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Beyond Payroll for the Small Business HR Department of One

HRTech for the 2020 Workforce



SHRM defines small businesses as those with less than 350 employees. For these small businesses with an “HR Department of One” the need for HR Services beyond payroll includes most commonly human capital management, labor costing reporting and financial management, eRecruiting and employee screening, time tracking, WFM (workforce management), and expense management.

To meet the demands of the 2020 workforce, HR platforms must evolve to include:

  1. Core Payroll Processing now includes WFM (workforce management) and labor analytics embedded into the core processing platform
  2. Human Capital Content (Recognition, Loyalty, Social, Wellness, Training, Professional Development, Career, etc.)
  3. Bundled HR Support Services

The Market Size

The market for HR Technology in North America is approximately 110,000 middle market companies ($10 million to $250 million, with 50 to 10,000 employees), more than one (1) million small businesses (SMBs with <$10 million, and <100 employees), plus the enterprise market, and plus government entities. And annually, more than 200,000 small businesses change their payroll provider based on public company customer churn / loss turnover analysis. W

The Market Landscape

The goal of HR technology has evolved to include automating and standardizing personnel administration, coordinating the human aspects, and measuring and analyzing it all.  To satisfy customer demand, payroll and staffing providers must move beyond basic payroll services to offer HCM (Social,eLearning, etc. )and HRMS technology as well as both HRO services and FAO (Finance & Administration) outsourcing services (primarily time tracking, scheduling, and expense management). In summary, a shift has occurred from historically only managing “employee transactions” to greater return on investment.

While the payroll market for small businesses with less than 50 employees is highly competitive (“red ocean”) between several different vendor types; there are approximately 175 payroll outsourcing players with significant, meaningful revenues ($10M or greater annual recurring non “pass-through / non-reseller revenues) in North America. For multinationals and global organizations there are more than a dozen global payroll service providers with North American operations.  Regional and industry specific providers do exist.

In addition to local accounting firms, insurance, and banks, which are increasingly choosing to be referral sources and turn to private-label partners for payroll services, the landscape can be categorized into the following primary buckets of competitive players:

    • The big “umbrella” brands with the majority of the market share. ADP, Ceridian, and Paychex together control a significant share of the market and continue to grow based on their sheer brand recognition and referral base.
    • The venture capital and private equity sponsored small business payroll platforms: at least fifty (50) beyond payroll platforms with greater than $10 million in annual revenues are operating in the USA today.
    • HROs, ASOs, PEOs - rougly 10% of the market share.
    • Licensees – there are 155 active service bureaus ranging from $1M to $10M in annual recurring revenues that are delivering their service based on licensed technology from a two dozen different software vendors in the market who in turn receive an average of 3 to 9% of the service bureaus’ revenue.  These licensees are primarily small businesses that are operated on a lifestyle basis and were initially started based on local relationships.

Download our latest reports:

Beyond Payroll HRTech Platform for the 2020 Workforce

Payroll Transaction Deal Multiples

Beyond Payroll HR Tech Platforms for the Small Business HR Department of One

Payroll Staffing Market Introduction

2015 SHRM Conference Update

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