Who the heck is this Zenefits and what exactly is it they do?
Talk about a splash. Zenefits, a two year old company, has gotten both press and a lot of venture capital dollars for their business that has disrupted the HR and employee benefits marketplace. They’re marketing like crazy, advertising on the radio, the web and directly to businesses. As Zenefits CEO Parker Conrad said, “…we should be stepping on the gas and putting the pedal to the floor.”
So what is it they do and are they revolutionary? And how do they offer their technology for free?
What they do is make the processes of HR – onboarding, benefits enrollment, termination, reporting, etc. – easier. And they use technology to do so. So, no, it’s not revolutionary – there are plenty of HR systems in the marketplace that do similar things. The revolutionary part is how they package their technology with benefits brokerage services. And that gets to the free part.
In exchange for the technology, Zenefits wants to be named the Broker of Record for all employee benefits, where commissions (typically large commissions) are built in to the plans. Zenefits then provides virtual benefits brokerage, managing the employee benefits plans just as a traditional benefits broker does, but without in- person meetings, getting paid through commissions and providing the technology at no cost.
The revolutionary part is not in the product innovation; it’s in the business model. The company found a need in the HR world where complexity grows by the minute and dinosaur benefit brokers were making a lot of money, but not adding value. Zenefits has become a market disruptor and exploited a market opportunity by merging two worlds – HR technology and benefits brokerage.
To date, Zenefits has focused on small employers that don’t have HR systems, but seem to be moving up market. Here in Vermont, it will be interesting to see how Zenefits makes out as there are no commissions built into small group medical rates due to Vermont legislation with the small business health plans being offered through Vermont Health Connect.
If Zenefits does go up market, larger employers here in the state have largely gone to fee based arrangements with their benefits brokers and consultants so they would have to work through the consulting agreement process. Pricing transparency has more often than not become the norm here in our State where, it seems, we’re often different.
And how does our firm feel about Zenefits entering the marketplace as a new competitor? Well, we welcome them. These are conversations we’ve had with our clients for years and are trying to have with more Vermont employers. Where technology, insurance carriers and HR couldn’t seem to come to terms for years, those terms have finally changed, but not because of Zenefits, but because of market changes. Zenefits has just exploited the market as a good start up will do.
We’re glad they’ve changed the conversation and feel they’ll make it easier to help us retain and grow our business as more organizations put HR and benefits together, just as we do. They’re finally making people stand up and