Landscape Map: HR Made Simple(r)

This is part 5 of a 6-part series on the trends that are changing Software-As-A-Service (Saas) for Small & Medium Enterprises (SMEs):

🛒Trend #1: Shopify’s growth creates new markets
🍉Trend #2: Restaurants fight for independence from delivery and discovery platforms
👋 Trend #3: Work, reinvented
👔 Trend #4: The rise of vertical biz management software
🤴 Trend #5: HR made simple(r)! - Below
👹 Trend #6: Bookkeeping becomes understandable

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Intro: HR Tasks Got Messier

As of today, two-thirds of small and medium-sized businesses (“SMBs”) still rely on pen and paper to manage payroll, time off, and absences.

Most of the remaining third run these processes on Excel and email. As a result, major inaccuracies take place and expensive mistakes are made.

On average, SMBs spend 5 hours calculating, filing, and paying payrolls for each pay period (ref). The rise of remote-first policies compounded the issue with the emerging need to handle relocations, visa changes, and office transfers. It is estimated that in a post-Covid world, 50% of the global skilled workforce, comprising around 140M individuals will be interested in relocating internationally. The resulting paperwork is currently outsourced to specialized HR agencies: Helping companies offer more flexible work arrangements while reducing the HR workload is the opportunity.

And of course, there is a massive talent crunch affecting all industries and technology in particular. These falling unemployment rates have led companies to double down on international hiring. Yet, navigating local labor laws in 150+ countries is a major challenge for HR departments and the relevant processes can be a pain for employees and employers alike.

Increasingly, SMBs are forced to adopt more modern human resource management solutions, employers of record platforms, and global mobility software to tackle the above-mentioned challenges. This entry focuses on these.

1. Human Resources Software

These platforms often begin as payroll automation services. Automating payroll is a great entry point, as this is one of the most painful processes for SMBs. For example, Pento (Denmark) has grown by offering a solution where users can import employee data, manage absences, and automate payments platforms.

The “more complete” solutions include the likes of Zenefits (US, raised $584M), Gusto (US, raised 516M$), Personio (Germany, raised $254M), PayFit (France, raised $208M), Rippling (US, raised $197M), HiBob (Israel, raised $124M), Bamboo HR (US), Factorial (Spain), and Kenjo (Germany), Humaans.io (UK), CharlieHR(UK), Humi (Canada), EddyHR (US), CharlieHR (UK). They all aim to simplify payroll management but also support other tasks such as hiring, onboarding, time and performance tracking, absence management, and benefits administration. Their goal is to become a complete human resources hub, tackling any tasks related to HR.

In order to create a complete HRIS hub, these companies have to overcome two major challenges:

1/ First, providers need to bundle different features without turning their platforms into clunky software. The HR hubs can rely on API integrations and possible revenue share partnerships with some dedicated software (like well-being or training management solutions). The European leader in this space, Personio (Germany) recently opened an app marketplace to facilitate the integration of third-party applications within its software. Similarly, People Spheres (France) built an HRIS platform "a la carte" by building a core HR platform and relying on integrations with third-party software to provide different modules (planning, expense, performance management, etc). 

2/ Secondly, geographic expansion is complex. The US and European markets are very segmented when it comes to specific regulations, labor laws, healthcare, insurance, and retirement plans. This means that many of these players are very localized.

⭐ Remote-first HR platforms & employers of record:  57% of SMBs in the US said that they will maintain remote working as an option following the pandemic (ref). The future of work, at least in the majority of desk-bound industries, seems to be a hybrid mix of office and remote work. Yet:

1/ Administrating remote employees and freelancers is tricky. Employers need to adapt contracts to match local labor laws, adjust benefits, onboard remotely, and manage payments for over 150+ countries. Moreover, most companies do not have the legal infrastructure, expertise, or resources required to support a global workforce.  

2/ Traditional HR platforms were not architected to specifically manage a remote workforce.  A new set of players now focus on remote workforce management. There are two categories of these platforms: 

⭐ Technology-first HR management platforms, include the likes of PapayaGlobal (US, raised $195M), Deel (US, raised $425), Rippling (US, raised $197M) RemoteTeam (US), Remote (US), Oyster (US), Boundless (US), Lano (Germany), Goco.io (US), WorkMotion (Germany), that have built dashboards and processes to manage contractors and employees worldwide. SMBs are able to generate local law-compliant contracts and manage payroll in 100+ currencies. Moreover, they offer their own managed companies to hire employees via their network of local employers of record. This simplifies hiring employees worldwide by removing the need to set up local entities.

Similarly, legacy companies and agencies such as Globalization Partners (US, raised $150M), Velocity Global (US, raised $100M), Elements Global Services (US), or Safeguard Global (US) have developed their own legal infrastructure for managing employees. They are international employers of record themselves, meaning they incorporate their own entities worldwide, and can hire their clients' employees on their behalf.

