Zeal's Guide to Navigating the Complexities of Contractor Payments and Compliance in the Gig Economy

The modern workforce thrives on on-demand services, and with this shift comes the need for streamlined gig economy payroll solutions. As the number of people doing contract and flex work has become a greater share of the labor pool, understanding the intricacies of payroll for contractors is crucial for businesses to survive in the on-demand economy.

During Gig Work Summit in October, we were joined by Kirti Shenoy, CEO of Zeal, who was able to shed light on how businesses are responding to the changes in the labor market brought about by these new trends. Zeal makes it easy for companies to pay flex workers, and her talk is a deep dive into mitigating the complexities associated with payroll and compliance for gig workers.

Watch the highlights and below and read the session transcript that follows for a recap of this informative discussion.

Introduction to the complexity of W2 payroll watch highlight

Launch mobile payroll apps quickly watch highlight

How Zeal makes it payroll easy watch highlight

How Zeal makes payroll compliance easy watch highlight

Hello, everybody. This is Gaurav Deshpande Chief Marketing Officer for HyperTrack. Welcome. Kirti Shenoy founder and CEO of Zeal -  Nice to have you here.

Absolutely. Thank you so much. For the introduction. Pleasure to meet you all. I'm super, super stoked to share a lot more about payments and compliance. I know it's our favorite topic to chat about as gig economy customers, and really excited to just dive right in. As a quick introduction. On my end, I'm Kirty. I'm one of the Co-Founders and the CEO here at Zeal. We are a leading workforce payments company, which basically means we make it super easy for you guys to pay out your 1099 contractors and W2 hourly or gig style workers on our platform. We were really built with that gig and staffing. use case in mind. So really excited to dive in. Today, I decided to focus the conversation on payroll for the gig gig economy, which I think is a really interesting topic.

Compliance and Payment in Gig Economy Payroll

A lot of gig startups typically start off as 1099 contractor workforces. But they end up building a W2 branch as time goes on, as they try to accept new brands, new partnerships and want to operate in a more compliant lens.

So today, I'm going to tackle payroll for the gig economy, we of course, do 1099 contractor payments. So if any of you all in the room are having issues with your 1099 compliance experience or payments experience and have some questions for me, later on, please feel free to reach out.

But yeah, just before I dive into a story that actually inspired me to start this company in the first place, was actually an early conversation that I had with the Instacart founders. And as we know, Instacart just recently went public and they're one of the most famous gig economy examples out there in the market. And a couple of years ago Instacart actually operated only as a 1099 business, but then switched to having both a 1099 and W2 arm when they wanted to partner up with larger brands like Kroger, because these larger brands really wanted to work with a vendor and a partner that would have compliant labor workforces in their locations and in their buildings.

And this is typically a trend that I start to notice with a lot of gig startups that I chat with, you know, they typically start off with 1099 they have some exciting brand opportunity, or they've gotten dinged on the compliance side and then they end up trying to build a W2 arm.

So with Zeal, we really again want to be that partner to make W2 payroll super, super simple, as simple as your 1099 contractor payment experience, and be that leading partner for our great Gig customers.

Understanding Gig Economy Payroll Complexity

As an intro on payroll payroll is essentially the bloodline of most staffing companies, onboarding time and recording your human resources, your billing processes and the way that you pay out your workers is all connected to that payroll process. But managing this W2 payroll can be very, very difficult.

A great example that I like to use is comparing the compliance requirements for these 1099 workforces to W2 labor workforces. With 1099, it's a very simple payment and compliance process. You do net pay disbursement, a little bit of KYC and AML Compliance and then you do an end of your 1099 filing. It's a pretty simple process.

On the W2 employee side, there are dozens and dozens of features that you have to keep in mind:  

  • How do you do gross to net calculations?
  • How are you taxing workers on a work location by work location basis?
  • How are you making sure that you're maintaining overtime compliance and minimum wage compliance in each one of these different jurisdictions?

So as you shift from that 1099, contractor model, and really launch into that W2 workforce, compliance requirements get really, really tricky. You're going to deal with 30X amount of compliance requirements, and you're going to need to work with a partner, that's going to make it super easy for you to dive into those spaces.

Zeal's On-demand Workforce Payment Solutions

And that's really what we created Zeal for.

