payroll people at startup
HR Tech

These cool startups just raised millions to disrupt the future of payroll

The HR Technology space is heating up as investors are funding young companies that are disrupting the status quo. This trend already started in 2020, but January 2021 showed that the pace is only increasing.

Unlike in 2020, where the investments often benefited the talent space, especially learning and well-being, the focus in January 2021 was on core HR and payroll. Although the first 2 weeks of January started out slow, the remainder of the month made more than up for it: with these companies raking in a whopping $200m! Another $300m went to more established companies providing HR and payroll services. Maybe the December rounds for payroll vendors Skuad, Finch, and Immedis were just a warming up?

What’s interesting is that these companies are innovating payroll, yet they all do it in a different way. A few help businesses manage the growth of their remote workforce, while others are clearly looking to replace the incumbent payroll solutions with a modern, cloud-based offering. Some focus on providing services, while others completely rethink payroll technology with an integrated interface (API) approach.

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The good news is that these newcomers offer buyers alternative options, as well as access to modern technologies. They are also disrupting a somewhat traditional market and turning it into a more competitive landscape. This will also force the payroll incumbents to adapt their products and support the requirements of a modern workforce.

The flip side is that these startups and technologies are in different stages of maturity. Buyers should complete a thorough due diligence to properly understand the risks and benefits associated. But if you are looking for a new payroll solution, you should invite at least one of these emerging companies, so you have a clear picture of what’s possible and where workforce payments are headed.

The main question is: how much risk appetite will buyers looking for a new payroll solution really have? We’ll watch closely how 2021 plays out for these startups in order to answer that.

So let’s first take a look at the cool payroll startups of January 2021. For completeness, the list also includes 2 startups that offer services on top of payroll, and 2 more established companies that received major investments for their solutions.

Check

Check, a NYC-based payroll infrastructure startup, emerged from stealth mode and launched with $35m in a Series B funding, backed by Stripe, Thrive Capital and others. This brings their total raised to $44M, including an $8M Series A raised early last year led by Bedrock with participation from Thrive and Index, and a $1M seed investment by Bedrock in 2019 when the company was founded.

It was only a matter of time before the fintech revolution would spill over into payroll. With Stripe backing Check, it’s clear we’re there. Check plays on Stripe’s strategy of creating a payments infrastructure for the digital economy by taking that to payroll. It’s focus is on developers, so they can extend the fast-growing array of business management software with payroll. And though payroll integration is fairly common and all HR systems offer it, Check takes the integration in the other direction.

Most (small) business solutions include everything except employee payroll because it’s too complex and tax codes change too often. With Check, developers can now build wage payments into their apps just as “easily” as accepting an online payment. The company provides the “building blocks” to build a customizable payroll product, such as an API, a dashboard and other features. In addition to tax calculations and transferring funds to the appropriate tax collectors, Check handles the filing of tax forms for services built using its system.

Running a payroll is more than software and small businesses typically outsource the process due to the regulatory complexity. Only time will tell if Check will succeed. But with Stripe in their corner, there’s a good chance they might.

Omnipresent

Omnipresent, which helps companies employ remote-working local teams worldwide, closed a $15.8M Series A funding round. The company said it closed the round five months after it’s July 2020 $2m in seed round.

Personal frustration with hiring and paying employees in other jurisdictions inspired the founders of Omnipresent to create a frictionless experience for others, supported by a platform. The company helps businesses with hiring remote workers, and takes care of payroll, benefits, compliance, taxes, and admin services. Omnipresent acts as EOR (Employer of Record) ensuring that labor laws are observed and employee administration is managed.

Omnipresent’s platform provides employees with local contracts, tax contributions, and local and international benefits such as health insurance, pensions and equity options. It’s a model that is growing rapidly, as a result of the pandemic and a globally distributed workforce, and allows businesses to quickly hire workers, especially in countries where they have no legal entity.

