What is an API Payroll Solutions?

In this video, you'll learn about the promise of API payroll solutions. Application programming interfaces (APIs) for payroll are the architecture that link payroll accounts to service providers.

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Additional Resources

https://www.youtube.com/watch?v=SpfJk1bC1CM
https://www.youtube.com/watch?v=VVOkjo7uwWw
https://www.youtube.com/watch?v=bIaIOZcuQ4Q

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There is a whole new class of company coming out, that is very kind of technologically enabled, that is basically able to offer payroll as an API solution. And so let me give you a little background on this, you know, in the old days, pre Kruze consulting 10 years ago, just celebrated our 10th anniversary, ADP and Paychex dominated. And they're very expensive and maybe not the greatest support, and cumbersome systems, all that kind of stuff. And when Vanessa started Kruze there was a lot, she worked with ADP and Paychex quite a bit.

And then a new kind of emerging payroll provider, like for lack of a better word, innovators, like Gusto, Zenefits, Rippling, TriNet, Justworks. They really came on the scene, and some of the stuff they did was automate auto payroll runs, and make signing up for benefits a lot easier, more transparent, help with employee onboarding, and offer letters. It was just like this super exciting world of payroll innovation really started, I'd say, literally, maybe 10 years ago, nine years ago, and has continued to this day. But what's interesting is, those innovators are actually turning into incumbents. They've raised tons of money.

Most of them are either public, or are waiting to go public, do an IPO. And they start having some of the same big company problems that Paychex and ADP had. Customer support is really hard to scale. It's really hard to do a great job in payroll. It's very complicated. It's a very emotional thing for clients and the clients' employees, like nothing worse than screwing up payroll. It really shakes the confidence of a company.

And there's a lot of user error. Oftentimes people, entrepreneurs might pay themselves without running payroll through payroll, and not taking the payroll taxes out and submitting that, or state registrations and the right tax codes, and quarterly payroll tax notices and just, there's a ton of stuff going on, and support for that is very hard. A lot of these companies have built really amazing systems, but still a lot of people cost, still a lot of people touching, a lot of phone calls, a lot of Zoom, a lot of emails. And so as they've scaled the organizations, they're running into the same problems that ADP and Paychex had. And that's kind of the state of the industry right now.

Still significantly better than what it used to be when Vanessa was starting Kruze Consulting, but it feels like it's plateauing a little bit, and now enter some of the payroll API providers. And what they're basically able to do is spur another level, or another age of competition here. They're basically able to go to, I think a lot of them are starting with like the vertical SaaS players. So maybe like some of the marketplaces or reservation systems, or anyone who has a big software internet platform that has a captive customer base and has a strong relationship with them. Those firms, they have those relationships, they have the customers, they see payroll delivered through an API as an additional service they can sell.

It just, it's not free money, but it's extra money. Now, I think some level, they may not quite understand how difficult true payroll is to run. I mean, not only do you gotta run the payroll but you gotta handle 401k contributions, you gotta help people set up benefits, workers comp insurance, 529s, FSAs, HSAs, commuter benefits. There's so many things that go into payroll and it's also a proxy for onboarding new employees. You've gotta have a good, intuitive online interface so people can self-serve. So there's a lot of complexity that comes on payroll but these payroll API solutions are slowly making their way into the mainstream.

And you're gonna see it first with the vertical SaaS solution providers who, they have, they sell to a lot of, health stores or power labor marketplaces, or whatever their specialty is, being able to offer payroll is, makes them stickier, gives them another revenue stream, and makes our clients happier.