Gusto vs. Zenefits: Which HR and Payroll Software is Better for Startups?

Gusto and Zenefits are among the leading HR software platforms for small and medium-sized businesses. Both are manageable for small teams and offer a good balance between functionality and cost.

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However, they each have different strengths: Gusto excels in payroll capabilities, while Zenefits focuses on enhancing efficiency.

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In this Gusto vs. Zenefits comparison article, we will evaluate both platforms based on their features and pricing to help you determine which platform is the best fit for your startup’s needs.

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Gusto: Ideal for Small Businesses Prioritizing Payroll Optimization

Alt: gusto homepage

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Originally launched as a payroll Software as a Service (SaaS) provider, Gusto has established itself as a specialist in payroll management. Over time, Gusto has expanded to include different features and capabilities.

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Gusto's intuitive user interface, exceptional customer support, and competitive pricing have made it the go-to HR software solution among many small and medium-sized businesses.

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It is suitable for small companies or those with complex payroll needs, making it a more effective choice than Zenefits for these businesses.

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Pros

• Gusto’s user-friendly design makes it easy for users to navigate and perform tasks without a steep learning curve.
• It offers robust payroll processing capabilities, including automated payroll, direct deposit, and tax filing, ensuring accuracy and efficiency.
• It provides different employee benefits options, such as health insurance, 401(k) plans, and workers' compensation, all integrated within the platform.
• Gusto automatically handles federal, state, and local tax filings, reducing the risk of errors and ensuring compliance with tax regulations.
• It offers competitive pricing plans, making it an attractive option for small and medium-sized businesses looking for cost-effective HR and payroll solutions.
• It integrates smoothly with popular business tools such as QuickBooks, Xero, and TSheets, enhancing its functionality and usability.

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Cons

• Gusto primarily focuses on U.S.-based payroll, which may be a limitation for businesses with a significant international presence.
• While Gusto offers many features, some users may find the customization options limited compared to other HR software solutions.
• It may lack some advanced HR functionalities that larger companies or those with more complex HR needs might require.
• Although generally affordable, the cost can add up for companies with more employees or those needing additional features beyond the basic plan.

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Zenefits: Ideal for Startups Prioritizing HR Efficiency

Alt: zenefits page

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Zenefits is an HRIS (Human Resources Information System) solution that offers crucial HR functions with flexible add-ons, making it highly valuable for rapidly growing companies.

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These companies will benefit from Zenefits’ comprehensive recruiting and onboarding tools. The platform stands out for businesses that require employee shift scheduling alongside time-tracking capabilities.

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Pros

• Zenefits offers several HR tools in one platform, including payroll, benefits administration, time and attendance tracking, performance management, and compliance.
• The software is designed with an intuitive and easy-to-navigate interface, making it accessible for HR professionals and employees alike.
• Zenefits automates many repetitive HR tasks such as onboarding, benefits enrollment, and payroll processing, reducing the administrative burden on HR teams.
• The platform integrates with various third-party applications, including accounting software, performance management tools, and others, providing a more cohesive workflow.
• Its mobile app allows employees and managers to access HR information, clock in/out, request time off, and manage benefits from their smartphones.

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Cons

• Fewer integration options compared to Gusto.
• Limited payroll automation features.
• Additional fees for payroll and recruiting services.
• Some integrations come with an extra cost.
• Requires a minimum of 5 employees.

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Gusto vs. Zenefits: A Detailed Comparison of Key Features

#1 Benefits Administration

Gusto and Zenefits allow customers to retain their current benefits brokers. However, this comes with an additional fee. This feature benefits companies with existing benefit packages seeking to transition to new platforms for payroll, onboarding, or other operational aspects.

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Both platforms help businesses maintain compliance with the Affordable Care Act (ACA). In addition, Gusto and Zenefits streamline data integration across employee onboarding, payroll, and benefits administration modules, reducing the need for redundant data entry.

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Here’s an overview of how Gusto and Zenefits fare in terms of benefits administration:

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Gusto

Gusto includes benefits administration features in all its plans, which can be beneficial for businesses that need help with benefits and payroll. However, companies already using a payroll solution may be paying for Gusto features they don’t require.

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When it comes to benefits selection, Gusto's licensed advisors help design competitive packages at a reasonable cost, saving time and money compared to using external brokers.

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While Gusto offers a range of benefit options at varying costs, upgrading to higher price tiers unlocks additional benefits like workers’ compensation, FSAs (flexible spending accounts), HSAs (Health savings accounts), and commuter benefits.

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Although both platforms help with compliance, Gusto covers ACA (Affordable Care Act), HIPAA (Health Insurance Portability and Accountability Act), and ERISA (Employee Retirement Income Security Act), while Zenefits focuses on ACA, COBRA, and ERISA.

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More so, Gusto's automated compliance alerts are available in its top two plans, whereas Zenefits offers its Compliance Assistant across all plans.

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One downside is that Gusto's benefits administration does not support electronic data interchange (EDI), which streamlines communication with carriers for benefits updates. Without EDI, HR teams may spend more time manually managing benefits changes during open enrollment.

