How Papaya Global’s Technology is Solving Payroll’s Market Failure
Eynat Guez| May 08, 2023
When we founded Papaya Global, back in 2016, we had a clear guideline: Papaya is not about setting up other companies’ global payroll operations by having payroll professionals or labor & employment lawyers on the ground in different locations; Papaya is about developing technology – a world-class, cutting-edge, built for scale technology – that will close the gaps in global payroll.
As I see it, one of the biggest gaps in global payroll today is the way payroll information is gathered and your ability, as a company, to manage this information. There are excellent payroll professionals and lawyers in every country. Connecting with them is not the problem. The problem is how to mediate their knowledge to executives who are not only based in other countries, but also have to manage the same complex process in 15 locations simultaneously.
Because payroll, whether we like it or not, will always be complex. This is something I’ve been adamant about when meeting my sales and marketing teams: we are not promising to make global payroll as easy as apple pie; it can’t be done, regardless of how capable our technology is. Payroll has become the most complicated process a business manages. It’s an extremely intricate operation that requires the highest level of precision. And you have to execute it in a dynamic environment, with ever-changing laws and regulations. It’s basically like shooting at a moving target.
To complicate matters further, the payroll process has many stakeholders, including some outside the organization. Since the introduction of employer withholding in the U.S. and the U.K. during the Second World War, governments all over the world have been using payroll as a mechanism for collecting taxes and funding – via employer and employee contributions – different social insurance programs. Companies, in that sense, are working for governments. Which is another reason why payroll is so taxing (no pun intended).
Now, you might think this state of affairs benefits payroll companies. After all, if these companies are able to streamline the payroll process and alleviate the pressure on finance teams, they should be able to charge hefty fees for their services. Unfortunately, this is not the case. Instead, there’s a market failure in the payroll space: the cost of producing a payslip for an employee – which includes the resources that go into it and the assumed liability – is much higher than the price companies are willing to pay for it.
How does the payroll space solve this conundrum? Some companies highlight other elements of workforce management, such as providing Employer of Record (EoR) services all over the world. In the US, companies are bundling payroll with employee benefits, most notably health insurance. In this model, payroll is what brings in the clients, but benefits are what pays the bills.
At Papaya Global, we look at things differently. While we cover all aspects of the employee experience – from hiring to payroll to managing to payments – and work with local regulatory bodies, lawyers, and payroll providers worldwide, we are first and foremost a software company. That’s our main value proposition. If a company wants to process payroll on its own – that’s fine; it will still be in the market for an advanced technology that can help them do it with one payroll manager instead of five. And that’s the main reason we were able to achieve strong unit economics.
The final frontier of the tech-first-solution approach to global payroll is payments. Payroll and the payments it generates should form a continuous process. But payroll companies typically prefer to outsource the payments part, mainly because doing it on a global scale requires, among other things, building the right technology infrastructure. The school of thought is that outsourcing payroll payments saves a great deal of effort and allows them to go to market much sooner.
The thing is, as long as payroll and payroll payments are handled by different parties using different tools, the payroll process can never be fully automated, end-to-end. That’s why Papaya Global developed the first fully automated global payroll and payments platform. We are proud to have created the first technology designed specifically for payroll payments. We are proud that our technology allows CFOs to manage the entire process under one roof with software built with their interests in mind. We are proud to have closed the gaps in global payroll. Reach out to schedule a consultation