Zeal is a programmatic payroll solution that is really built for staffing companies. And our goal is to be that partner for gig and staffing companies, and essentially just make it super easy for your payments and compliance experience for your workforce payments to be as easy as possible.

And with our solution, we like to call ourselves three things:

  1. We are a full service Payroll solution and payment provider for the 1099 workforce.
  2. We like to help you to automate your compliance and payments experiences.
  3. We want to keep that entire product experience as native as possible for our workforces, so that the worker stays engaged, they stay on your product and are never leaving that ecosystem.

And we've been working with some really amazing brands like Wonolo to help them to launch their W2 programs help them to manage compliance, HR and Payroll at scale. And it's been an amazing ride so far.

Tackling Key Challenges in Gig Economy Payroll with Zeal

For my presentation today, I want to tackle three key problems that I see time and time again, with a lot of our staffing customers. And that is, first, how can I accelerate my digital product strategy? I want to launch an app, I want to launch wallets and cards, how do I do that as efficiently and as cheaply as possible?

Number two, how do I bill and collect revenue from my customers faster? In the staffing industry, each and every one of these gig platforms is partnering with 100 or 1000s of customers that want your labor. And you have to be very, very careful and diligent in the way that you bill and collect that revenue.

And last but not least, how do you automate tax and HR compliance a lot of us here we are product builders, we don't want to be spending hundreds of hours reconciling and spreadsheets to manage tax and HR compliance, we want that experience to be as programmatic and as seamless as possible.

Digital Product Strategy for Compliance in Gig Economy

So like, let's first dive into accelerating digital product strategy.

What I typically find with a lot of good customers is that everyone loves their mobile app and wants to launch their mobile payments experience as quickly as possible with a provider. And something that we've built for our customers are these white labeled compliance components. And these are components like our onboarding widget that does compliant W2 employee paperwork collection, employee dashboard where workers can view their payments and compliant pay stubs that are compliant based on the jurisdiction that the employee is working in.

These are all examples of components that Zeal has actually built, we allow our customers to actually white label those components. So put your logo, your color scheme on it, and host it in your native solution and get to market really quickly and not have to deal with these compliance requirements. So this is a really easy way for us to help our customers, again, stay compliant, but keep that native experience. For any of y'all in the room that don't have a mobile app, but have more of a web based worker portal for your workforces, or like to maintain both a mobile experience and a web based portal for your workers, we also have components for web.

So with one of our customers, Lawtrades, they are a staffing company for legal professionals. And they have a more web based portal experience because that's what their users really need. And the same compliance components, onboarding paperwork, employee, dashboards, paystubs, all available for these customers to host on their solution.

And last but not least, I think for every gig economy company, we want to make the fun money off of wallets and pay cards, payroll or payment processing is your largest line item expense. And in addition to paying your workers faster, you actually want to make money off of the payroll or payments that you're processing.

We're going to be launching wallets and pay cards with full payment compliance for PCI compliance so that you don't have to manage that payment program, that compliance program in house that we'll be launching on our platform just next year.

So we tackled a little bit about automating that digital strategy, making sure that you're staying compliant but getting to market really quickly and trusting a vendor to hydrate your product with those compliance variables on your behalf.

Streamlined Billing & Payment Methods in Gig Economy

The next item I want to talk about is billing and collecting revenue faster, which again, I think is a top of mind problem for almost every staffing company out there.

With staffing platforms, what we've noticed is that platforms actually have some of the most complicated invoicing scenarios and that's because you are commissioning these workers to work for several different brands at different rates of pay at different work locations. And especially if you're tackling the W2 space.

In America, we have 11,000 tax jurisdictions that actually can govern how you get taxed. So you need to be very, very careful to make sure you're taxing the worker on a work location by work location basis, not just that you're taxing them based on their initial state that they onboard it in. And in general, what we've noticed is not only does this cause nuances in the tax base that makes it really hard to tax employees, but it also causes problems for invoicing of course, because for every staffing company, you want to know exactly what to invoice each and every one of your customers and exactly what your gross margins are as quickly as possible.

