Update to Our Customers on ADP
Last week, without your permission, ADP systematically de-activated Zenefits accounts within ADP — accounts that small businesses had set up so Zenefits could help them automate time-consuming, day-to-day payroll administration work.
Since the day these small business accounts were turned off, we’ve done everything we could to work with ADP to restore access, but have been met with resistance every step of the way. Initially, ADP claimed they had disabled our access because an unusual traffic spike on June 3-4 placed undue load on their servers. Interestingly, ADP actually started blocking clients from connecting their payroll with Zenefits about a week before this spike supposedly occurred. After we shared our traffic logs, which showed no such spike, ADP shifted its justification to “security concerns”, without a lot of detail. We’ve repeatedly asked to confer with their security team, only to be directed to their lawyers instead. Make no mistake about it: if there are indeed true threats, we want to know about them. We want to work with the ADP security team to address them, but we have yet to be given that opportunity.
In the meantime, we have reviewed our system and practices, and we’ve identified no threats to the security of our clients’ data. We take the safeguarding of our clients’ information very seriously, employing bank-level security protocols and constantly probing our systems for vulnerabilities. Our clients’ data is secure, and we believe Zenefits has best-in-class security.
As for the security of our interaction with ADP, from the start, we have used the same secure link to ADP’s system that they have designated for all third-party administrators – like bookkeepers and accountants – to manage payroll on a company’s behalf. In fact, we have been using this process for two years, without incident. During that time, although ADP and Zenefits competed with respect to insurance services, we cooperated with respect to payroll — a service Zenefits does not directly provide.
Now, ADP seems intent on changing that relationship. ADP’s business model is to offer a bundled solution to customers, and evidently they don’t want small businesses using Zenefits for the HR and benefits portion of their business. Instead, we believe ADP is using a tried and true tactic in enterprise software: whenever a new, innovative company enters a market, the incumbent tries to spread fear, uncertainty and doubt about the new market entrant. This tactic is so common it even has an acronym—FUD (Fear, Uncertainty, & Doubt). Here are just two examples:
- ADP accuses Zenefits of “un-masking Social Security numbers.” Zenefits does not expose Social Security numbers. Any accusation to the contrary is false. ADP is also confused about how our system actually works. Typically, employees of companies that use Zenefits onboard through Zenefits. New employees enter their Social Security numbers into Zenefits, and then Zenefits enters that information into ADP. That’s one of the benefits of the Zenefits service: we set up employees in payroll for you. We do the same thing with health insurance, 401ks, commuter benefits, PTO systems, and more.
- ADP is spreading a lot of fear about how Zenefits integrates with our clients’ payroll systems. But this is misleading. Zenefits accesses payroll systems when our clients create an administrative account in their payroll system for us to use. In every single case, the customer themselves set up these accounts explicitly for Zenefits to use. And this practice is quite common: ADP has for years allowed third-parties such as accountants, bookkeepers, and HR services firms to manage ADP payroll systems on behalf of their clients. The only difference is that we’ve built software to automate some of these tasks. This is a benefit to customers because it allows us to offer the service at scale for free and it also eliminates human error. Although we have automated this process, we obtain and transmit data through the same secure link, encrypting data both in transit and at rest.
While it is always impossible to make inferences about anyone’s motives with total certainty, we and our shared customers have been treated in such a way that makes it seem like ADP is willing to make life harder for its small business customers in order to get a leg up on Zenefits. That may be good for a threatened incumbent, but it’s certainly not good for the small businesses ADP is burdening with more admin work.
At the end of the day, this dispute is about customer choice. We want small businesses to be able to choose who they want to use to help administer their payroll — whether it be Zenefits, or any other bookkeeper, accountant, or HR outsourcing firm. We’re willing to fight for that belief because we believe in standing up for competition and for small businesses — even in the face of ADPs legal threats.
But we need your help.
If you agree that big companies should compete like everyone else, and small businesses should be able to use the latest technology, then please sign our petition and send a note to the ADP executive team.
We also encourage you to make your voice heard on Twitter, with the hashtag, #ADPeeved.
All that said, we promise to make sure your payroll is run on time and accurately, in the face of this inconvenience. In the mean time, I’d like to thank those of you who reached out to us or to ADP to let us know that you value the Zenefits service and want it to stay connected with ADP. It makes a huge difference, and it means a ton to me personally to have your support.
CEO & Co-Founder, Zenefits
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