In this month's discussion, we delve deep into a significant shift in HR management catalyzed by the pandemic—particularly, the transformation brought about by the widespread adoption of remote work.

This change has redefined workplace dynamics and significantly amplified the complexity of HR tasks, pushing the boundaries of what was once a relatively straightforward role.

The Remote Work Ripple Effect

Pre-pandemic, an HR leader here in Colorado could confidentially manage compliance by developing a solid grasp of local employment laws and then leaning on the occasional support from their payroll provider for out-of-state queries.

Fast forward to the era of remote work, and the same professional is expected to navigate the labyrinth of employment laws across multiple states and perhaps even multiple countries. This complexity is no longer just challenging—it's often downright untenable.

The Customer Service Conundrum

Back in 2022, we witnessed a near-simultaneous explosion of customer service issues across various HCM and payroll vendors. These vendors were acquiring customers at unprecedented rates, fueled by a booming economy and low-interest rates. However, each new customer brought increasingly complex needs due to the nuances of managing remote work. This surge in demand led to a significant strain on service capabilities, which culminated in widespread service breakdowns during the "Great Resignation".

A Staring Contest Between Buyers and Vendors

Caught in a deadlock, HR buyers expected a continuation of the consultative support they were accustomed to, covering everything from technology troubleshooting to strategic HR guidance. Meanwhile, vendors were overwhelmed, caught between their capabilities and the escalating expectations, leading to a crucial standoff: Would vendors enhance their service offerings without changing the price, or would buyers need to pay more for better service?

The Verdict: Paying More for Peace of Mind

The answer, it turns out, has leaned heavily in favor of the latter. Companies have increasingly shown a willingness to invest more for enhanced service levels.

A prime example is ADP’s Comprehensive Services, which has seen a rise in popularity. This premium service, essentially an HR outsourcing layer added on top of software subscriptions, underscores a growing trend: businesses are ready to pay more for dedicated, reliable service.

ADP markets their basic Comp Services package quite straightforwardly—pay more, get more dedicated support. This concept, seemingly unthinkable just a few years ago, is now becoming a norm, with other major HCM vendors introducing similar premium service models in 2024.

The Rising Tide of HR Outsourcing

Furthermore, the realm of HR Outsourcing (HRO) is experiencing growth rates that would make many VC-backed tech companies blush. Companies like PuzzleHR, HCM Unlocked, and OperationsInc are expanding rapidly, thanks to their ability to offer the specialized compliance and HR support that businesses desperately need in today’s complex work environment.

Lessons Learned

This shift has been illuminating, to say the least. Initially, I anticipated significant pushback against the notion of paid premium services for what was once standard.

Surprisingly, however, the market's response was more accepting than anticipated. Vendors recognized their leverage and successfully transitioned what was traditionally included in standard fees into a freemium model. This strategic pivot reflects a profound understanding of market dynamics and customer pain points.

In conclusion, the transition towards paying for premium service reflects a broader change in business operations and priorities post-pandemic. Quality service, it turns out, really is worth paying for.

Stay tuned for more insights and discussions as we continue to explore the evolving landscape of HR technology and services. Your engagement and feedback are what keep us moving forward.