Running a business is more complex than ever. Business owners must keep up with fluctuating regulations around payroll, tax compliance, and operations in the midst of staffing challenges and new remote and hybrid work expectations. They didn’t start their company to spend hours on the operations side, they did it to solve real problems.
Business owners need a simple, all-in-one solution to run their operations, from scheduling to time tracking to payments. That’s why there’s been an explosion of software companies building “business-in-a-box” tools to serve the needs of specific industries. By some estimates, the number of vertical SaaS companies has leapt nearly 30% since 2020. There’s an exciting opportunity here for vertical SaaS providers, POS solutions, neobanks and others to collaborate as partners and take this idea further. Together we can build solutions that truly meet all of a business’ needs in a single place. That’s why we introduced Gusto Embedded Payroll. Our vision is to take everything we’ve built over the past decade and make it available as a platform for developers.
In the past six months, we’ve taken ten years of payroll infrastructure and technology and made them available to any third-party provider through simple APIs and flexible, pre-built UI flows. The companies building in-app payroll with Gusto serve hundreds of thousands of businesses. Our first partners to go live are up and running payroll for their customers— and the feedback has been incredibly positive. Their customers are benefitting from more streamlined workflows and the ability to manage payroll and other operations in one place.
Josh, Eddie and I have been closely involved in this because we believe that embedded payroll is a huge part of the future of the industry (we talk about this more in this video). We’ve committed the time, resources and people needed to support our software partners. Today we want to share more about why we’re so excited about embedded services and pull back the curtain a bit on what’s next.
A Win For Partners and Their Customers
We believe embedded payroll is a win-win. First for small and medium businesses — they have everything they need to run their companies and take care of their teams in a single place. Payroll is one of the biggest expenses for small and medium businesses and comes with numerous complexities. Instead of spending hours on payroll each month, business owners can use an in-app solution to handle payroll in a few clicks. They can also integrate payroll into the whole financial picture, which opens up many opportunities to optimize cash flow and operations.
The second win is for vertical SaaS providers — they get to offer more services tailored to their customers without having to navigate payroll and compliance themselves. Using Gusto’s core technology, services and the decade of experience we’ve built, our partners can take on payroll for their customers and ultimately give them more time to focus on running the business.
Our partners understand the unique needs of their customers: Vagaro knows what it takes to handle operations for salon, spa and fitness centers; Collective understands the pain points of solo entrepreneurs; busybusy knows the ins and outs of managing construction crews. By combining their vertical expertise with our payroll and tax compliance expertise, we can better serve the holistic needs of business owners with a single solution. It’s a no brainer.
Fred Helou, CEO of Vagaro, sums up the dual benefit to partners and their customers nicely:
“This is going to be revolutionary for [Vagaro] and anyone like us that would like to have payroll that’s customized within their solution. Our customers want to focus on the services they provide: styling hair, providing spa treatments, and training clients. They want to leave the complexity of running the business to us and we want to take on that complexity because we are strong technologists.
There are many payroll providers out there but the problem is the payroll tool doesn’t know how many hours an employee worked or the commissions they earned. Vagaro already tallies the hours worked and commissions earned for each employee, but in the past some customers had to do the last step, the payroll step, manually. We’ve known for years this was a shortcoming even though many of our customers were asking us to go all the way. Now we can offer that end-to-end solution, easy and seamless, and we think our customers are going to be very excited.”
Not only do our partners and their customers benefit from Gusto’s payroll API and full-service tax filing, they also get access to our support services and best-in-class customer support. Our support staff train our partners’ teams to handle customer questions and will step in to handle especially tricky issues. We have the experience to do so: in the last ten years, we’ve seen all the outlier tax and payroll situations that really make you scratch your head. There are tens of thousands of tax agencies in the US, from large agencies down to a small school district. You need to know who to call with a question about the latest tax rates and tax calculations. We’ve been building relationships and solving tricky process questions for a decade. This enables us to be more than an API provider. We’re an expert and advisor to our partners.
Not all embedded services are equal — experience matters
Since launch, our team has released dozens of new endpoints and developer resources. We’re able to move fast because we’re building on a reliable and proven foundation – Gusto. I’m immensely proud of the progress we’ve made, especially given the complexity of running payroll across all 50 states and preparing to support payroll issues, including the inevitable tax notices, at scale. I’m also excited about all that’s to come for our partners and the hundreds of thousands of businesses they serve.
That’s one thing that makes Gusto Embedded Payroll unique: the ability to scale rapidly. By the end of our first year of operations, we anticipate that the partners working with Gusto Embedded Payroll will cumulatively serve more than half a million small and medium businesses, or 10% of the market in the US. Our partners anticipate strong adoption and we’re ready to support them. That’s only possible because of our infrastructure, processes, and ability to hire and onboard the CX teams that will support these partners, and their customers.
We’re not just making the payroll and tax filing infrastructure that we’ve built fully-accessible via API. We’re making a decade of experience available to our partners. Successful in-app payroll combines product and service. Gusto Embedded Payroll is not a hands-off, drop-in-this-UI-and-call-us-in-the-morning offering. We believe true partnership is the only way to really make our partners, and their customers, successful.
Our experience means we help our partners not only set up in-app payroll but also guide them on how to offer the unique features customers want and make recommendations to inform key product decisions. For example, we can look at how 5,000+ spa and salon customers use payroll in order to help guide Vagaro’s decisions. And many partners are excited by what our other fintech solutions could look like in their world. Together we can not only impact their customers but the employees of their customers by offering mobile solutions like same-day pay.
These kinds of financial benefits enable employees to build up their financial resilience and improve their well-being— a key differentiator that enables small and medium businesses to compete for talent against larger corporations in a tight labor market.
In-app payroll is only the beginning
The time for in-app payroll is here — but it’s just the tip of the iceberg. There are so many exciting opportunities to innovate with our partners and offer more services to small and medium businesses. We plan to make workers’ comp, 401k and similar benefits, and other HR features embeddable as well—because that’s what growing businesses and their customers deserve. We believe this space is going to grow quickly because of the real value it can provide to customers and their teams.
Paychecks and financial benefits play a pivotal role in the economy, in people’s lives, in families and in communities. There’s a huge opportunity here but also a lot of responsibility to do things well and to not cut corners. We think the next wave of embedded services require deeper partnerships than developers and product teams may be used to. But as we move past payroll into benefits, insurance, and other products where the regulatory and compliance considerations only go up, deeper partnership is the only way to realize the full opportunity.
Stay tuned for updates and learn more at gusto.com/embedded-payroll.