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But if payroll companies’ recent earnings are any indication, at least some employees are still getting paid, and thus payroll and human capital management (HCM) systems were able to boast a successful final quarter of 2022 on earnings calls this month.
“I think we have an advantage being the HCM business,” Paylocity’s co-CEO Steve Beauchamp said on the company’s recent earnings call. “Payroll is something that every single company has to do. For us, it all starts with payroll, and using the data from doing payroll to be able to connect to the rest of the suite and obviously sell a much broader solution today.”
Cloud-based payroll and HCM platforms reported a strong final quarter of the calendar year, ending on Dec. 31:
- Paylocity saw total revenues of $273 million, an increase of 39% YoY for the quarter.
- Paycom reported total revenues of $371 million, up 30% YoY for the quarter.
- Paycor’s total revenues were $132.9 million, up 29% YoY for the quarter.
Expanding offerings. “I think the [payroll software] category as a whole has changed over the last decade,” Paycor’s CEO Raul Villar Jr. told investors on the company’s earnings call. “It’s really added some really powerful modules around recruiting, around attracting, around retaining employees, and so in this hyper-tight labor market, I think that’s been a big driver of accelerated demand.”
Villar also pointed to Paycor’s efforts integrating new services and technologies, like its acquisition of AI recruiting software Talenya as areas where the company plans to grow.
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“The combination of the cloud acceptance in our category, the additional modules that we’re adding that are helping other facets of the organization outside of traditional finance, or traditional HR have really made the solutions more powerful and more attractive,” he said.
For Paycom, it’s Beti, the company’s automated employee-driven payroll solution that launched in July 2021. Paycom continues to move existing clients to the platform and about 50% of clients have adopted the employee self-service approach, according to CEO and president Chad Richison.
Richison cited a recent EY survey on payroll errors, in which the professional services firm found that payroll was only correct about 80% of the time on average, each mistake costing an average of $291 to fix.
The company hopes Beti will help employees identify payroll errors before checks are cut. The company’s clients using Beti are sticking with Paycom at a higher rate than those who aren’t, and Richison expects more clients to stick around as more convert to Beti.
Key players seek new business. Paylocity co-CEO Tony Williams says the company plans to continue to focus on business growth by expanding its new client base because of the “size of the opportunity in front of us,” although efforts to expand existing clients’ suites will also continue.
Villar said Paycor and its competitors have room to grow by moving legacy clients over to modern solutions like those it offers.
“The three modern players in our space combined have somewhere between 8% and 12% share, so there’s a really big pie of legacy solutions still available for us to continue to convert over to a more modern solution, and I think that’s why you’re seeing really strong demand across the board,” said Villar. — AD