Sound familiar? We’ve heard that cloud HR benefits company Zenefits plans to roll out a payroll service similar to the startup formerly known as ZenPayroll. In a weird twist, these cloud-based startups, once partners in offering each others services are now both planning to offer their own payroll and benefits services in one platform – in other words, Zenefits and Gusto are now competing for business.
“The size of this market and the speed of the disruption are likely to attract many new entrants.” Zenefits spokesperson Kenneth Baer told TechCrunch when asked about the competition. “We’re happy we started on this journey a little more than two-and-a-half years ago, and as the market leader and pioneer in the category, believe that no one can match our product and how easily and automatically Zenefits eliminates the administrative work behind running a small business.”
BuzzFeed pegged the secretive new Zenefits service as “Project Nutshot.” Zenefits would not comment on the addition of payroll officially, but we’ve also heard this is the plan and now would be a good time for the cloud-based HR startup to combine benefits and payroll processing.
The addition and subsequent rivalry is a punch in the gut to Zenefits – which partners (for now) with the newly named Gusto to offer payroll services to its clients. This partnership proved particularly helpful earlier this year when payroll giant ADP shut off access to Zenefits small business customers. Zenefits turned to then ZenPayroll for the needed payday processing.
But the addition of benefits and name change was always a part of the company roadmap, according to CEO Josh Reeves. Now is the right time to add benefits offerings, he told TechCrunch.
“We’ve always had these additional services in the plans, even the name. ZenPayroll is just something we came up with a week before YC Demo Day” Reeves said.
Whatever the origin story, the name change to Gusto helps clarify any potential confusion customers might have over the two “Zens.”
Gusto does not see itself in competition with Zenefits, though offerings are now mighty similar to each other. Instead, it says it made sense to include these additions based on customer demand. More than 86 percent of Gusto’s customers have asked for a single point solution to payroll and benefits.
“We are automating all of the complex enrollment and administration, so that a business owner can offer this important service to their employees, without any headache,” Reeves said.
Gusto has also been on a rapid growth tear after raising $60 million in April, building out a Denver office and adding more than 275 employees this year, up from a headcount of 60 at the beginning of the year. Compare that to Zenefits’ $583 million in funding and unicorn valuation status, plus, according to LinkedIn, more than 2,000 listed workers. Zenefits is clearly the cloud HR services company to beat.
Gusto told TechCrunch earlier that it plans to hire more than 1,000 employees in the coming years. It will need that to take on Zenefits. The startup already pulls in 20,000 businesses nationwide, with an estimated 5x increase, according to Gusto.
Reeves believes the field is still wide open. “Over 90 percent of our customers aren’t on the platform yet,” he said.
Gusto’s workers’ compensation offering is available nationwide today. Health benefits are available in California, with plans to roll out to more states in the coming months.