By Jason Bramwell
When San Francisco–based ZenPayroll Inc. launched in December 2012, its mission was to bring the power of modern software to the payroll industry through a Cloud-based service that's simple, easy to use, comprehensive, and accessible 24/7 from any computer or mobile device.
"So much of the payroll industry today is still done manually. That's why some small businesses every year get fined for forgetting to file Form 1099, reporting wages incorrectly, or making filing errors with the government", Joshua Reeves, CEO and cofounder of ZenPayroll, told AccountingWEB. "By fundamentally rethinking how payroll works with a focus on user experience, we're able to deliver delightful payroll through automation that's easy to use, secure, and saves businesses time and money."
After raising $6.1 million and receiving the backing of CEOs from such companies as Yelp, Yammer, and Dropbox, ZenPayroll initially focused on providing businesses with its Cloud-based payroll service to pay full-time employees. However, on June 12, the company launched support for contractor payments.
According to the US Government Accountability Office, nearly forty-three million workers, or approximately one-third of the US workforce, are independent contractors. Providing support for contractor payments was one of the most requested services ZenPayroll received in the past several months, according to Reeves.
"We found that a lot of folks, including ourselves with previous companies we have run, end up doing checks or using PayPal or other various payment mechanisms to pay contractors. They track the amount paid, when it was paid, and who it was paid to in spreadsheets or in other types of systems", Reeves said. "Any business owner who uses ZenPayroll can add contractors to their existing system and, much like paying their full-time employees, the contractor's payment is direct deposited into the [contractor's] account. Rather than paying employees and contractors separately, it's all done through one system. All that data gets centralized, and companies can see in one place how much and when they paid contractors."
How It Works
Signing up to use ZenPayroll takes about ten to fifteen minutes, Reeves said. The payroll service asks for specific information from the user, and that information is entered one time only.
Companies must provide ZenPayroll with the contractor's bank account number and routing number for the contractor's payment to be direct deposited. When a contractor is scheduled to be paid, the employer clicks on a "pay contractor" button on the service's online dashboard. The employer is asked how much the contractor should be paid, and after that amount is entered, the contractor soon receives his or her payment.
Once a contractor is added to the system, an employer can also record previous payments made to the contractor prior to using the service.
ZenPayroll maintains bank-grade security, Reeves said. Data is fully encrypted at rest and in transit using 256-bit secure sockets layer (SSL) encryption. The company employs state-of-the-art firewall and backup technology, and data reside in high-security, access-controlled data centers.
"We spent all of last year building out the platform to make sure we leverage bank-grade security because it's such a business-critical task. It always has to work correctly", he said. "We've had tens of millions of dollars now come through this system, and customers love it. They tweet about it and have validated our belief that payroll can be delightful.
"If you think about it, the underlying building blocks of payroll are two of the most amazing building blocks possible", Reeves continued. "Two of the happiest moments of the month for employees or contractors is when they get paid – for contractors, they may even get paid more than twice a month. For the employer, it's how you reward your employees or contractors for all the work they've done."
Another feature of the service is that it automatically creates the contractor's Form 1099 for income tax-reporting purposes. Businesses are required to file Form 1099 with the IRS at year's end for any contractor who received more than $600 in wages from the employer.
"Because all that data is already stored in the system, the 1099 gets printed automatically. We send it to the IRS, which is what we do for all tax filings, through eFax or e-file. Then we go ahead and send a copy to the contractor", Reeves said.
Employees and contractors also receive a lifetime account to ZenPayroll, in which they can log in to the website and view their account.
"They can change the direct deposit, they can review their payment history, and they can view the 1099 that we created for them and where that data came from", he said.
Pricing for the service is the same for both employees and contractors. A company pays $25 per month and $4 per month for each full-time employee and contractor. When a company grows past ten employees and contractors, the rate drops to $2 for each additional person.
"The company gets unlimited usage, so if it wants to pay a contractor six times a month, all we care about is how many people it has in the system", he said. "There are no additional fees or surcharges, nothing at the end of the year, and nothing on a quarterly basis. It's just that simple monthly price."
ZenPayroll for Accountants
Another service ZenPayroll provides, ZenPayroll for Accountants, was launched in April and allows independent accountants, independent bookkeepers, and other back-office service providers to manage the payroll needs of multiple companies from an online dashboard.
"We're really excited to empower those individuals with modern software and help build their service businesses more strongly and more successfully", Reeves said. "With the launch of contractor payments, we're enabling these independent accountants and bookkeepers to help their customers manage contractors."
Anelya Grant, founder and senior accountant for AgAccounting, which provides accounting, bookkeeping, corporate, and tax services to small and midsized businesses, told AccountingWEB that her company has used ZenPayroll since October 2012.
"It's the best payroll software on the market right now", she said. "It makes doing payroll so much easier. First of all, they take care of filing all state and federal payroll tax documents. Second of all, you can add people to the payroll and just forget about it. They have an option for automatic payroll, which makes direct deposits automatically. You just have to set up payroll and everything is delightfully easy."
ZenPayroll's Cloud-based payroll service is currently only available in California, but nationwide expansion is a top priority for the company, Reeves said.
"We'll be adding support for Florida, New York, and Texas next month, and we'll be nationwide by the end of the year. We'll be expanding into Canada next year", he concluded. "However, contractors can be located nationwide. For example, a company in California can pay their contractors who live anywhere in the United States."