Free Enterprise Staff  | September 24, 2015

Startup Justworks Takes the Hassle Out of HR for Small Businesses

You might take for granted that your paycheck is deposited directly into your bank account, or that you can buy health insurance through your employer. But not everyone enjoys these luxuries. Many small businesses can’t offer the same kinds of benefits that larger companies can—or at least they couldn’t before firms like Justworks came along.

Founded by Isaac Oates, Justworks is democratizing the world of human resources and benefits by offering a streamlined platform that lets companies, regardless of their size, access the types of services that big businesses routinely offer. It’s also bringing them these benefits—everything from medical, dental, and vision insurance to 401K and commuter benefits—for much less money than they would otherwise have to pay.

What’s the company’s secret? Justworks negotiates better rates for its clients by aggregating them into a Professional Employer Organization (PEO). The New York startup is essentially leveraging the power of numbers to take advantage of the kinds of pricing schemes long reserved for companies with thousands of employees.

Courtesy of Justworks.

Courtesy of Justworks.

This means that instead of venturing into the benefits marketplace as, say, a 5-person company, you’re lumped together with hundreds or thousands of other small- and medium-sized businesses; now you’re more like a Google or an Amazon than a mom and pop shop. It’s more efficient than going out on your own, and it’s also more cost-effective, regularly saving anywhere between 20% and 30%. You can think of it kind of like Costco: It’s cheaper when you buy in bulk.

As anyone who has ever worked in HR knows, managing payroll, benefits, and compliance at a small- or medium-sized business is often tedious. It’s also easy to make mistakes, as Oates quickly recognized while launching Adtuitive, the first company he founded. “We raised some venture capital funding and were incorporated, but then came the funny part: paying ourselves, hiring employees, and paying other people,” Oates recalls.

“I discovered that payroll, in particular, and benefits were really, really difficult and complicated for small businesses to set up. We had employees all over, so I was doing a lot of faxing to different states. I said, ‘This is crazy!’ It was so time-consuming, and I thought if every business has to do this it makes no sense.”

After Adtuitive was sold to Etsy, Oates worked at the e-retailer, building out its then-primitive payments platform. Having both studied computer science in college and worked on third-party payment systems at Amazon, he became increasingly aware of a universal problem: How do you make something that is inherently complicated simple for the end user?

“When I was leaving Etsy, I was thinking about the big problems that I had run into in business and in my career,” Oates says. “I kept coming back to this payroll and benefits thing. I just thought that it should be as easy to pay an employee as it is to pay someone on PayPal or Venmo.”

Oates drew on his technical background and business experience while developing an intuitive and inclusive platform that would become Justworks. For small- and medium-sized business owners, Justworks is something of a godsend. It handles payroll, compliance, and benefits, and it offers a number of HR tools to help track and manage vacation and other internal policies.

Courtesy of Justworks

Courtesy of Justworks

“What makes us different is that we use this PEO model, which means that we are able to get the less expensive benefits,” Oates explains. “We’re able to provide that streamlined tax filing, and we also create our own software. Companies that have traditionally done this typically outsource the software component, but we think that leads to a pretty poor customer experience.”

Justworks represents a new era in the evolution of the small business economy. Its customers—a group comprising firms with anywhere from two to hundreds of employees—are better managing their HR and compliance needs, and their employees are getting access to services that make accepting a job offer that much more enticing. “The real reason companies engage with us is because they value their employee base, and they want to make sure they have access to the best stuff.” Oates says.

“For us, we’re really excited about helping entrepreneurs and helping their teams. In our view, if we can enable more people to pick the job that they want and love—whether at a big or small company—that’s a great day’s work. That’s how we look at the world.”