, but paying the fed/state/county/local agencies doesn't. And aside from the actual costs of providing the service, it's a tremendous value to the employer. Even at low hourly wages that $25 pays for itself.
Up for the challenge?
Your only interface is through our single-page app, so no messing with kludgy government software (like the EFTPS software) or and paper forms.
This is a world that is RIPE for the taking if you can do it right, but for $154/month @ 99 employees, they should be aware they're going to blow 3 times that in support costs (for instance, how do integrate this into GL using Quickbooks? How can I set up my Vacation accrual rule for employees that isn't straight forward, etc.)
For all federal, state and local taxes, we automatically debit the tax amount (along with employee pay) during each pay period. We then deposit your employee's pay into their bank accounts. Finally, we pay your payroll taxes to the various government agencies before they are due.
In addition to making all tax deposits on your behalf, we automatically file all required government forms, such as 941s, DE-9s, DE-34s, W2s, etc. Wherever a signature is required, we allow you to e-sign the forms right from our site.
We also handle benefits, garnishments, and vacation/sick accrual.
Integrating with Quickbooks is a feature that is coming very soon. Hope that helps!
For instance, I have an employee in Florida so I have a UCT-6 for SUI, and also a couple employees in PA (so local taxes galore)
How do you handle a state such as California where the employee has to OPT OUT of receiving a paper paystub?
Don't take this as me bashing what you guys are doing, I'm just genuinely interested as this is a little bit of a hobby of mine (payroll consulting)
EDIT: I just read that they only support California at the moment. Bummer.
For California (and for all other states we will support in the future), we handle all the tax deposits and forms for you, including all tax table updates throughout the year. We'll even take care of payroll compliance for you, such as filing new hire reports to the state.
Our goal is to really abstract all the complexities of payroll into a really simple, and easy-to-use web-app. Part of that is making sensible assumptions about things (like paper paystubs), while making sure the employer is always 100% compliant.
p.s. We love payroll consultants, as we have several of our own to navigate all the intricacies of payroll!
(I've had to deal with this a few times when working remotely for companies in town...)
Seriously, though, congrats on the funding, and let me know when you support KY :)
I approached all of the major payroll companies looking for a partnership and got nothing but static. Their partnership models look like they were created sometime around 2005. Intuit, in particular, was looking for partners that were accountants. The thought that a social/content site would generate legitimate payroll leads didn't seem to track with them, even after I was showing them hard numbers of dozens of sales per month.
I even thought about coding up a payroll solution on my own, but the legal overhead looked like a bitch.
So I finally gave up. I did not find the major players to be innovative.
Best of luck, guys. I hope we can work together sometime. To me it looks like a field ripe for innovation. There are a lot of things you can do to really kick butt here. Look forward to seeing some cool apps (and trying them).
"There are a few small payroll companies with similar offerings. However, I have had bad experiences with self-serve payroll services and this is one of the functions that you do not want to deal with, especially when mistakes/adjustments are made. The penalties are high for non-compliance and you want the ability to have a "live" person to deal with when problems surface. In the end, I highly recommend paying for the service as the costs are not extremely high. You can save a few dollars but it is not worth it. There are so many payroll companies out there and I'm surprised the VCs are backing this one"
Team have thoughts on this?
Regardless, congrats on the fundraising.
You're absolutely right.
Many other self-serve payroll services that your CFO might be referring to place the burden on the employer to ensure they are compliant. These companies might only send you an email reminder to pay your taxes along with the amount to pay. If you forget or don't have the money, then you're out of luck and can face hefty government fines, just as your CFO says.
We've built our system to ensure that the employer is 100% compliant. One way we do this is we actually impound all the taxes from the employer and pay the tax agencies ourselves on the employers behalf. We also file all forms on the employers behalf (after getting the necessary authorization to do so).
Hope that clarifies a little bit how we are able to claim the same amount of service/compliance as more expensive options out there!
I'm currently in the middle of an ADP implementation for our company (120 employees), so I have a bit of insight into this. Once you reach a certain threshold of costs associated with payroll, it's very hard to beat the big players:
>"These legacy companies rely on selling to other enormous enterprise clients whose opportunity cost of switching services provides a sufficient lockin"
I don't know about this. How am I locked in? Sure, there is some labour associated with moving employee files from one provider to the next, but you have to do the same to get your data into ZenPayroll. ADP required me to fill out a spreadsheet with the required employee information. Once the data is in, you flip the switch and you're up and running on the new system. I don't see any lock-in whatsoever. I still have my employee information spreadsheet, ready to pass to the next competitor. What am I missing?
