All Xero Gravity episodes
Hosted by Elizabeth Ü
Payroll can be confusing as hell with all the types of businesses, tax requirements and calculations. Doesn’t have to be that way.
Meet Mark “Payroll” Pinard, Director of Product Marketing and Strategy, Global Payroll, at Xero. A non-stop ball of energy, this former semi-pro, freestyle snowboarder turned payroll authority demystifies the confusion.
He hones in on what’s needed to integrate self-service payroll for small business, like: understanding your business needs, how you pay and handle employees’ money and taxes, business growth cycles, and knowing how much time you have to dedicate.
Payroll Pinard also talks online tax payment calculators and staying in the IRS’s good graces, plus the significance of an accounting advisor, and how you can now do payroll anywhere, on any device. Plus why Mark thinks payroll is sexy — all with host Elizabeth Ü. Xero Gravity #44!
Small Business Resources:
Host: Elizabeth Ü [EÜ]
Guest: Mark Pinard [MP]
EÜ: Hi everyone. I’m Elizabeth Ü, and this is Xero Gravity.
“It's such a sexy transition, isn't it? It's not some awesome goal in life. Children please close your ears.”
EÜ: Meet Mark Pinard. He just so happens to be director of product marketing and strategy of Global Payroll at Xero, And this sexy transition he speaks of is how he found success in payroll. And he should know. He's been in the business for more than a decade. Mark is always on. He's a ball of energy. And he joins us today to demystify a lot of the confusion around payroll products that are available to small businesses.
“I can be at my son's soccer game, or be on vacation with my family and still be able to log in and process payroll anywhere, anytime, on any device.”
EÜ: Mark points out the implications of not thinking before committing to a payroll product, and also what opportunities await if you find the right payroll solution. So we have all that and more coming up on Xero Gravity, right after this.
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EÜ: Mark “Payroll” Pinard, thanks for joining us on Xero Gravity.
MP: Thank you for having me. It's great to be here.
EÜ: We know a little bit about your professional background. Can you tell us a bit more about what you're doing, when you're not serving as director of product marketing and strategy, Global Payroll at Xero?
MP: Yes. Absolutely. So for the most part I'm either, (a) playing with my English bulldogs or (b) recently on the slopes. Yeah. I have a little bit of a background in snowboarding. I've got the addiction running through me pretty hard, again.
EÜ: I understand you're quite the powder chaser. Tell us about your former life as a sponsored snowboarder.
MP: Born and raised on the east coast: New Hampshire. Been skiing since I was probably about four years old. Switched to snowboarding as it started to kind of take up as a big sport back in, man, the '90s or so. And from 12 years old on started to actually really get into it. So right around the age of 16 I started to do competitions. More around the freestyle stuff; crazy aerials, all that fun stuff.
And, yeah, and let's put it this way, I had a lot more nerves back then than I do now. I'm starting to realize that real quick. So as I started to get competitions and started to win a little bit more and place in the top five — it's kind of like the minor league system in baseball. Whereas, like, major snowboard companies, as well as goggles and the rest of the gear and everything else, would kind of reach out to you and start giving you free stuff, in hopes that if you keep winning that they can kind of get you under their wing from a sponsorship standpoint. So yeah.
EÜ: And why did that journey end?
MP: Well, there was a couple of reasons why it ended. My pursuit of college sports, which I don't know if necessarily was the best avenue for me to take. They didn't want me to get hurt, for obvious reasons. On top of that, when I moved out to California in 2002, I drove down to Fresno to actually go snowboarding the next day with a friend. All of my stuff, including board, binding, books, the long underwear, everything, down from socks and hand warmers were stolen out of my car.
EÜ: Oh no!
MP: So, yeah, that is the most terrible story ever, and I had not snowboarded for about 10 years until this year. My wife finally said, "No, we're going to, I'm going back up, I'm going to buy you a board for your birthday." And to her it's funny because now she says, "I didn't know that buying you a snowboard would equal that I would never see you again." Because I am literally...
