Friends with Zenefits

Human Resources ConceptWe’re always exploring various services for small to mid-sized businesses. This helps us stay on top of time and money-saving technology options for our clients.

Last week, we decided to try Zenefits, a relatively new HR product. Labeled “The Fastest Growing SaaS Company Ever,” Zenefits is only 2 years old and claims over 2000 business clients managing 50,000 employees.

Zenefits aims to disrupt (2015 New Year’s resolution – stop using that word) the HR software industry by offering the functionality of larger HR software providers (e.g. Oracle’s Peoplesoft) to small and mid-sized business, at a fraction of the price. How small a fraction? Well, you can’t really calculate $0/$x. That’s right, it’s free. Completely free.

Well, sort of. Zenefits is actually a freemium product. Freemium, a term coined on the venerable Fred Wilson’s blog, is a marketing method of offering basic functionality to a large audience with the goal of charging for premium services to a fraction of your customers. When done right, with the right software, it’s a very successful way for start-ups to enter markets or create new ones.

For Zenefits, the premium offering seems to be a combination of basic functionality (e.g. time tracking is $8/mo.per employee), and an attempt to sell various HR related products, especially insurance. On closer inspection (http://www.zenefits.com/licenses), Zenefits starts looking like an insurance agent dressed in HR software clothing.

Back to the software itself. Zenefits is slick and very easy to navigate. However, during set-up, you quickly run into limitations. For example, while Zenefits will sync with the large payroll providers, you still must log into both systems to manage and enter your payroll. Another example is setting up a PDO (paid-days-off) policy. Our PDO policy is not cookie-cutter, and didn’t fit into Zenefits predefined options.

Still, I think Zenefits addresses a real pain-point for small to mid-sized businesses, especially start-ups and fast growing companies. If they focus on that space, they can turn Zenefits into a must-have for any small business. However, it’s my guess that their business model will quickly lead them to the enterprise and its gigantic insurance commissions, leaving small businesses like ours behind.