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Date: 10/26/98
Author: Pete Barlas
An old business is learning a new trick.
Automatic Data Processing Inc., the 49-year-old Roseland, N.J.-based company, is jumping on the Web bandwagon. ADP, the largest payroll processor in the U.S., plans to announce this week that it will debut its first Web-based service in December.
The service will allow customers to enter payroll and related information directly on ADP's Web site without making a phone call. Payrolls for many companies are contracted out to firms such as ADP and handled via phone appointments.
ADP is getting on the Web because of the sudden growth in electronic commerce, says Brad Smith, vice president of marketing for ADP's emerging business services group. It joins the ranks of other payroll service companies that are migrating to the Web.
''While 75% of business owners process their payroll over the phone today, we project that over 69% of all payroll data in five years will be transmitted either through a PC modem or the Internet,'' Smith said.
ADP's Web offering will include all payroll services, including tax filings, direct deposit and 401(k) plan disbursements. Using the service, customers will be able to review payroll reports online 24 hours a day and can even print out employee checks.
ADP, which reported revenues of $4.5 billion in '97, will debut the service in New York and introduce it to other states early next year. It has 425,000 businesses as clients, 325,000 of which are small firms. ADP is directing its Web offering primarily at small businesses.
Smith says ADP's Web service is designed to be more convenient than phone appointments. Most companies spend more than 50 hours a year processing payroll on the phone. Weekly payrolls can be processed in minutes over the Web.
''If you are fixing pizza all day as a small-business owner, (with the Web) you can sit down at your kitchen table at 10 p.m. and do your payroll,'' Smith said.
To date, nearly half the 12 million small businesses in the U.S. have access to the Internet. Of those, 35% have Web sites, according to the National Federation of Independent Business, a Washington, D.C.- based industry group.
ADP's rivals are aware of this. In recent months, Ceridian Corp., ProBusiness Services Inc. and Paychex Inc. have launched Web-based payroll services.
Ceridian, like ADP, offers a browser-based service that allows companies to input and view data. Paychex and ProBusiness currently only allow customers to view payroll and benefits information. Both plan to beef up their Web sites, though.
Paychex, which has 300,000 clients, launched its Web service Oct. 16. The company is working on making its Web site more interactive, but such strides take time, says Gene Polisseni, Paychex's vice president of marketing.
''When you get into something like (payroll), which requires total accuracy, you don't want to rush it,'' Polisseni said.
Smaller payroll companies also compete on the Web for customers. Virtual Payroll Inc., a privately held company in Margate, Fla., was one of the first to bring payroll services to the Web. It launched its service in March 1997.
Another company, Telepayroll Inc. in Los Alamitos, Calif., plans to debut its own payroll service on the Web next month.
Payroll companies are rushing to the Web because customers are becoming more enamored with electronic commerce, says Dan Maddux, executive director of the American Payroll Association, an industry trade group with offices in New York and San Antonio.
''Everybody is trying to move to a paperless system,'' Maddux said. ''You are going to have more corporations that want to move (to the Web), so vendors have to move in that direction.''
But not everyone believes the Web will become a panacea for payroll.
Companies that sign up for payroll services on the Web should be concerned about hackers, warns Jim Weidman, spokesman for the business federation.
''As an employer, you probably don't want anyone else to know how much your workers are getting paid,'' Weidman said.
ADP says it has taken several security precautions. The Web site is hosted by IBM Corp., which also provides intrusion detection software. Inventa Corp., a Santa Clara, Calif., Web developer, built the Web site.
Other payroll providers, such as Virtual Payroll, seemingly have licked the security problem by putting the Web connection and payroll-processing databases on separate servers. Information is entered into databases from the Web site by Virtual Payroll employees.
''The server and payroll processing are not connected by hard wires, so it's impossible for a hacker to break in,'' says Rey Monzon, Virtual Payroll's chief executive and founder.
Still, Weidman cautions that some Web services could become too costly for small businesses.
''The question is: Is the service priced so that small businesses are going to see this as a good deal?'' Weidman said.
Prices for payroll services range from $36.95 to as much as $80 to handle one payroll period for a company with 20 workers.
Company clients, though, say they would rather have their payroll processed online than off.
''(The Web) makes it a lot easier to do payroll. I just click on buttons, and that tells (the company) what to do,'' says Stephanie Dettman, office manager for Kinex Medical Co. The Waukesha, Wis.-based medical equipment rental company signed up with Virtual Payroll in July.
These days, Dettman saves about 30 minutes each time she handles the company's payroll on the Web.
''A half-hour is important to me,'' Dettman said. ''If I don't have to do payroll in that time, I can do something else.''
Having more time to do other things would be a joy for Peter Kraus. Kraus, controller for Broad Street Productions Inc., a New York video production company, spends much of his time handling payroll for the company's free-lance staff, which changes frequently.
Broad Street, an ADP client, will be one of the first to try ADP's Web- based payroll service.
''(The Web) is going to cut my workload in half,'' Kraus said. ''Having the information on screen, with the ability to add and remove things online, will be a lot easier than writing it down.''
(C) Copyright 1998 Investors Business Daily, Inc.
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