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Zenefits

Zenefits stands out in its straightforward approach to benefits, unlike Gusto which segments benefits into different pricing tiers. This simplifies business benefits management, as all benefits can be handled from a single platform without increasing costs.

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In terms of benefits selection, Zenefits helps startups that do not have a benefits strategy to create a tailored package, but for an additional fee. On the other hand, Gusto guides licensed advisors across all its plans.

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Regarding compliance, while Gusto offers federal and state compliance alerts in its top plans, Zenefits has comprehensive automation features for benefits administration compliance. Zenefits' Compliance Assistant, which is included in all plans, streamlines compliance by automating federal regulations for benefits, payroll, and HR.

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It allows users to schedule custom deadline reminders synced with work calendars, thereby ensuring that no regulatory deadlines are overlooked. The Compliance Assistant dashboard offers a clear overview of compliance status, alleviating HR staff from the responsibility of keeping up with regulatory changes.

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For EDI connections with insurance carriers, Zenefits offers this capability as an optional add-on. This feature is beneficial for companies managing a wide range of benefits or with a large workforce that exceeds what HR can handle manually.

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Which Platform Should You Choose for Benefits Administration?

Zenefits wins here.

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Zenefits provides a more comprehensive benefits package, enabling customers to choose from a wide range of employee benefits without the concern of cost fluctuations. It also allows you to bring your own benefits broker for an add-on fee, an option available with all plans.

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Its compliance features are also more robust compared to Gusto. This is beneficial for small HR teams that may not have the resources to closely monitor compliance measures.

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#2 Pricing

Gusto and Zenefits each have unique pricing strategies, which can make it difficult to determine which one offers better value. The cost-effectiveness of either vendor depends on the specific requirements and the size of the startup’s workforce.

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Gusto

Gusto's pricing starts with a low base rate and increases based on the number of users. The platform requires a minimum of five employees, meaning that companies with fewer than five employees will still be charged as if they have five.

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Gusto provides three pricing tiers for most businesses, with the features of each package outlined in the image below:

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Alt: gusto pricing plans

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Zenefits

Zenefits takes a simpler pricing approach compared to Gusto, albeit with a slightly higher per-user cost. However, Zenefits offers a comprehensive package of core HR features within each plan, eliminating the need for additional add-ons.

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This can result in lower overall costs for businesses seeking extensive employee management tools. Check the image below for a breakdown of the features in each plan:

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Alt: zenefits pricing plans

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Which Platform Should You Choose for Pricing?

When it comes to choosing a platform for pricing considerations, the decision can be tough. Here's why:

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There are key differences in pricing between Gusto and Zenefits that you need to know:

• Gusto includes payroll functions in all plans, while Zenefits offers it only as an add-on.
• Gusto provides basic recruiting tools in its Plus and Premium plans, whereas Zenefits' recruiting add-on might be a better fit for teams that require extensive recruiting support.
• Zenefits' middle-tier package incorporates features like performance management, whereas Gusto users need to upgrade for similar functionalities.

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Gusto tends to be more cost-effective for small businesses with straightforward needs beyond payroll. However, Zenefits offers greater value for its price, especially for startups that need a wider range of features and accommodating more users.

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Hence, smaller companies looking to balance budget and functionality may find Gusto suitable initially, until they either expand their headcount or need to upgrade to Gusto Premium or shift to Zenefits Growth.

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In a nutshell, Zenefits' pricing strategy is suitable for midsize companies with ambitious growth plans, as it can save them both money and stress in the long term, even if the upfront cost may be higher compared to Gusto.

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On the other hand, smaller companies may opt for Gusto's flexibility in adding extra functionality as the need arises.

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#3 Time and Attendance Tracking

Both vendors provide remote clock-in and clock-out capabilities, along with reporting tools to analyze key metrics like total workforce costs and time allocation across different projects.

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Gusto and Zenefits both have mobile and desktop applications that simplify clocking in and out, allowing employees to accurately log their work hours.

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In addition, they both have geolocation features, enabling managers to verify an employee's location when they start and finish work, thus preventing time card fraud.

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Gusto

Gusto has a time-tracking tool in its top two pricing tiers, while its basic plan supports integration with an external time-tracking tool of the company's choice.

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The built-in time-tracking tool syncs with payroll but not with other HR functions, which complicates the coordination of employee time-off benefits with requested and approved time.

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This might require manual cross-checking between the time-tracking and benefits modules by managers and employees when handling time off.

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HR teams can tailor PTO policies and designate paid holidays using the time-tracking tool, which then syncs with payroll. Employees can manage their time-off requests directly within Gusto's time-tracking tool.

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Approved time off automatically updates both payroll and Gusto's internal calendar. Users can also integrate Gusto with external calendars such as iCal, Outlook, or Google.

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However, integration with third-party applications like ClockShark or When I Work is necessary for employee scheduling.

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Zenefits

All Zenefits plans come with integrated employee time tracking, which seamlessly connects with its HR, benefits, and payroll modules. What sets Zenefits apart is its inclusion of employee scheduling within the time tracking feature.

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Zenefits offers an in-built scheduling tool that allows shift managers to easily create and modify shifts while sending push notifications to employees once schedules are finalized.