MP: Yeah. Yeah, I know, right? So now I'm literally chasing powder and every weekend, yeah, I'm absolutely addicted again, and it's fun to be back into it.
EÜ: So how did you go from being an almost pro athlete to becoming Payroll Pinard?
MP: It's such a sexy transition, isn't it? It's not some awesome goal in life. Children please close your ears.
MP: No. No. To be honest I think it sort of, my personality in general is that I'm super passionate about things. Anything that I take on, whether it be snowboard, skateboarding, or even just when it comes to the payroll, I sink my teeth into it and kind of run with it and do it to be the best of my ability. When I graduated college, I actually got my first job out of college, was a sales job in a small company called Pay Cycle. And Pay Cycle back in the day was, like, the most innovative thing when it comes to payroll. Again, super sexy, right?
They were one of the first companies to actually build an online payroll solution that really was trying to help small businesses cut the cost of what it takes to actually process payroll, and what it cost to actually use a product. Right, so as I started from a sales perspective talking to these customers, I was super passionate about the problem that it was solving. I could just hear just by the tone of their voice on, like, the major pain point they were having when it came to payroll, and for us, the solution that we were solving and everything else. And I think that passion — just as I started to deliver and get more into it the sales role — it just became something that I was super excited about.
EÜ: And what gets you most passionate about small businesses and helping them?
MP: Yeah, I think the biggest thing is that, so from the small business perspective if you think about it, like, what they are, it's the entrepreneurship side of it that's amazing. The hard work they put in, the dedication, and most importantly the guts that it actually takes to start a small business and be successful at it. That's what, from my perspective, is I'm so passionate about a small business. Because all these guys are trying something new, you know what I mean? They're working hard day in and day out just to be successful in the little niche that they've created.
On the flip side of that, what makes me passionate about them is understanding those pain points and figuring out a way that I can solve them. I think that’s the most important thing, you know. It's like, I know that you guys are trying to be super successful at what you're doing as a business. But in the midst of that there also comes, like, you know, organizing your finances and, you know, making sure that you understand your accounting and everything else. And the pain points that comes with that journey of, like, using financial management software or anything in general; organizing your back office if you will. And I'm just super passionate about solving for those pain points and trying to figure out a way to make it easier on these guys, so that they can focus on being successful.
EÜ: In one sentence, can you tell us why payroll is sexy?
MP: Whoo, what a tough one, Elizabeth. Yeah, I know. Right like, payroll's sexy...
EÜ: No, you can't.
MP: ...and that typically is not in the same sentence. But I think for me it's because for a small business owner, payroll means success.
EÜ: So let's dig a little deeper into this episode's theme which is, of course, payroll. So first up, can you contextualize what the small business space looks like in terms of the types of businesses that are in the market for a payroll product?
MP: Yeah, absolutely. It's all over the place. Right, so it's the, look, the entrepreneur that just is getting going, realizing that their business is starting to take off a little bit, and that they can't handle it all on their own. And this kind of goes back to why the whole thing about sexiness, is that that means that they have to hire their first employee. So that kind of relates to a little bit of a growth and success pattern for them. So that's kind of like the bottom level, right?
But that also varies from what the actual small business does from, you know, selling flowers to small businesses that work with government contracts or, it all really depends what the industry is, all the way up to, like, the large corporate models and everything else. And along that, obviously there's such a large breadth of small businesses and what they do and everything else, there's a large breadth of accompanying products that go with it. And it's incredibly, incredibly confusing. If you look at the market in general, everyone is trying to sell you the kitchen sink, right?
They want to bill you on a per payroll basis. They want to include benefits and services in there. They want it to link up to some sort of accounting software or, you know, there's just all kinds of nuances and pitfalls within every kind of payroll product and how they're pitching to a small business, and what they need and everything else. I think most small businesses in general aren't aware, especially when they're just starting to get into it, of what the market is and exactly what they need. You know, there's the high priced products that are shiny and they seem like they're right, and they handle everything, and they tell you that they're compliant and they — it's almost a scare tactic if you will.
