With the crashing of SVB and others, it jeopardized payroll– at least for a few days - for many. That was entirely dependent on your company’s specific payroll setup. This really matters because over the past decade, numerous new entrants, primarily based out of Silicon Valley and some using SVB, have entered the space – names like Zenefits, Workday, Gusto, Rippling, and the like.
Payroll processing is both the lifeblood of and necessary evil for any business to function well. It doesn’t matter if you are 50K+employees or three. It’s a monthly process. It should be a simple process for the normal bystander, but it is full of nuance.
In the wake of SVB, several tech company leaders and many others in the U.S. expressed concerns about making payroll following the collapse of SVB, depending on who managed their payroll. The incident has highlighted the importance of selecting reliable financial partners and taking measures to mitigate risk. It remains to be seen what the long-term implications will be.
The crash would have posed payroll problems a decade ago, but in different ways. In modern day, with our connectivity and the ability to wire funds and direct deposit easily, it is a new breed of problems – combined with the fact that over the past decade the payroll landscape has evolved dramatically with new vendors, most Silicon Valley-based, meeting market needs for both large and small employers.
So how did we get here, and how did some of the major players fare this past week?
How we got to the current standard
Payroll processors have undergone significant changes driven by advancements in technology, increased competition, evolving customer expectations, and changes in regulatory and compliance requirements. Here are some key ways in which payroll processors have changed:
That’s a lot of change in a short amount of time – which is great for an evolving employer and employee landscape with digital-first expectations.
Some of the major players today and how they fared
On the small to midsize business side, it depended on whom your vendor was using as their bank. Below are two ends of the spectrum -
§ Got lucky - Gusto - Released a statement reassuring its customers that its services are not affected by the recent issues faced by Rippling due to its partnership with Silicon Valley Bank. Gusto uses a different bank and payment processor for its services, and thus there is no impact on Gusto's payroll processing.
§ Not so lucky - Rippling - a human resources startup, relied on Silicon Valley Bank to process employee paychecks, but the bank collapsed, causing payment issues for their clients' employees. Rippling quickly pivoted and worked with JPMorgan Chase & Co. to process the payments for their clients' employees. Rippling's CEO apologized for the delay and promised to reimburse any overdraft charges resulting from the payment issue. Employees can expect to receive their pay on Friday, Saturday, or Monday, depending on their banks.
§ Still figuring it out - Human Interest – Their main partner was SVB, even according to their website on Monday. They are likely on the hunt for a new partner.
You can Google the rest to see the actual impact for others like Bamboo, Gusto, and Zenefits.
As a benefits leader, what can you do to ensure you are safe?
Make sure you are with an FDIC-insured bank, which SVB was, and nearly all others are. There is nothing you could do to foresee what was happening, and if you could, you should be on Wallstreet and not in people operations. What you can do is check for a well-documented Service LevelAgreement (SLA):
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