Outsourced HR Fills A “Huge Gap” In HCM & Payroll

By Guest Author | 10/02/2023 | 5 min read

For more than two decades, Austin, TX-based Kazdon, Inc. has offered an array of payroll and benefits-related services to employer clients nationwide. But as their business grew, the two realized a significant opportunity awaited - one that today has countless HR professionals jettisoning the pressures of corporate and launching their own HR and payroll firms.

"We saw a huge gap in the industry for affordable outsourced HR solutions for the small-to-middle market," said Holly Acosta, Chief People Officer. "HR expertise was increasingly needed because of so much new and changing legislation with the Affordable Care Act, remote workers, and constantly changing legislation which has to be monitored on the federal, state, and city levels. Companies were getting into legal trouble over compliance issues because they simply didn't know what they didn't know."

Exacerbating the need for expert HR assistance was the fact that today's largely Millennial and GenX workforce arguably are the most tech-savvy and informed in recent history. It's something of a double-edged sword, Holly says.

"Our younger workforce is far more educated than previous generations in what their rights are," she said. "But there also is a lot of confusion. It's much like a person having a symptom and diagnosing themselves with 'Dr. Google'. That's very dangerous. But many employers are doing the same when it comes to searching online for answers to various HR and payroll compliance questions, then incorrectly applying what they find." The proof, Holly says, is in the uptick of EEOC (Equal Employment Opportunity Commission) claims in the wake of new legislation prompted by the COVID-19 pandemic and the new remote workers. According to Bloomberg Law, between April 2020 and December 2021, the EEOC received roughly 6,225 COVID-related charges of discrimination under federal civil rights laws, plus more than 2,700 vaccine-related charges based on religious exemption and other anti-bias laws, as well as violations of the Americans with Disabilities Act. The issue is just one of many that collectively signal a burgeoning opportunity for payroll and HCM service bureaus to more fully embrace all aspects of HR.

Years ahead of the curve, Kazdon opted to expand its payroll and benefits business to include a more comprehensive suite of HR solutions needed by small and mid-sized businesses that lack access to large corporate HR departments. But the move necessitated a change. By 2018, handling of the firm's full product and service line forced reliance on as many as five different software providers at any given time. As the business grew and client employers increasingly sought to modernize and consolidate their payroll and HCM operations, it became clear that Kazdon needed a simpler, more streamlined system to boost efficiency, minimize costs and offer clients and their employees the top-quality experience they expected.

Enter the IRIS HCM software solution; Iindustry-leading payroll and HR technology and services developed by a team of professionals with decades of experience in the payroll and HCM space...

"When we were first looking to switch to a new payroll and HCM software, the most important thing we sought was an effective API integration," Holly said. "The IRIS payroll software has an open API giving us the opportunity to bring together all of our clients under a more streamlined system and allowed us to offer a different, fuller line of services."

That industry-leading API integration allowed for the compatibility and consolidation of multiple popular software platforms, like Employee Navigator, Swipeclock, Equifax and Xero, into a singular platform. It also cleared the way for integration of multiple partner programs offering added-value perks such as telehealth, behavioral telehealth, KazPay (wages on demand), veterinary telemedicine, online banking, Human Interest (401k), Pay-As-You-Go Workers Comp, and much more.

"All of these integrations have helped our HR side be more successful," Holly said. Among the features favored by employer clients is the new employee onboarding platform, the built-in application tracker, and the online HR courses such as "Sexual Harassment and Worksite Management".

"Being able to upload not only all the necessary employment documents but also the opportunity to plug in the clients' videos that welcome the new hires, explain benefits and jumpstart training - everything that covers onboarding from start to finish - is a complete game changer," Holly says. "Those features alone have taken onboarding from reams of paperwork to just a few clicks of a mouse, saving our clients tremendous amounts of time, energy, money and keeping the client in full legal compliance."

"One of the questions that many of our clients asked during COVID and the ensuing 'Great Resignation' was 'What do we do to keep our employees?'" Holly added, citing separate studies revealing that 48 percent of workers would switch jobs to have a learning opportunity, and that some 75 percent who quit their jobs might have stayed with employer-provided training and better benefit resources, especially mental health. These statistics prompted Kazdon to boost promotion turn - key, online video training resources from IRIS with more than 300 courses on subjects from sexual harassment in the workplace, to cyber security, to employee development. Video collections can be customized to employer clients' industries and are regularly revised to comply with updates to not just national, but state-specific employee training requirements - a critical need for employers with remote work forces that cross state lines and may be subject to different regulations.

Again, help with compliance tops most employer clients' lists of HR needs. Kazdon recently landed a new client who opted for a Human Interest 401K plan. These errors were noticed when Kazdon's HR team was completing an HR audit that included reviewing the client's benefits. "The client had been handling their 401K in-house using QuickBooks and while they were doing payroll deductions, they weren't submitting the loan payments to their 401K provider or correctly using the proper deductions," Holly explained. The mishap racked up more than $100,000 in fines and forfeitures. "We were able to work with Human Interest to negotiate an agreement with the prior 401k provider and cut the amount by more than half."

Meanwhile, partnering with IRIS has helped Kazdon not only expand their offerings, but boost revenues and accelerate growth. At the time Kazdon first switched to an IRIS HCM software solution, the company's business had been growing by five to ten percent year over year. After the switch, those year-over-year growth rates increased to 18 percent, then 20 percent, even through an economic downturn. Going forward, Holly estimates continued significant annual growth of 20 to 30 percent.