Because they don't want you to choose something for you to do it on your own, so they tell you, "No, payroll's way complicated. And you should probably use us because we provide all the customer support. And don't worry, we’ll do it for you," and everything else. But the reality is if you look at some of those higher priced products and you go on something, you know, like the debtor business bureau for example, there's a lot of pitfalls that those products are all, you know, making, as well. So they give that scare tactic for a small business to kind of buy into the model.
But honestly it's not always the best model for them. So I think it's important from a small business perspective, number one is to always kind of stay organized. Understand, you know, how your business, from a numbers perspective, interacts with the IRS. What are the tax filings that you're required to make, how often you're required to make them. Then also understand your employee's information. So I think it's always good to have those three on it because then it gives you flexibility on choosing a solution, and what's the best for you.
EÜ: So in addition to some of those scare tactics that you mentioned, some of the products you use, are there other misconceptions around payroll products on the market?
MP: Yeah. I think there's a ton. I think the biggest misconception is that if I go to a full service or I - I use this bigger better service that's more expensive then I'm - then I'm more compliant and - and I'm better off. Which technically isn't really the truth, right?
It's when I come back and talk about, like, you've really got to take a look at your business and understand what the needs are from that perspective. That's what allows you to make the right choice from a product perspective. If you're a super pay easy payroll: you've got five employees, maybe all of those employees are hourly based, they don't require a lot of, like, you know, complex benefit tracking. Or you're not doing 41Ks or health insurance or stuff like that — just a super simple business, right? Again, maybe we'll refer back to the mom and pop flower shop. Using a self-service solution is probably the best fit for you.
Only reason is because it's half the cost, but still does all the work, right? So the most self-service solutions will still do all the tax calculations for you. It'll get you to a point where you just have to click a button to electronically file the pay, and it's at a quarter of the cost than what you would spend for, you know, some of the larger companies. So you're not paying, like, $200 per payroll or anything like that.
For a small business that's, and understanding that is huge, because now you've actually, you know, the cash flow we know is king for any of these guys. But using the solution that's, like, a quarter of the cost is a huge time saver not only for them, but then it's also knowing that, you know, hey, all right, I have extra money to put back in my pocket to use on other things to make my business better.
EÜ: Well, I think the first part of that process is understanding what you actually need at whatever stage your small business is at. So can you describe some of the things that a small business owner can do to identify what their actual needs are, in terms of looking for a payroll product that will work for them?
MP: Yeah, and I think it's understanding where you are in the growth cycle, and what your business market is. It's ranging from how are you paying your employees, to what kind of stuff do I need to track, you know, tip reporting (if you're a restaurant), you know, shift management if you want to separate between waiters and waitresses. Or things like I get back to, when, if you are a business that's working with the government, requires government contractors, requires certain calculations and support and filings, and everything else.
So I think it's really just taking a step back and looking at, (a) the business that you're in, and (b) how you're paying and handling your employees and where you are in your growth cycle.
If I'm the mom and pop flower shop it's extremely simple. Then, like, I can probably understand that a simple solution is better for me. Whereas if I'm a corporate, you know, and I'm now starting to get over 100 employees and starting to manage a lot of that, well, maybe then I want to go more towards a full-service solution. And I think the biggest thing is that you need to be cognizant of the time it takes you to run payroll.
A self-service solution with hourly employees still requires you to go in and enter in the hours. Right, so from that aspect of it, if you start to get up towards 20, 25, 50 employees the time it takes to enter those hours is going to be, you know, a lot more laborious than it is when, you know, once you have, like, a full service solution and you're up around 100 employees, they do a lot of the hard work for you. With even that caveat, a lot of the self-serve solutions provide timesheets, so expanding in that aspect of it, you can use the self-service solution while your business is still growing. Because if you have timesheets, then you can actually push those back on to the employees and require them to fill out.
So it's really just, it's a balancing act: understanding where your business is from a market perspective, what you're selling to the customer — because that's a big difference. How many employees you have, and kind of where you are in the growth cycle.
