Payroll providers are under attack! Across the nation, over 240 independent payroll providers are under attack by “mega payroll providers.” Their mode of attack? They offer a slew of low-cost or “no-cost” add ons to their core services in a bid to persuade small- to medium-sized businesses (SMBs) to contract with them. Seems benign enough, but the problem is that many of these add-ons are poor imitators of quality HR tech. They might be compared to the equivalent of kids’ cheap party favors…the ones that are “thrown in” when you schedule your five-year-old’s birthday party at the pricey bounce house playground.
Some of these mega payroll providers are starting to appear like late-night infomercials… “But wait there’s more! Order now and get FREE software for hiring, onboarding, performance management, PLUS a robot to fire your bad hires!” It would be comical if it was harmless, but unfortunately that’s not the case.
Because just like those infomercials, there are times when the HR add-on features and benefits touted by the mega providers are too good to be true. The result is that businesses get a pretty good payroll provider with subpar HR software that may be clunky, limited, and resting on the dull edge of technology. This hurts the health and growth of an SMB, which begs the question: are these SMBs really, in fact, getting a good payroll provider?
Finding True Value
The reason a business partners with any vendor is to free itself from work in which it does not specialize. Efficiency is gained by contracting the work out to a vendor, and the service received is of higher value than the dollars invested–a positive ROI. This arrangement allows the business to focus on its core competencies and reach its objectives more efficiently. However, this only works when the vendor provides value via a superior product backed by responsive customer service. Quite frankly, when SMBs go with a mega payroll provider they may be setting themselves up to lose on both fronts.
Many of our clients’ previous experiences with mega payroll providers were characterized by slow, poor customer service when it came to supporting ancillary HR software products. And the less robust add-on products that those providers hawk can sometimes cause more problems and inefficiencies than they solve. So while an enterprise-level payroll provider might provide some benefits and value through its core offerings, many SMBs will find themselves frustrated and nowhere near nirvana with the big provider “single sign-on” platforms.
But there are other victims too. Reputable independent payroll providers with effective solutions and responsive customer service, but without the resources of a mega provider, are being pushed out of the market. They may feel compelled to internally develop solutions that fall outside of their core focus and that threaten profitability. To say it simply, smaller providers are being forced to be something they’re not, in order to give clients something they ultimately won’t want (imitation HR tech). So what is an independent (non-mega) payroll provider to do?
Partner Up
Of course mega payroll providers are not evil. They are simply leveraging their market position and resources to create more perceived value for prospective customers–nothing new here. The problem is that they are failing to deliver enough value to the smaller and mid-sized clients that they steal from independent payroll service bureaus. So if smaller providers are to stand a chance at competing with mega providers, they will have to find a way to offer leading-edge HR technology, while also protecting profitability and providing real value. The best way to do this is to partner with “best-of-breed” HR tech vendors.
The world of HR tech has exploded in recent years. There are SaaS solutions for nearly every HR task and process you can imagine. However, not all tech vendors are created equal. When partnering with a hiring technology vendor, you’ll want to ensure that the following is true of the vendor:
- It provides product support and customer advocacy.
- It is committed to product improvement and enhancement.
- It provides sales support via print and/or digital marketing content.
- It prices products competitively, protecting your profit and customer value.
Each of these areas must be thoroughly vetted before making a decision on a vendor. A vendor that simply says “yes, we do that,” but cannot provide evidence to how effectively it can, in fact, “do that,” is not a vendor with which you want to partner. Remember, although you will resell another company’s product, your clients will associate it with your organization. If the vendor fails to impress you, it will in all likelihood fail to impress your clients, which reflects poorly on you and can damage your client relationships.
Plan Your Counter Attack
In today’s market, it is critical for independent payroll providers to partner with successful, client-centric HR tech vendors. Doing so provides value to clients and maintains profitability for the provider. But rushing to find a vendor and entering a partnership without planning or research can be disastrous.
Before launching a counterattack on mega payroll providers, take the time to plan your approach to an HR tech partnership. ExactHire has created a guide to help you do just that. In it, you will be walked through a series of questions to consider before you commit to a partnership or any type of reseller arrangement. Our hope is that this exercise will help you evaluate whether teaming up with an HR technology provider will potentially open doors for your organization in the marketplace.
ExactHire specializes in providing small- to medium-sized business with HR software, including solutions for applicant tracking, employee onboarding, automated reference checks, and assessments. Additionally, ExactHire partners with other SMB service providers to help maximize value for growing organizations.
Feature Image Credit: Cross-Hairs 
by Paul Sableman (contact)
