Here's how Zenefits is trying to reinvent itself

Can new software revitalize the scandal-plagued company?

Zenefits had a rough year. The company -- previously a darling of Silicon Valley -- was rocked by a massive insurance scandal in February and has been fighting to regain the trust of customers and regulators since.

David Sacks, the Yammer cofounder and former Zenefits COO, has been leading the charge after taking over the CEO role in February. The company made its biggest announcement under his tenure Tuesday, unveiling Z2, a redesign and upgrade of its capabilities.

The marquee change of Z2 is a design that brings the app store model popularized by smartphones to the world of human resources. Zenefits's offerings, like vacation tracking, offer letter generation, and employee insurance, are still available as apps in the new Z2 platform. But now, users will also be able to add third-party integrations from a set of 17 services. 

Third-party apps will show up alongside Zenefits features in the company's product. Those features include an updated benefits purchasing experience, a freshly-released payroll product, and a new HR Advisor to help companies without in-house expertise work through their HR problems.

It's a move that mirrors the rest of the business software world, which is moving increasingly toward products that integrate deeply with a broad range of other apps and services. The change could help the company hold on to customers as more companies try to also capitalize on the trend of releasing all-in-one HR software.

Sacks argued that Zenefits was the first company to do the HR suite well, and its competition is racing to catch up. Payroll firms like ADP and startups like Gusto are trying to get a piece of the pie.

platform 3rd party apps Zenefits

Zenefits's Platform lets third parties integrate with the small business HR software suite.

With this new model, Zenefits aims to be the hub for managing all the parts of an employee's lifecycle at a company. When employees get hired, Zenefits integrations will help with tasks like assigning stock options via eShares and getting them set up with email through Google's G Suite.

As part of the Z2 launch, Zenefits is also unveiling a new HR Advisor service that lets small businesses get advice about the difficult questions they face. The Advisor will have a knowledge base of articles about key topics, and users can also request help from a live HR expert.

HR Advisor costs an additional US $5 per employee per month, and companies must pay for a minimum of five employees. It's the first in what may be a series of premium "apps" that Zenefits builds on top of its own platform.

The company has also enhanced its core products, with new benefits features that make it easier to see how a change in health care contributions or plans could impact each employee at a company. Zenefits is also opening its payroll service for a beta after the company provided it earlier this year to a handpicked group of customers.

The beta is only open to companies in California, but it will likely be welcomed by the 4,000 businesses that signed up on the Zenefits payroll waitlist. It's not clear how many of them will be able to take advantage of the launch, but they represent an important opportunity for Zenefits: Half of the companies on that list will be new customers if they choose to sign up.

Looking toward the future, customers should expect additional expansions of Zenefits Payroll, along with additional expansions to the company's platform capabilities, Sacks said. Sacks hopes to expand the functionality of platform and will allow products from competing companies.

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