EÜ: These are all super helpful. Thanks. Earlier you also mentioned compliance. I think that a lot of small businesses that are just entering into the payroll space, maybe they're just hiring their first employee or they're just paying themselves as an employee for the first time. I wonder if there's a lot of things that they don't even know that they don't know. So especially as we're watching Zenefits fall from grace right now, around some compliance issues.
Are there certain things that people need to keep in mind when they're looking for a good product?
MP: Yeah. I think it's a matter of doing your homework. It's two fronts. Before you even start looking for a payroll product I think it's natural that you have to do your homework to understand, like, what are those key questions that I should be asking for, or what are the responsibilities that I need to have in order to run payroll for an employee? I think that if you don't do your homework then you're kind of going into it blind. And I think that's why a lot of small business owners see it, like, "Oh, look at that shiny object at the other end." That's usually going to cost them a ton of money from a perspective of a product, right?
So I think it's understanding, like, (a) what it takes to actually hire and educate yourself. And there's a ton of research out there that provides it. I mean, it's incredibly easy. And then (b) understanding what it takes to actually get going from an IRS standpoint when you have to pay an employee and, like, what are the tax implications that are required from that. Having your head wrapped around that and providing the education to yourself is going to be huge, because just doing that small bit is going to help you understand exactly what product is the best fit for you. And just as far as tax requirements compliance and what it takes to hire employees, is absolutely huge.
Once you do your homework, make sure that you stay organized. Just making sure you have all your employees' information and your tax information in one place. Because then once you're at that point selecting a product is a lot easier. If you're a small business and you move over to something like a self-service solution, that kind of product's going to require you to enter all your information in there. So if you're organized and have all of that, then it's going to be a lot easier for you to do that and make the transition.
On top of that, regardless of what service you use; whether it's a full service or a self-service or hybrid or whatever it might be, you're the one who has to still provide them the data for them to get you set up. If it's a larger service they may do the setup for you. But you're still providing them the input data to actually get you going. And if it's a self-service, the major difference is like, you’re the one who’s inputting that data. So being organized on the front end and having all your data, you know, in one spot is huge, you know, whether you're a 941 file or a 940 and all that stuff.
But being organized, understanding your business and the tax implications of hiring an employee is huge.
I think the most overwhelming portion of it, which you're alluding to is the whole tax side of it. Like, how often do I pay taxes? How much do I pay taxes? How much taxes am I going to owe? There's a lot of great tools. Let's start from the beginning.
If you're going to hire your first employee there's a lot of, like, great tools like pay calculators online that'll actually show you, allow you to enter an employee's salary or hourly amount, whatever the employee's entered in from the W4 information and how many withholding are taken and everything else. And deductions. And then it'll allow you to calculate that amount, and then it'll show you the breakdown from an employer and employee standpoint. So before you even use the service, it kind of gives you an idea of what you're going to be on the hook for from a tax perspective.
EÜ: What are some of those services that people can look to, to calculate their taxes?
MP: If you just Google search PayCheck Calculator, that's literally what it's called. And online it's a free paycheck calculator that allows you to just enter that information in. And it'll ask, it sort of breaks it down and if you want net to gross or gross to net. And then it'll ask you specifics about your business if you wanted to kind of enter that information. This is what your implications are going to be from a tax perspective.
A lot of products will even include that free paycheck calculator on their website, or as part of their product as well. A lot of products will allow you to enter in your information, allow you to run payroll. And then you can actually review the payroll to see what the tax number is, and everything else, before approving it and actually paying the employee. So a lot of the companies have services like that built in as well. I think that's the most important part upfront: do your homework. You can't be over educated in the aspects of when it comes to managing taxes and staying in the good graces of the IRS.
EÜ: Okay. Imagine that as a small business owner I've done all my homework. I know exactly how I'm going to be paying my employees and what my specific needs are given the type of business that I have. Where do I go to start discovering what some of the different payroll products are that are out there on the market, that might be a good fit?
