Zenefits: Why the Conventional Wisdom is Wrong

It’s hard to imagine a company with more good press, VC admiration, and impressive growth stats than Zenefits.

And the concept that underlies Zenefits sounds fantastic: Shake up the ossified world of health insurance brokers and provide software tools to help businesses manage all the annoying HR tasks more simply and elegantly than they ever could before.

That does sound great.

We believed the hype, and last year we switched away from the very nice people at our insurance brokerage. What happened next I report to you here as a cautionary tale. I’m not going to tell you that you shouldn’t use Zenefits, but if you do, well, at least you’ll go into it aware of the potential pitfalls.

 

The Worst, Except For The Others

I often say that the health insurance we have now is rotten. It’s the only kind of plan available to small businesses, the kind where the employer pays hundreds of dollars a month, and if you as an employee don’t have anything catastrophic happen, you get absolutely nothing back for all that money BlogMutt spent on you. Zero. Every time you go to the doctor, you have to pay the whole bill.

You do, however, have to deal with a crap-ton of insurance paperwork anyway, even though you get no money back.

My fellow founder, Wade Green, says that he thinks our coverage is great. It’s flexible, and significantly less expensive than other plans for both the employer and employee. Also, preventative care was 100 percent covered even before ACA took effect. Also, using the Health Savings Account means that employees get some great tax advantages.

The truth, unsurprisingly, lies somewhere in the middle. I’ve eventually grown into a Churchillian point of view that our insurance is the worst plan in the world for employees… except for all the others.

In our earliest days, we used an insurance broker that I hired, but never met. He came recommended, but he just filled out the paperwork and then didn’t call again until it was time to renew. I’ve learned since then that the guy made thousands of dollars off us. The crime, as the old saying goes, is what’s legal.

We later switched to a bigger brokerage with a great and responsive staff. They were stuck a little bit in the old ways. (Just as a tip, when trying to win over business from a tech startup, never EVER ask to fax anything.) But they were very nice, and sent someone to our office to help us navigate health-care choices.

Growing Fast, We Switched to Zenefits

Then last year we grew a lot. We had some comings and goings of personnel, and although we were small we thought about hiring a part-time HR person just to help us with paperwork, and to help be an advocate for our employees. We had one key employee great with child, and we wanted to be sure that she was accommodated as well as she could be given our small business size.

That’s when we heard about Zenefits. 

Employee onboarding? You don’t need to collect all those forms any more!

Vacation tracking? We’ll do that for you!

Multiple insurance coverages? Health Care, Disability, Dental, Vision? We’ll do it all and you (the employer) won’t have to do a thing!

Health Savings Account? If you are willing to switch to the HSA bank that’s just as super-fabulous as we are, we’ll integrate all that. It will be as easy for you as ordering an Uber to take you to a startup party!

So we said goodbye to our broker down the street, and we signed up. Those Siren Songs from Zenefits did the trick.

Look, the problems we’ve had with Zenefits are legitimate, and I do not think they are isolated. But they are problems that we’ve had. Maybe Zenefits has learned from them, maybe not.

zenefits-broken

But many of the problems are so befuddling, it seems clear that the team at Zenefits just hasn’t been able to scale up to serve the thousands of companies that it has taken on.

Consider:

  • We added one employee and Zenefits changed the pay we entered as semi-monthly to monthly in our payroll system. When we saw that they got a salary wrong by 200 percent, we realized that Zenefits hasn’t really built a full software solution. Software can make lots of mistakes, but that one had the smell of a human data-entry error.
  • Our employees went an embarrassingly long time without disability insurance, and Zenefits only figured it out after we brought it up. Again, a thing that is supposed to happen automatically didn’t happen at all.
  • Zenefits also mis-coded employee contributions in our payroll. Are we the only company in the world that pays health care for employees? Zenefits seems to goof up every aspect of that.
  • Zenefits completely screwed up employer contributions to employee HSA accounts in the bank that they said we had to switch to in order to use the software. Again, this has the smell of human error, not a software glitch. And anyone who’s done it will tell you it’s no fun at all having to write employees asking them to go and check their personal HSA accounts to see if part of their compensation was received properly because we — the employers — just have no idea.
  • There have been software issues, too. Plenty of them. Managers who can’t check enrollment status of employees; requests to review plans with invisible prices; a confusing inability to interface with ADP  ( and now it seems as if it never will given some recent developments — see this post about Zenefits’ feud with ADP for more on that).
  • We got an email from Zenefits at 4 p.m. on a Friday that an enrollment period was now open, and would be open for three days.
  • Zenefits also asked us to send our passwords for various accounts to them in unsecured emails, something that’s long been a banned practice.

There were countless other issues, too… just frustrating stuff. Zenefits was technically our broker. When we called our old broker, we got a friendly response and even if it wasn’t technically the duty of that broker, the office would really try to help. Our pregnant employee tried calling Zenefits about an issue only to be told that it wasn’t Zenefits’ problem. It wasn’t, but…

Conventional Wisdom: Use Zenefits

So the conventional wisdom is that Zenefits is the only way to go for modern tech businesses who want to modernize their HR software. The software is pretty slick, but with 20–20 hindsight, I think we would have done better to ignore the conventional wisdom and stick with our local broker, and hire some local HR help. 

Now that we are integrated with Zenefits we’ll probably be sticking with them. We keep hoping that we have worked through all the bugs, but new ones keep coming up. So now it’s a devil-you-know issue, combined with the fact that we are kind of busy running the fastest-growing company in Boulder and don’t have a bunch of time to spend switching yet again.

Bottom line: the conventional wisdom is wrong about Zenefits.

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