"Needless to say, it’s a big market. One dominated by not 800 pound, but by 800,000 pound gorilla’s. ADP. Paychex. Intuit. Combined, they represent $50 billion in publicly traded market cap. They also represent slow-moving incumbents, disincentivized to pursue innovation."
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.
For what it's worth, I use intuit's payroll (formerly paycycle) and while it's functional, it is neither innovative or progressing. It's very much stagnant, with a UI straight from 2000. I've been with them for two years and nothing has been changed.
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.
Errm, that really isn't true. The vast majority of the Paycycle engineering team is still at Intuit and working on Intuit Online Payroll and/or related projects. The amount of people that have left over the past few years feels inline with normal attrition rates (or slightly better than).
I am a one-man-band with an S corp. I would love, love love it if something like ZenPayroll would help me with the 941's, state taxes, and eftps but its too hard to justify offloading that stuff at $30/mo ... $360/yr... when Bank Of America offers their kludgy software for free with my business checking account and when that fails, just manually process them.
It has been a constant inconvenience of mine since I incorporated myself 6 years ago.
I'm with you! I just posted this on the other ZP thread:
"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."
I just shot you an email to try to see if you'd be interested in trying out ZenPayroll as well! We strive to be the most delightful payroll software out there. Part of this is making the initial setup process as painless as possible. Getting setup takes less than 10 minutes for most companies we've onboarded.
Thanks for the email. I'm happy to poke around ZP but for me to switch from what we have "working" to ZP (which would cost more, means that ZP would need to blow my pants off amazing).
Wave's solution sounded good, until the part where they mention for automated tax deposits it's an extra 25/user so it becomes the same prices as most other providers.
You guys might want to change the verbiage, I thought it said per employee but you're right it says per employer. Still seems weird to say 25 per employer per month, especially when that seems to be the standard fee structure for most other services - http://wavepayroll.com/pricing/
In the US there are many agencies you have to deal with and a lot of paperwork that must be filed. Unlike Canada where you tax based on the work-location and pay everything to the federal government, the US has all sorts of fun rules that mean you could be remitting taxes to multiple state/county/local agencies. And each agency has a different level of technology savvy so you could be faxing/mailing forms to get a particular tax paid.
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.
One of the ZenPayroll founders here. We definitely take care of all payroll-related tax and compliance deposits and forms for you, including 941, DE-9, and state compliance forms (such as new employee hire report forms).
Your only interface is through our single-page app, so no messing with kludgy government software (like the EFTPS software) or and paper forms.
I've been using crappy Paychex for 4 years. Sometimes their software doesn't even work in any (yes any) of the current browsers. Their support wanted me to downgrade my browser to an older version of IE9 so that I could run their software error free. Could not use Chrome, Firefox or Safari and Microsoft had moved onto IE10 at the time. Time for change. Time for disruption.
Congrats to ZenPayroll. We've been using them at Swiftype since early this year and they really do provide an excellent service. We love the fact that it's easy to use and inexpensive, but more than anything else, they've saved us countless hours by automating so many of the tedious details required to process our payroll. As a young company that is already time constrained, that has been huge for us.
We're happy ZenPayroll users. It's my first time dealing with any sort of payroll, and I haven't had to worry about it once. And the service (online + offline) is amazing.
After experiencing other kludgy payroll systems, I decided to try ZenPayroll at my current company. So far I've had zero regrets. Delightful is a high bar for payroll, but so far they've hit it for me.
I'm really curious how they're doing things such as unemployment insurance filing, local taxes, garnishments, etc.
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.)
I'm one of the co-founders of ZenPayroll, and I'd be more than happy to help clarify.
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!
You are correct, we only support California at the moment. However, we'll be rolling our more states in Q1, and will have full 50 state support in Q2.
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!
We just completed the process of switching over from Paychex to ZenPayroll. It's now clear to me why companies like Paychex should be very worried. ZenPayroll's online dashboard is orders of magnitude simpler and more intuitive than Paychex'. By automating most of the process (in lieu of a payroll specialist calling you every 2 weeks), their cost structure will enable them to always beat Paychex on price.