MP: I think from that aspect of it, it's probably, you know — I hate to say it, but — taking it to the Internet and doing your Google search. Every product in general is obviously going to have the biggest market against sales pitch. So on the side note of that is also reach out to your peers. So if you know of friends, family, anyone that is running a small business, I would look for input from them as well.
I think on top of that, another big thing — and I can't advocate this alone, enough — is to have an accounting partner. Being successful up front means managing your finances and managing them well. And that's obviously an important part of payroll as well. So reaching out to an accountant is probably the biggest advice I can give. Why not allow them — who's the professional in services and does this for a career — help you to organize everything you need from the get-go? Most accountants will be your financial advisor. They will provide you the information you need to, you know, from growing your business to hiring your first employee, to buying a truck.
It's like starting a basketball team without a coach, right? I mean, great I'm a small business owner, I've got a great idea, I'm ready to go. But, really, I've never done this before. I really think an accountant's important — probably the best investment you're going to make — because they will literally be your coach as you start to grow.
EÜ: You know, I found it really surprising that if you have a small business you don't get a letter from a IRS saying, "Here's how frequently you need to file, or here are the different types of payroll taxes you might owe." You are responsible as the small business owner for educating yourself about all those rules and regulations.
MP: Technically that's true. What happens from a new business perspective is that once you actually run your payroll and make your first tax payment, the IRS will then reach back out to you and say, "You know what; your tax liability is not that high."
If you look at, like, if a small business has one employee, part time, let's say, right? So that the amount of tax withholding that you're taking from that person's paycheck probably isn't a ton, meaning that your liability is pretty low. So they’ll make you a lot less frequent, you know, taxpayer, than that. So it's usually typically called a 944. The 944 is the actual filing.
But the actual tax payments that go with that are going to be a lot less frequent, maybe on a quarterly basis rather than a bi-weekly or monthly basis. And, again, it all completely depends. But the IRS will give you a heads up based on your tax payment submission that you made the first time.
The second scenario in that is, like, what if you're, a doctor's office? Really high salaries, tons of money, every time you run a payroll there's huge deductions that come out of that. Not only from the employee's side but from the employer's side, and a lot of liability. So then they will actually ask you to make more frequent tax payments, usually on a weekly basis immediately after you run payroll. So it all depends. The IRS does try and guide you with that.
EÜ: And can you tell us some stories about what happens if you don't meet all the rules and regulations, because maybe you don't have a payroll system yet, or you're using one that doesn't keep you on track?
MP: I mean, if you're not submitting your tax payments on time, or during the right time, or making the correct filings, or calculations are incorrect or anything like that, the IRS is, I mean, they have no mercy on anybody. I think we all get that. They will go after you pretty hard core and you will have large tax penalties, fines and payments that are loaded to that. And it can always come down to garnishing your bank, taking over your bank account, to everything else, and so eventually taking over your business. So you definitely want to stay in the good graces of the IRS.
And I think, again, so that's one of the biggest scare tactics that a lot of the large payroll companies do. To be honest, any payroll product out there gets in the business of making sure you are compliant and making sure that you are, you know, obviously staying with the IRS from, you know what I mean, not having to have penalties and everything else. So I would talk to other people that are using your product.
Understand the good, bad and ugly of what they love, what they hate, you know. Making sure that the product is compliant, and making sure that the product has customer support, are huge.
EÜ: Can you tell us a story about a company that was using one of these really expensive full-service products and realizing that they could switch to something that was less expensive, but still met all their needs and what that opened up for them?
MP: From the PayCycle days, one of the long stories I got was, one of our customers that had two employees realized that they had not provided the correct data when getting set up. Or that, you know, the information that ADP had entered when they were getting set up was not correct. And they then mentioned that they had over $15,000 in tax fines and were trying to get to the bottom of this, but it seemed like it was taking too long, and they were getting no response whatsoever from their payroll provider.
When that full-service solution fails you and you're getting no response or no answer to whatever is going on, and they're not following up with the IRS, obviously it's incredibly scary for you from a small business, and what the next steps are. Typically you don't have the cashflow to pay those penalties and fines.