For example, Globalization Partners currently supports 2000 clients via 50+ incorporated entities. These companies only started developing their own HR management SaaS platforms recently, in reaction to recent market developments and emerging competition by tech-enabled players. 

⭐ Outsourced contractors: There is a growing need for virtual assistants across HR, accounting, or daily assistance to executives. 70% of SMBs were already working with freelancers in the last 3 months and 81% of them want to hire more freelancers in the future (ref). For SMBs, it is often a simple way to leverage the skills of an expert during a few hours per week, at an accessible price, without any legal and regulatory concerns.  

To hire and manage remote contractors, dedicated platforms offer to handle the full process, from selection to hiring. Bambee (US) allows their users to get a dedicated HR person for 99$/month. Double (US) and Inv.tech (US) offer an executive assistant on-demand at an hourly rate. Pilot (US, raised $161M), Bench (US), Xendoo (US), Zeni (US), Taxfyle (US) are able to match their users with a dedicated bookkeeping team. OnePilot (France) can handle all support tasks, even outside of business hours. 

2. Employee Management

⭐ Employee engagement and wellbeing: In a remote environment, it is key for SMBs to constantly assess the well-being of employees. Swile (France, our portfolio company) Peakon (France), Lattice (US, raised $154M) CultureAmp (Australia, raised $151M), Reflektive (US) 15Five (US), Jubiwee (France), Glintinc (US), Performetry (France), Windoo (France), Supermood (France), capture insights about employee's wellbeing.

⭐ Mental support: Lyra (US, raised $475M), Modern Health (US, raised $167M), Mindstrong (US, raised $160M), Ginger (US, raised $221M), Spring Health (US, raised $106M), Spill (UK), Teale (France), Holivia (France), Moka Care (France) Unmind (UK), FrankieHealth (Ireland), or PeppyHealth (UK) measure employee well-being and provide proactive and reactive mental support, with the help of therapists and interactive content.

⭐ OKR reporting: Lattice (US, raised $154M), GTMHub (Bulgaria), Perdoo (Germany), Ally (US), Workboard (US), Koan (US), Leapsome (Germany),  OkayHQ (US), Pathlight (US) collect key metrics from various sources (CRM, support solutions, product metrics via Segment (💛) and help businesses to conceive, display, and follow objective and key results (OKR). To bridge the gap between planning and executing, they also integrate with major project management software.  

These companies benefit from two tailwinds. First, SMBs have been accelerating their digital transformations over the last few years. Secondly, there is a rise in the popularity of OKR models  OKR-management software is aiming for a broad market that is composed of SMBs, SMEs, start-ups, scale-ups, and enterprises.

⭐ Culture building, Goal celebration: Building a culture of recognition helps companies to retain their employees, and align people behind the same goals. Employees feel like  their company values them and the impact of their contributions This is particularly important when companies grow or transition to new processes over time (such as when switching to a remote-work model).  

PerkBox (UK), Bonusly (US), and KazooHR (US) all built gamified platforms, where the most engaged employees are recognized by their colleagues. It's a peer-to-peer recognition scheme, which encourages engagement and celebration of small improvements. The most recognized colleagues can get small rewards like bonuses or day-offs. SetSail (US) integrates with CRM data, offers OKR management features, and rewards best-sales practices.  

Droyd (France), Disco (US), and HeyTaco (US) help to celebrate team achievements on Slack. They integrate with major data sources to share milestones publicly.

3. Compensation and Equity Management

⭐ Sales commission management: Building a sales commission system is complex. It requires designing commission rules, extracting sales data that is often siloed, computing compensation, reporting the data in accounting solutions, and processing the payments. 75% of businesses are relying on spreadsheets to process commission calculations and each business has its own way of designing its commission plan, which is often more complex than payroll math.

CaptiveIQ (US) Spiff (US), QuotaPath (US), Sales Vista (US), Qobra (France), Equalto (Germany), Amalia.io (France) conceived no-code, excel-like, collaboration dashboards to design commission plans and execute them in a few clicks. They fetch sales data and calculate the compensation automatically to provide a flexible editor to adapt to any commission plan.

⭐ Employee equity management software: Ledgy(Switzerland), Capdesk(UK) offer a user interface for employees to follow the evolution of their equity pool. Employees can follow their ownership, and automatically vest stocks. These tools are used to keep company stakeholders and employees aligned.

Many thanks to Ilan Nabeth for the invaluable research that made this series possible, and to Yusuf Janahi and Anna-Stella Fetha for your contributions!

Next: Trend #6: Bookkeeping becomes understandable