Omnipresent is joined in this space by other, recently funded startups. But given the size and the outlook of the global workforce market, there’s a lot of room for growth.

Cwallet

Cwallet closed a $220,000 pre-seed funding round and crossed the $2m valuation mark. This fintech startup is working closely with the Qatar Central Bank (QCB) to obtain all the necessary licenses to launch their payroll and remittance feature.

Cwallet started in 2019 to help low-income workers access digital financial services without a debit or credit card, and it aims to disrupt the current financial landscape model in Qatar. It’s a blockchain-powered wallet designed and developed to be a one-stop-shop where users can pay, spend, and eventually receive their salary and send money back home along with cross border bills payment feature.

Apart from offering a digital wallet to the unbanked, merchants and e-commerce platforms can use Cwallet as a built-in wallet for their App via API integration.

Cwallet is one of the first blockchain based wallets to offer a payroll feature, thereby foregoing the traditional banking system. We’ve been hearing about blockchain and payroll for a long while but until now, not seen a lot of real world applications. It’s an exciting step and a startup to watch closely.

Personio

Personio, a startup that offers holistic human resources (HR) software-based solutions, secured $125 million for its business in the latest fundraising round that took the company’s market valuation to $1.7 billion(!)

Founded in 2015, the Germany-based company offers comprehensive HR services, including recruiting and onboarding, payroll, absence monitoring, etc and targets small and medium-sized enterprises (SMEs). They support over 3000 companies in the SMB space, and have around 600 employees. The company focuses on Europe, and considering the size of the market, sees possibilities because the large vendors have neglected this space.

Personio focuses on offering the “must-have” services in HR, where Personio functions as the system of record. They offer “out-of-the-box” integrations as well as an open API so customers can extend the platform with other services. In early 2019, Personio acquired Rollbox, a startup providing a multi-country payroll engine, which allowed them to introduce Personio Payroll.

Even though all large vendors are now rolling out midmarket methodologies for their solutions, the SMB space is a different market with it’s own requirements. For starters, the size of an SMB allows people to communicate and work with each other on a daily base, and so there’s less need to use a system to find skill sets you need. Yet, you still need to cover your base with compliant employee administration services.

Offering a comprehensive set of tailored services for a reasonable price can make all the difference when competing against the large solution providers. With smaller companies often working cross-border, being able to support more countries is a clever approach, as is the focus on one region, Europe.

Darwinbox

Darwinbox is one of Asia’s leading enterprise HR technology platforms, and they announced the closing of a $15 million funding round led by Salesforce Ventures. This follows the company’s Series B round raised in September 2019, bringing the total investment to $35 million.

Back in 2015, Darwinbox was created because the founders believed Asian enterprises deserve a tailor-built solution that reflects their unique and diverse context which most legacy solutions fail to address. And they have a point: the well-known HR solutions are created elsewhere with the global workforce in mind. Because payroll, HR admin and time are subject to local legislative, being close to your customer’s country can work to your advantage.

Darwinbox offers a full fledged HR & Payroll solution, including recruitment, time & attendance, performance management and employee helpdesk. The influence of their investor Salesforce shines through when looking to their next steps: “with persona-specific (employee, Manager, HOD, HR, CXO) dashboards, we will bring interactive analytical tools and contextual intelligence to augment decision making and improve everyday performance.”

It will be interesting to discover what that means in practice. With more companies focused on the total employee experience while mapping the employee journey, that might just give them a competitive advantage in the market.

PayDashboard

PayDashboard, an “interactive payslip platform” was selected by Innovate UK to receive a £167,072 funding grant to support its continued growth in the financial wellness space. The London based company received the sum as part of the UK Government’s sustainable economic recovery plan following the impact of COVID-19 on UK business.

PayDashboard offers an interactive payslip experience, where employees can access financial education through their digital payslips and utilize smart features to help them to understand their pay, their payslip, and their taxes, so HR professionals can focus on other activities. The solution integrates with the incumbent payroll provider and helps HR staff gain insights from payroll information.