And that's exactly what a lot of our customers rely on Zeal for many of our customers are relying on Zeal as a source of truth for not only the workforce payment data, but also for their client data. They are hydrating our API with items like client codes, client rates, work location, and the rate of pay for workers. And using Zeal as that system of record for all of that client data. What ends up happening is at the end of the week, every single time we process payroll, we're creating a very organized log for every single staffing company to let you know exactly what you should invoice your customers at the end of that pay cycle exactly which workers were associated with that customers. And we give you that data in a clean way such that you can calculate your gross margins very easily.

Another kind of stat that I like to share on invoicing for most staffing companies, invoicing can be a net 90 Your net 180 process, which is absolutely crazy, because in this market downturn, a lot of platforms are operating on very thin margins, you're competing against other staffing businesses. And it's a little bit harder to get debt than it was a couple of years ago.

So this has been a top of mine goal for a lot of staffing, business and gig economy founders that I've been chatting with, how do I get that invoicing process from net 90 or net 180 to more of a net 14 style process. And it really comes down to organizing that payment data, organizing that workforce data and making sure that you have great mappings across all those variables, and that you're working with the right provider for that.

Automated Compliance Services in Gig Economy Tax and HR

And last but not least, I want to talk about, of course, automating tax and HR compliance, which is of course, Zeal specialty, something that was the whole reason why we created this business. And as I kind of mentioned earlier in this presentation, right now, if you were to build a W2 arm, you need to manage tax obligations and 11,000 tax jurisdictions in the United States.  

We're a very, very democratic country. And each and every one of those tax jurisdictions will govern how you have to tax each and every one of your employees. And if your workers work in one taxable location on one day and another on another day, you need to tax them differently based on those locations. So managing these tax obligations with traditional solutions like ADP or pay comes with the world is extremely gruesome, you would have to build a team of in house compliance experts in payroll experts that would monitor each and every shift, add those local taxes to that shift and do all of that labor, basically, in their brain and in spreadsheets.

And what we like to do at Zeal is create that payroll tax compliance on autopilot like experience, what we do at Zeal is we actually collect the work locations directly from our Gig customers, we dynamically tax those workers based on the exact location that they're working in, will actually trigger workflows like show telling you and alerting you that you did not collect a piece of onboarding paperwork in a net new state where a worker is working. And you can display that right on the app, we essentially give you that all in one payroll tax compliance experience on autopilot that you wouldn't get with those legacy behemoths of companies, like I mentioned.

Another top of mind and very exciting. Offering from Zeal is how we help our staff and customers manage HR compliance. You know, there's level one, which is managing tax compliance, which comes with making sure that federal state and local taxes are perfect that you're keeping paystubs compliant and that you're paying and reporting to the right agencies.

But there's, as we know, a whole other layer to the W2 employee side, which is managing overtime compliance, sick leave minimum wage compliance and more. And in the same way that we have those 11,000 jurisdictions on the tax side, we also have equally as many jurisdictions that govern the individual minimum wage rates, overtime rates and more for all of those items.

If you were to manage this program on your own, again, you would have to research the overtime sick leave and minimum wage laws, check the shifts that you are processing and manipulate those variables manually, which is again, very time consuming and error prone process.

But with Zeal, we've actually built our own version of what I like to call embedded HR a programmatic way for us to be that HR partner for you, and to offload all that HR burden from your plate. What's really interesting about the Zeal solution is we will actually detect, as you send us shift information, whether each and every one of your shifts qualifies for a compliance trigger.

If we notice that there's a compliance trigger will actually update that paycheck on your behalf, create the audit trail for you, so you can track it, and then process that paycheck. This gives you that fully end to end, automated payroll processing experience, which again, you wouldn't be getting, if you were to use a standard payroll standalone solution, or trying to build an in house team of experts, that would be manually checking for these variables.

So that's kind of a wrap on my presentation. As a recap, you know, for Zeal, we like to be that workforce payments platform, whether you're doing 1099, or whether you're doing W2, we want to be that dynamic and aligned partner that helps you to really build and launch that strategy.

A lot of the use cases that I shared today are really helping our staff and customers with the top of mind problems, which is getting more digital getting more native with that party experience billing and collecting that revenue faster. And automating that payroll and HR compliance experience so that we're focusing on product and all the important stuff, and not in the weeds on on all the tax variables.

And that’s the conclusion. I would love to answer any questions, if anyone has questions.


For the full video and more information visit https://hypertrack.com/gigworksummit.