>"Faced with expensive and complex software options"
Not really complex. We worked with an ADP "implementation specialist" to design the earnings/deductions rules (customized to our specific needs), which took about a week. Now we enter hours in a text box, and adjust parameters as needed. Sure, the interface isn't pretty, but we're talking about tab-ing through text boxes and entering numbers. Can't be much more intuitive.
>"With ZenPayroll, companies can handle the standard functions of adding employee hours, overtime pay, bonuses, reimbursements, garnishments, benefits, etc., and issuing periodic payments via check or direct deposit."
This is standard for payroll systems.
>"Where ZenPayroll really sticks its head above the crowd is in the long term tracking and management for both employees and employers. On the platform..."
Standard features, at least with ADP.
We made the decision to switch from manual payroll to a payroll service when the cost/benefit made sense. I can understand that that threshold is far, far lower for the multitude of 1-50 employee sized businesses out there. ZenPayroll looks good there.
But the big players can offer something I can only assume ZP can't: support. We have two agents, ready to handle whatever crazy questions our staff has. That's vitally important to an enterprise. Although the author sees payroll as "evil", we're talking about other people's livelihood. It's not to be taken lightly. I don't see one mention of support in the article.
For $30/month, there's a market, and a big one. But let's not fool ourselves into thinking that the big players have nothing to offer. And they won't be easily displaced.
One of the things that the article didn't mention that I think is worth bringing up is how we eventually plan expose parts of a "payroll API" which can make managing payroll much easier. For example, I would imagine that tabbing through text boxes to enter hours for 120 employees every 2 weeks can get pretty tedious and error-prone. Well, we actually have a (currently internal) API for that, which can eventually be integrated into, say, time tracking software. We believe similar benefits can be realized by integrating our API with accounting software, expense reporting software, etc.
In fact, we've architected our system to be an API from the start, and our JS web-app is just a consumer of our API.
I'd love to hear some other ideas people might have that could take advantage of a payroll API!
Good stuff. I'm going to keep my eye on this. Having gone through it, it's an interesting space. I think it can be done better than the incumbents, and that's key, right?
My point was that there's a bit too much "shoot-for-the-stars" mentality when great start-ups are on the rise. Players like ADP are slow because they are large. But they got large because, at the end of the day, they offer a good product (maybe a tad pricey). $30BB in market cap ain't easy to achieve.
Anyway, I believe there's a big hole ZP can fill, especially if you can market to businesses that can't justify spending thousands per year on payroll. It didn't make sense for us for a long time. It's nice to see a relateable problem being solved. Congrats on the round, and good luck.
To the representative of the company - does anyone on your team have industry experience and/or have been a HR (or possibly finance in smaller companies) director?
Good luck and happy to give some direction on the challenges of dealing with the enterprises area. Contact details in profile.
a) Flexible. Can handle my current and future employee payroll needs. b) Accurate. c) Reliable d) Great customer support. This includes people who are very knowledgeable with what Congress is up to, taxes, etc, and can make sure I am always in compliance.
I agree with a lot of the comments above. I am not sure with the ROI is from your system vs. PayChex or ADP.
Perhaps it's an approach unique to me, but pretty much, yeah. If I can define exactly what I need in a service, and the service provider can assure me they can meet those demands, it's all about price.
Which was my point with regards to ADP. It may be clunky and unpretty, but it does what I need it to do: pay my employees, accurately and on time (disclaimer: I hope, still in implementation!). Flash and prettiness is nice, but if it's superfluous, it has to be free.
I think the article is referring to much bigger implementations - I'm just finishing up a 3,000+ employee implementation with all kinds of crazy things going on that cost my client an arm and a leg. To put it into perspective, the implementation took ~ 3mos to go-live for employees across almost all 50 states and another 2mos to fix the issues that cropped up during the first few payrolls. It's unlikely they'd be willing to switch anytime soon regardless of how unhappy they are up to this point.
Absolutely. I can imagine the kind of work an implementation like that entails.
Maybe I misunderstand "lock-in". Nothing is preventing me from switching providers, since there is no reliance on proprietary measures anywhere along the line. Switching from one implementation to a different one is as easy as re-doing the labour (not that that is "easy", as you point out). But that's the bare minimum that I can expect to do anyway. I certainly can't have less work to do the second time.
So I signed up for an invite, and I'm hoping you'll let our (very) small business be a part of this! We have less than 5 employees, and we're in Fremont, CA.
One question: how easy would it be to get the data for each transaction into accounting software like Quickbooks?
Side note: Since when is $6.1M a seed round?
I know tech companies hate that and want to automate everything, but some products need sales reps.
Surepayroll also offered much better online tools and better pricing than either Paychex or ADP at the time. Now that Paychex has acquired Surepayroll it's good to see another online friendly option being built. Now if somebody would just build an online friendly way of managing 401Ks for small businesses.