Well-known players dominate, but a few smaller vendors finding a home
Canadian payroll is a “mature market.”
Economists use this term to describe slow-growth industries where a substantial market share is held by a few well-established firms.
It’s well- known the Canadian payroll market is dominated by a handful of existing vendors, such as ADP and Ceridian in outsourcing, or SAP and Oracle for larger employers that process payroll in-house. And, clearly, the size of the Canadian payroll market is limited by growth in the overall Canadian economy.
One characteristic of a “mature market” is that it’s difficult for other vendors to become established, to grow and to challenge the dominant players. In part, this difficulty also reflects the conservative nature of the payroll profession. Excess caution is understandable when what’s at stake is the ability to process payroll — accurately and on time.
While some people might think this means there isn’t much opportunity for new Canadian payroll vendors, they might be surprised by the number of recent new offerings.
Mostly, these new entrants see the existing situation — a mature industry dominated by a handful of firms — not as an obstacle but as an opportunity. In this view, dominant firms have not kept up with user expectations or changes to web-based technology.
For Wagepoint Payroll, there are three aspects to competing with existing vendors. First is a focus on smaller employers — those with fewer than 100 employees. Second are efforts to make payroll processing as easy as possible. Third is an emphasis on service and support, available over the phone, via email or live chat.
This focus on ease-of-use for small employers doesn’t come at the expense of functionality. Wagepoint provides employees with self-service access to online pay statements, together with the ability to update employee demographic and banking data.
Wagepoint Payroll offers two levels of pricing and service. Employers can sign up and use the system for free, with only two exceptions: CRA remittances and direct deposit are not available. Otherwise, free users get the same functionality as employers who pay, including access to service and support. Employers that want Wagepoint to make direct deposits and remittances on their behalf pay $20 per payroll run, plus $2 per employee paid.
Payment Evolution also offers multiple levels of pricing: free, $18 per month and $79 per month. Free payroll services are limited to no more than five employees. The only additional fees on top of these prices are for direct deposits, which include a $55 one-time setup fee, as well as a $0.50 per deposit fee. For example, an employer could pay four employees by direct deposit, on a semi-monthly basis, at a $4 monthly cost.
Like Wagepoint, Payment Evolution focuses on smaller employers. However, the company says its software is built to handle the requirements of much larger employers — those with up to 1,500 employees.
Payment Evolution has two interesting approaches to the market.
First, the company offers programming access to its gross-to-net calculation engine. The availability of these application program interfaces (APIs) means this back-end processing could be integrated into another vendor’s accounting, enterprise resource planning (ERP) or human resources information system (HRIS) package. As a result, Payment Evolution’s growth isn’t limited to its own retail customer base.
Second, Payment Evolution offers seamless interfaces to other cloud-based accounting systems, such as FreshBooks for time entry/billing and Xero and Kashoo for general ledger accounting. With this approach, employees could enter time in FreshBooks, which could then be used to pay employees and the resulting expenses could be posted to the employer’s general ledger. Moving this data around happens in the cloud without users having to manipulate file exports and imports.
PaySavvy targets small to mid-sized employers with between 30 to 500 employees. However, the company is actively pursuing larger employers in the 1,000-plus employee range.
In line with this ambition, PaySavvy offers a cloud-based workforce management suite, including time and attendance (scheduling integrated with physical or online clocks), payroll and HR (benefits administration, certification and training management).
The software and service levels give it a competitive advantage, PaySavvy says.
First, the company says its modern user interface allows for ease of use, which reduces client support costs. For example, end-users can easily modify the pay codes used in time entry, including the ability to define their own custom pay codes.
Second, the software supports functionality required by larger employers, such as a flexible yet easy-to-use reporting tool that allows end-users to create or modify their own custom reports. This service is provided on top of the standard reports provided by PaySavvy.
Third, PaySavvy provides implementation services to new clients at no charge, including the replication of custom reports provided by a client’s previous provider.
Despite their differences, the three aforementioned vendors all share one characteristic — they define target market based on employer size. By contrast, Ibex Payroll has a very different marketing approach.
Ibex Payroll started out in the mid-1990s as a Winnipeg-based payroll service provider. The company quickly gained traction among small, local employers, but had difficulty getting the attention of larger employers. While a few locally-based larger employers eventually became clients, the company soon came to appreciate the difficulty of convincing employers with more than 500 or 600 employees to consider Ibex when looking for a new provider.
To overcome this, Ibex refocused its marketing efforts on a very specific niche market — organizations that provide group support services to those with intellectual difficulties. Satisfying the needs of this niche market meant adding time, attendance and scheduling functionality to the base payroll product. Focusing its marketing efforts on this area had immediate results — Ibex saw business grow by 30 per cent in a three-month period.
Ibex has not turned its back on the general payroll market, the company says. The quick growth experienced by Ibex gave the company the confidence to continue with what many (in the very conservative payroll market) might see as decidedly quirky branding — its Ibex Herd Culture. Similarly, the company positions itself in the market by charging more for its services than other vendors. Both are conscious efforts to filter out prospects that might not value the level of support and services offered, the company says.
Alan McEwen is a Vancouver Island-based HRIS/payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at firstname.lastname@example.org, (250) 228-5280 or visit www.alanrmcewen.com for more information.