So I think that's, like, the biggest horror stories that I've ever heard, are those small business clients saying, "I had $15,000 in fines and the payroll provider's gone MIA."
EÜ: Given how long you've been looking at this space, how have you seen payroll evolving recently?
MP: So there's kind of a self-service, and then it’s evolved almost into a hybrid option. From a self-service solution, you go in, you enter in all your information, you process payroll, it does all the calculations for you, and then it fills out all the necessary tax forms and lets you know what tax payments to do. But it still requires you actually logging in and clicking a button to complete the filing of your payment.
Now, what the hybrid solution does is that it allows full-service providers to kind of cut some of the costs of managing in half, but still have this anchor of, in your bank account, impounding tax money and making the filings and everything on your behalf. Typical those solutions are probably more mid-market businesses with 50 plus employees.
The concept of the hybrid is, at the front end, still a self-service solution that requires you to enter in hours and interact with it somehow. But when you process payroll, it impounds the tax money that is due and then will automatically make the tax filings and payments on your behalf.
So self-service to hybrid, which is kind of that full service, but what's also coming up — and that we're seeing in the market — is this evolvement into the employee management life cycle as well. So it's not only providing payroll but it's the process of hiring an employee, all the way to firing an employee, and getting them on board not only to payroll, but to your company. Then entering in their benefit information, their own bank account, filling out the W4 information, everything: total employee management.
EÜ: So how is the shift to mobile affecting payroll technology?
MP: I think that the realization from a payroll perspective is small businesses just do not want to be tied to their desktop, and they don't want to be in an office every Friday until five o'clock to go in and run payroll and making sure people are submitting timesheets, and all that. More companies are seeing that trend and getting into the mobile environment, providing apps where the employee can actually log in, enter in their timesheets and check their pay stubs, and enter in vacation requests or expense management, and all that kind of stuff.
So if I can take some of that stuff that I need to do, on the go, and be able to log in through an iPad or even my mobile phone, and still be able to process payroll from my desktop, then I can be at my son's soccer game, or be on vacation with my family and still be able to log in and process payroll through anywhere, anytime, on any device. The market is starting to expand into that now as well. You'll see that a lot of products have some sort of mobile capability to support businesses in that world.
EÜ: So what do you see as the ultimate outcome for small businesses engaging with a payroll product?
MP: I think that the end result of what you want your customer to have is peace of mind. So when they process payroll and walk away you want them to feel good about it and feel confident that it was done correctly and that the hard stuff and everything else is handled for them and that they don’t have to worry about it.
Making sure that the calculations are correct and that, you know, that the tax payments are going to be made, and the filings and everything else are going to be done on time. And that they're not worrying about, you know, penalties or anything like that.
You want the small business to focus on their business and be in the business of doing business. I think that's the hugest thing.
EÜ: We're going to finish up with our five quick questions, for which we need five quick answers. Are you ready?
EÜ: What business book or idea made the biggest impact on your life?
MP: Zero to One, by Peter Thiel.
EÜ: What's the one thing you can't live without?
MP: My bulldogs.
EÜ: The most useful app on your phone right now?
MP: My Radar.
EÜ: In one sentence, what is the greatest lesson you've learned through your small business journey?
MP: Be prepared to overcome adversity.
EÜ: What skill do you want to enhance in 2016?
MP: Besides snowboarding? Thought leadership [laughing].
EÜ: Oh, what a great conversation Payroll Pinard, or Mark. Thanks so much for joining us on the show.
MP: Of course. Thank you so much for having me, Elizabeth. It’s been great.
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EÜ: That was Mark Pinard. He's the director of product marketing and strategy of Global Payroll at Xero. Thank you for listening to Xero Gravity.
And make sure you join us next Wednesday, because we'll be talking to Megan Roth from Insightly and Ron Cates from Constant Contact.
Megan and Ron will be sharing their insights about attracting and retaining small business customers. So don't miss that one and we’ll catch you then.
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