No one understands the tribulations of payroll quite like a small business owner who has done it manually. Tom Sagi, the Co-founder and CEO of Hourly, experienced the complexity of payroll for small businesses firsthand while managing his family’s construction and real estate development firm in the Bay Area.
With approximately 40 employees in a high-risk work environment, Tom and his team spent 30+ person-hours each month processing payroll, navigating a labyrinth of manual data entry, check verifications, and workers’ compensation calculations.
“Payroll was a full-day affair. We started with muddy timecards, manually entered data into spreadsheets, and verified it before entering it into our payroll software. We would joke that the excel sheet ran all the way from Palo Alto to Los Altos.”
Tom Sagi, CEO, Hourly
In 2018, Tom and his co-founders launched Hourly to bridge the gap in the market for time and attendance (T&A), workers’ compensation (WC), and payroll solutions, mainly targeting businesses with mobile employees—the company’s ambitious vision aimed to integrate these highly regulated products seamlessly in a mobile-first platform.
Hourly’s value to customers goes beyond convenience, by bringing together payroll and other platform data Hourly can better solve compliance challenges for small businesses. However, it requires flexibility from the technical platforms they use to create the right frontend user experience (UX). Read the full case study here.
“No other companies that I know of combines payroll and workers’ comp the way we do. We’re built for employees who are mobile. We can verify location with GPS, help prevent spurious claims while streamlining payments for injured workers, and get much more accurate on a customer’s workers’ comp premiums with real-time calculations. It all comes down to how we collect and analyze the data.”
Silvana Narvaez, Director of Product, Hourly
The Challenges of Building Payroll for Small Businesses from Scratch
Hourly recognized the need for an integrated solution covering time tracking, accurate payments, and worker insurance. Combining these three essentials in one platform, specially designed for mobile employees, became the company’s mission.
However, achieving this was no small feat. Hourly faced the challenge of building its payroll infrastructure from the ground up. Silvana Narvaez, Hourly’s lead payroll product manager, understood the intricacies of developing payroll solutions for all 50 states, emphasizing the complexities of compliance, tax filing, and payment regulations.
“Very few people understand what it means to build payroll for each state… It’s a huge effort to go from one state to all 50; there are multiple agencies and filing systems within most states. It’s a tremendous amount of work to get it right!”
Silvana Narvaez, Director of Product, Hourly
Hourly initially explored options like MasterTax for tax filing. However, the executives needed more flexibility to seamlessly integrate their time and attendance, payroll, and workers’ compensation systems. So they decided to build their payroll filing infrastructure from scratch.
In addition, their vision involved establishing an insurance agency, or Managing General Agent (MGA), a domain fraught with nuanced regulations mirroring the complexities of payroll tax filings. After building the payroll filing systems from scratch for California, Silvana and the Hourly team found that standing up the same systems for forty-nine other states would take a long time and require a significant investment.
Gusto Embedded: The Flexibility Hourly Was Looking For
As the Hourly team evaluated ways to expand nationally, the team recognized building from scratch in every state would divert resources from customer adoption and growing the business. The concept of embedded payroll was new and while Hourly evaluated startups in the space, the team sought a reliable platform on which to build its future business.
“Gusto Embedded offered the ideal platform for our needs. Their commitment to partnership and the existing infrastructure for payroll filing in all 50 states made them the perfect fit for Hourly’s vision. As they say, ‘startups should not work with startups – it’s too risky.’”
Tom Sagi, CEO, Hourly
The decision to partner with Gusto Embedded liberated Hourly from the complexities of building payroll filing systems across all states. This partnership allowed Hourly to focus on expanding its business and ensuring nationwide workers’ compensation compliance.
Impact and Future Prospects for Payroll for Small Businesses
The partnership with Gusto Embedded allowed Hourly to offer payroll nationally and unlock resources to focus on growth. The seamless migration of existing customers and the ability to retain control over employee payments delivered the flexibility the Hourly team demanded from their embedded payroll partner. Moreover, it freed up resources, enabling the team to concentrate on core platform improvements and ensure compliance for workers’ compensation in all 50 states.
“Our growth projections soared with Gusto Embedded. Payroll simply works, and customers love it. Our engineering focus shifted from mundane product work to innovation, propelling our business forward.”
Tom Sagi, CEO, Hourly
The shift from building internal payroll systems to leveraging Gusto Embedded Payroll changed Hourly’s resource allocation and positioned them for substantial growth. Hourly’s successful integration with Gusto Embedded demonstrates the power of payroll data and dedicated partnership in the competitive small business application landscape.
Learn more about how Hourly and Gusto Embedded have partnered to build embedded payroll: read the case study!