While many vendors now incorporate digital payslips, not all of them have made this service available, and it’s the local vendors that are falling behind. PayDashboard fills that gap and gives employees access to financial information that a digital payslip doesn’t offer. This is a solution that fills a current gap, but with many vendors modernizing their payroll solutions, the question is if the company can survive on its own in the long term.

Not payroll startups, but close

Here are 2 companies that received funding in January to run services on top of payroll:

Syndio

Even though it’s not a payroll solution, Syndio is worth mentioning because of its focus on pay equity. Syndio, an EquityTech analytics platform, announced it raised $17.1 million. The company offers a solution for starting pay and ongoing compensation adjustments with fairness and equity baked in at every stage of decision making.

As fixing workplace inequality takes on new urgency for employers, Syndio helps them understand and rectify pay inequities: workplace fairness is no longer simply ‘nice to have.’ Legal requirements are expanding globally, but perhaps more importantly, equity and transparency are becoming necessary ingredients for workplaces to attract and retain the best talent.

Bxblue

Bxblue, a marketplace in Brazil for payroll loans, raised $7M. BxBlue lets people with guaranteed incomes automatically deduct a monthly sum from their paycheck to re-pay the lending bank.

Using a credit card to loan money is expensive because of the interest rates. From the borrower’s perspective, these payroll loans are attractive because there’s not only the ease of repayment and minimal risk of default, but the rates are much better than what they’d be able to get by financing purchases with a credit card (usually 10x lower).

Bxblue has taken this industry online by creating a marketplace where borrowers can review the options available and then choose which bank they wish to work with. Banks can automatically deduct payments directly from a person’s paycheck. The payroll loan space is worth watching – with several companies trying to offer alternatives for expensive payday loan vendors and credit cards.

Not startups anymore

And to make the list complete, here are 2 more companies that received funding, but have been around for longer:

Employee Navigator

Employee Navigator, a US-based HR software & benefits administration provider, raised $34m in growth equity funding from JMI Equity. The company was founded in 2008, so not exactly a startup anymore. However, the modern platform approach secures the company’s place in this overview.

The company began licensing its benefits and HR products to insurance brokers in 2012 and has expanded its offerings to partner with the insurance carriers, payroll companies, and third-party administrators (TPAs) to provide a unified benefits and HR solution.

Combining HR and Benefits admin with integrated payroll is a smart move: offer all the “local, legal” processes in one environment and give employers control and insight on employee related spending. By doing so, Employee Navigator is creating a benefits ecosystem and making a play for an industry platform. It’s an approach that can scale very well in the American market with its many benefits brokers.

Paycor

Paycor was the first HR & payroll company of 2021 to announce an investment, and it also takes the prize for the largest round: 270M$.

Paycor was founded in 1990 and serves more than 40,000 medium and small-sized businesses with a modern, intuitive SAAS-based recruiting, HR and payroll solution.

Payroll is hot

The basic principle behind payroll: you want it to be accurate, timely and compliant. If it isn’t, you’ll hear from your employees – all of them! Or the local authorities. So it’s not a space where you can adopt a “let’s check this out” approach.

At the same time, the workforce is changing rapidly, new payment methods are being tested (hello blockchain) and new features introduced, such as ‘pay me now’ and ‘payroll loans’. Plaid introduced Deposit Switch to help employees more easily change where their direct deposits go. And once features become available, the digital workforce expects their employer to offer them. Mobile first.

Can your payroll solution handle these new ideas? If not, it’s time to start paying attention to what’s happening in this space, so that you can have an informed conversation with your current provider and if necessary, evaluate what’s out there.

And when you do, be sure to pay close attention to the companies mentioned above. Their models are all slightly different, from in-house administration via managed services to platform integration. The good news is that this gives you options. We’ll be closely following these companies and provide more insights as the year continues. For now, payroll is the cool kid of January – who would have thought?

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