I create websites in my spare time, and one of my websites was generating a lot of traffic in people looking for payroll services.
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).
We currently use ADP as recommended by our first CPA, so was curious to ask our new CFO what he thought about switching to such a service. His response:
"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"
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!
As an employee of a company that uses ADP, I can certainly say that their software has a horrible user interface and its login authentication system is from 1996. So, having two other large payroll companies (Paychex and Intuit) certainly hasn't pushed ADP into improving their UI.
Cool product. Tough market. It will be essential to focus on small business targets. Too bad the article centred on competing with the big guys. I don't think that's where the easy money is at.
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.
These are all really great points you bring up -- we definitely aren't taking other payroll companies lightly, and providing amazing customer support for both big and small companies is one of our core-tenants.
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!
>"we definitely aren't taking other payroll companies lightly, and providing amazing customer support for both big and small companies is one of our core-tenants."
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.
Curious - do you see price as being the only differentiator?
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?
>"Curious - do you see price as being the only differentiator?"
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'd be very interested to hear how you feel after you get out of implementation. Maybe we can share war stories (see my email in my profile if you're interested in catching up).
Price is most definitely not the only differentiator for us, though we do see it as one of main benefits of using us, especially for smaller businesses. One of our main differentiators is having much more intuitive, simpler, and beautiful payroll software.
I think if you are banking on something being simpler and "beautiful" as your key differentiator then you are not in a good place. A lot of solutions on the market are not hard to use and they are very entrenched. Sure, they don't look great but at the end of the day you need to realize this is payroll software. People don't live in these systems like they do with Apple products. Not to mention, most of the current companies will have a trained tech setup your account. You really don't have to do much. All customers want is:
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.
Just to heed a warning...be very careful with design being a differentiator when it comes to large enterprise (as the article insinuates). The person buying the software may not be the one actually using it, so therefore this is not as much of a USP as you may hope.
Good luck and happy to give some direction on the challenges of dealing with the enterprises area. Contact details in profile.
We currently use paychex and hoping to switch to ZenPayroll as soon as you guys allow us :). The biggest attraction is the API which will make managing all our workforce sooooo easy!
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.
>"I think the article is referring to much bigger implementations"
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.
Yes, I would agree with that statement as well. There is certainly nothing stopping us (nothing proprietary, etc.) other than a lot of work. But, to your point, it should be less the 2nd time around!
This is awesome. My family's small business has really been dreading automating our payroll. We use Quickbooks, and every year I swear I'm going to sign them up for Intuit's system, but every time I try, I can never figure it out.
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?
Board seats go out in seed rounds. There is no hard rule for naming the different rounds, in this case it is just their first round of institutional capital.
Extremely well-deserved! We use ZenPayroll over at http://collections.me and it 100% lives up to the hype. It's going to be a true pleasure watching it grow into a titan of the industry.
We're Zen Payroll users and have had a terrific experience with them. Their support is amazing. I have no doubt they can and will take on the big players successfully.
Sounds coo but as a small business owner who uses online payroll I could care less whether this is "cloud based" - what will this do better than Intuit online?
Mobile first still makes sense when you are talking about consumer products. This is a B2B product and sales approach where mobile does not matter as much.
Agreed. I don't think it would make sense for their service anyway. These kinds of services are the type you buy, integrate and forget about (in a good way).
Article says direct sales doesn't make economic sense in this market. ADP employs an army of well payed outside sales reps. I interviewed there out of college. Seemed like a good job. What's the difference between the businesses that ZP can't support that long term?
I know tech companies hate that and want to automate everything, but some products need sales reps.
I think it depends on the size of company that ZP wants to target. I did a payroll processor evaluation for my startup 2 years ago and the upfront pricing and lighter (less time consuming) sales process that surepayroll offered compared to paychex and ADP was one reason we chose surepayroll over those companies.
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.
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...