A Toronto startup hopes to employ its growing user base of free online accounting software customers as a launching pad for a lean Web-based payroll tool targeted primarily at micro businesses.
While there is no shortage of software companies catering to the payroll needs of small and medium sized businesses (SMBs), Wave Accounting Inc., wants to corner a market that is a few rungs lower. The company claims its online payroll tool Wave Payroll is priced way below the competition at $3/employee/payroll.
The Canadian version of the software, which is being tested by several businesses for some months now, will rollout today. A version for United States businesses is expected to be released later this year.
“Although our software can handle more users, we are targeting businesses with 10 employees or less,” said Scott Zandbergen, the firm’s vice president of product marketing.
This segment, he said, is typically made up of self-employed professionals, freelancers, home care workers and small corporations employing a mixture of full time and part time employees. Although their operations may be small, their payroll needs and documentation cover some areas similar to those of larger companies. Most small businesses, much like larger enterprises, need to provide year-end tax forms (also known as T4s), manage tax deductions and other remittances to the government and account for things such as employee vacation days off and sick days.
Zandbergen said the online tax tools available to this segment are expensive or too complicated for their needs. “Products offered by the likes of ADP are above the price range of these smaller businesses and are loaded with features they may never use.”
He said Wave Payroll will cost about $234/year to handle the bi-weekly salaries of three employees.
Other providers like Ceridian Canada Ltd. and QuickBooks Payroll from Intuit Canada also offer SMB-focused features. Toronto-based PaymentEvolution Corp. also provides an easy-to-use solution that is not hard on the wallet.
“PaymentEvolution offers many of the features found in high-end payment tools along with the option to tailor the service according to your needs,” says Sam Vassa, head of operations for the company. “While leading payroll firms charge as much as $50/employee/month, we actually offer our services for free to firms with five or fewer employees.”
Organizations with six or more workers pay $18 per month, with no extra charge for additional employees. The service allows employees to access their online pay stubs and tax documentation. For an additional fee of 50 cents per transaction, users can also have payments electronically transferred to their bank accounts.
Manitoba roots
Wave Payroll traces is origin to an online payroll tool developed by an app developer who was looking for a Web-based payroll solution to handle his salary and tax remittance documentation for a caregiver he had hired to take care of his children.
In 2009, Sean Walberg of Winnipeg, Man. Launched Small Payroll which he created after his frustrations with the government’s unwieldy online tax remittance calculators and expensive payroll software from high-end companies. A couple of years later, Wave Accounting (With funding from OMERS Ventures and Charles Rivers Ventures) bought Small Payroll and rebranded it as Wave Payroll.
Wave Accounting remains a 100 per cent free service but Wave Payroll is a paid service. The tool handles the following aspects of payroll tasks encountered by many small businesses:
- Direct deposit to employees’ bank accounts
- Calculations of wages and overtime
- Withholding deductions; and monthly remitting to the government
- Income tax forms (including the Canadian T4) and Records of Employment
Wave Payroll user gets wish
Mike Potter, CEO of AddIn Social, an Ottawa-based social media app development firm, is an early user of Wave Payroll. Potter found the online service a good fit with his operations. AddIn Social is a four-person team of developers looking to expand its workforce to 12 in the near future.
“None of us is an accountant but we wanted a solution that would help us handle our payroll without the use of an accountant or bookkeeper to keep cost down,” said Potter.
Initially the company looked at ADP. “We didn’t go with them because a check of their site led us to conclude that their services were not geared towards businesses of our size,” said Potter.
AddIn Social also tried Ceridian. “Costing around $25/payroll, Ceridian appeared to be a bargain but we found their solution to complex for out needs,” said Potter. For instance, he found that users were spending too much time navigating the system than doing the payroll.
“We found the system just had too many menus to wade through before you got to the actual feature you wanted,” he said.
Potter said Wave Payroll provided the ease-of-use his staff needed. “The user interface was clearly developed with SMB users in mind. From the get go, we were up and running within a matter of minutes.
When we talked to him last week, Potter said there was one feature that Ceridian had which he missed in Wave Payroll. Ceridian allowed users to do tax remittances by deducting the needed amount from the employee’s salary automatically. With Wave Payroll, the company had to do the deductions themselves.
Yesterday, we received word from Wave Payroll that Potter’s wish had been granted. The automated remittance feature was added to the online payroll tool.
Freemium model beginnings
Wave Accounting has been growing its customer base since 2010 by using the so-called freemium model embraced by many game makers and Web-based companies.
Mint.com, the free personal finance management service, is the best example of a successful freemium business, according to Zandbergen.
Rather than charge users for its accounting software, the company offers for free online. The company makes money via online ads from firms such as Dell Inc. American Express and Grand & Toy, which are presented to the users when they access the accounting tool. “Our ads are never intrusive and we only serve up ads that are relevant to the user,” the Wave Accounting executive said.
Within a year of operation, Wave Accounting has signed up more than 140,000 users in over 200 countries. Fifty per cent of the company’s customers come from the U.S., another 18 per cent from Canada, and India is number three at around 10 per cent.