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This tool is synchronized with the HR module’s time-off requests, preventing managers from scheduling employees during their approved leave periods.

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In addition, Zenefits is equipped with compliance tools to help businesses adhere to labor laws regarding employee breaks and overtime.

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It also features time card fraud prevention mechanisms, such as requiring employees to take a photo at clock-in to verify their identity. This reduces the risk of buddy punching and minimizes the need for constant time clock supervision.

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Which Platform Should You Choose for Time and Attendance Tracking?

Zenefits stands out as the preferred option for several reasons.

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While both Zenefits and Gusto offer robust time-tracking tools, Zenefits includes its native time-tracking feature with all of its plans, unlike Gusto. Zenefits also integrates time tracking, time off, and employee scheduling into one seamless system, which Gusto does not.

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The extensive data synchronization capabilities of Zenefits' built-in tools also reduce the risk of incompatibility issues with third-party applications.

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#4 Payroll

Gusto and Zenefits both provide lots of automated features in their payroll systems, including automatic tax calculations and filings. Nonetheless, each platform automates different functions.

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Gusto

Gusto provides full-service payroll with varying features based on the selected plan. The Simple tier supports single-state payroll, while the Plus tier accommodates multi-state payroll. Startups with distributed, remote teams will likely need to start with the Plus plan.

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Gusto also offers international contractor payroll in over 80 countries, which is beneficial for startups employing contingent workers worldwide.

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Gusto's AutoPilot allows HR to automate payroll processing. Zenefits, on the other hand, offers reminders to run the payroll on time, but this doesn't match the convenience and efficiency of Gusto’s fully automated system.

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Zenefits

Zenefits provides payroll services either as an add-on to its comprehensive HR platform or as a standalone product, offering flexibility to customers who may already have payroll software but wish to use other features that Zenefits offers.

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When integrated with onboarding, Zenefits automatically adjusts payments based on an employee's start date. It also handles paycheck deductions by automatically calculating them based on the options the employee selects during self-onboarding or annual open enrollment.

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This eliminates the need for HR personnel to manually input payroll deductions, as the system adjusts them according to the benefits the employee chooses.

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In addition, offers different reporting options that allow HR leaders to gain insights into several aspects of payroll operations. These reporting types include:

• General ledger reporting, which integrates with accounting software
• Payroll timeline reporting
• Labor distribution and job cost reporting

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Which Platform Should You Choose for Payroll?

Gusto stands out as the platform for managing payroll. Gusto's AutoPilot feature streamlines payroll processes with its set-it-and-forget-it functionality.

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Also, Gusto provides international contractor payroll services, a feature not available in Zenefits.

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When Should You Choose Gusto vs. Zenefits?

Gusto

If you're a small business owner in need of payroll processing tools, Gusto is an excellent choice due to its focus on payroll and its competitively priced plans. While Gusto's range of HR solutions isn't as extensive as Zenefits, it does provide tools for job posting, hiring qualified candidates, employee onboarding, and managing performance reviews.

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Gusto offers multiple payment options for employees, including direct deposits, pay cards, and self-printed checks, unlike Zenefits, which only supports direct deposits and paper checks.

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In addition, Gusto can facilitate payments to international contractors in over 120 countries. For US-based employees, Gusto provides access to different standard and non-standard benefits plans, although its health insurance coverage is not available in 13 states.

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Zenefits

Zenefits is ideal for growing businesses that need a comprehensive HR system to manage their employees and optimize HR functions.

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Compared to Gusto, Zenefits offers a more extensive range of features, enabling users to handle different HR tasks, from basic to complex, including employee scheduling and compensation planning.

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Although Zenefits' platform has payroll capabilities, it requires an additional fee, whereas Gusto integrates payroll into all its plans at no extra cost.

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Wrapping Up

As discussed in this Gusto vs. Zenefits comparison article, both software solutions are solid for small businesses, offering cloud-based, self-service platforms for HR, payroll, and employee benefits.

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Zenefits is ideal if you want a scalable HRIS solution that can grow with your startup. However, if your goal is a cost-effective way to manage payroll, provide comprehensive employee benefits, streamline onboarding, and track time, we recommend Gusto.

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FAQs

Is Gusto the same as Zenefits?

Gusto and Zenefits are different platforms for HR and payroll needs. The primary focus of Gusto is on payroll services and includes some HR features like benefits administration and onboarding. Zenefits, on the other hand, is an all-in-one HR solution offering integrated tools for time and attendance tracking, employee scheduling, and performance management.

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The choice between the two depends on whether your primary need is comprehensive HR management (Zenefits) or payroll with additional HR features (Gusto).

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Does Zenefits offer health insurance?

Zenefits is not a health insurance provider itself; however, it offers a supplementary service to help create and manage employee healthcare benefits plans. These healthcare benefits provided through Zenefits are accessible in every state across the United States.

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What does payroll software do?

Payroll software is used to handle, organize, and automate the payment process for employees. Beyond its main function of simplifying payroll management, many of these software solutions also provide several HR features.

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These often include managing employee financial benefits, overseeing brokered health insurance, facilitating direct deposits, tracking work hours, and offering onboarding tools.

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