Maybe I should stop writing about Zenefits but Zenefits is not going to go away. Last weekend I was at a youth basketball game and I ran into a broker I knew who told me their firm lost a 110 person client to Zenefits. This was a Massachusetts broker. This weekend I got an email from a broker in Pennsylvania who needs help because they just lost a 75 person firm to Zenefits. I am sure with Zeneifts generating in excess of a million dollars in commissions a month these stories are a frequent event. While many brokers may think Zenefits is a fad I think Zenefits says a lot about the benefits business that few brokers are recognizing. If you want to learn a little about the Zenefits model you can read my other blog titled, “If You Want to Be like Zenefits You have to mow the Lawn”. https://joemarkland.wordpress.com/2014/10/15/if-you-want-results-like-zenefits-you-need-to-mow-the-lawn/.
I speak at many broker conferences and I often ask brokers how they are different. The most common answer I get is that they provide great service and have strong relationships. It is in this environment that Zenefits comes in and displaces more broker’s business faster than any company has ever done. And they do this with a different value proposition, extensive marketing, and no local service. So while most brokers think their service is a differentiator and of great value there are a large number of employers that don’t put the same value on the service. I think these employers are buying into Zenefits for one of two reasons:
- They think they have some new and great technology.
- They are looking for help administering their HR and Benefits and they see Zenefits as a firm that is offering this help.
Based on my experience the Zenefits technology and service offering on average has a street value of around $5-$10 per employee per month. This cost would vary based on the client size. They are displacing brokers that receive commissions of $20-$40 per employee per month for providing brokerage services. What this tells us is that the employer market values the Zenefits $5-$10 offering more than the brokers $20-$40 PEPM services. They may not know the street value of what Zenefits is delivering or know what their broker is getting compensated but is doesn’t matter. One is being sold against the other.
Many brokers have acknowledged that they believe they are highly compensated. For that reason they have been adding free “value-added” services to employers so that they can “give back” something. These value added services have ranged from benefits enrollment systems and HR call centers to wellness programs. The major difference between the average broker’s value-added services and what Zenefits is delivering is that Zenefits appears to be offering something that is in greater demand.
As a consultant in the HR and Benefits technology space I believe this demand will stay strong until the majority of employers have automated their HR and Benefits. This will be for years to come. So while many brokers can hope that Zenefits will go away I believe the demand for what they are delivering will grow. And there will be others. The Zenefits model tells us the benefits market is changing. What employers have valued in the past may be of less value in the future.