Ecosystem

At a time when nearly half of the American households have no retirement savings, we can no longer rely on plan practices that were introduced 40 years ago. Today’s service providers are increasingly becoming aware that participation in retirement plans hinges on how easy it is to access and manage those plans—especially for small to midsize business (SMB) sponsors. This makes the 401(k) plan sponsor and participant experience vital for recordkeepers, third-party administrators (TPAs), and advisors.

A seamless user experience spans from sponsor onboarding to day-to-day plan management.  Poor user experience often stems from cumbersome data access methods, largely because they slow everything down and make more work for everyone involved. Manual processes like SFTP have long burdened sponsors with unavoidable admin tasks, increased compliance risks, and dampened employee participation. 

But change is on the horizon. Employer expectations are shifting rapidly. Plus, with SECURE 2.0 fueling the rise of SMB sponsors, recordkeepers are at a junction to redefine and automate operations to lighten the administrative burden on sponsors.

Why the 401(k) plan sponsor experience is more important than ever

Delivering a top-notch 401(k) user experience is crucial. But to truly nail it, you need to understand what’s shaping plan sponsors’ expectations of their digital retirement service providers. These include:

• New regulations like SECURE 2.0 and state mandates 
• Surge in new, first-time SMB sponsors
• Increasing need for connectivity
• Mounting complexity of staying compliant

New legislative updates

SECURE Act 2.0 shook up the retirement game for sponsors, participants, and service providers alike. SECURE 2.0 aims to boost accessibility, bridge coverage gaps, and amp up individual retirement savings. With perks like auto-enrollment and expanded eligibility criteria, it's leveling up employer-sponsored plans. SECURE 2.0 also rolled out new plan types, like Pooled Employer Plans (PEPs), offering more options and coverage than ever before. 

Recordkeepers who simplify auto-enrollment and contribution escalation and support new plans like PEPs are poised to attract more clients. Without these features, sponsors face the headache of manually enrolling employees and adjusting contributions every year. Any slip-up here can result in fines and penalties—which greatly reduces the user experience. Sponsors now want hassle-free plan setups and seek to be minimally involved in plan management. Recordkeepers that meet these demands will succeed in customer acquisition and retention in the long haul.

The influx of new SMB sponsors 

Federal incentives like startup tax credits and state mandates are pulling in a flood of new SMB sponsors to the retirement scene. Unlike big corporations with hefty HR departments, these smaller employers need more support from their recordkeepers and TPAs. Employees at these companies wear a lot of hats, so they have limited bandwidth to administer the plans, meaning they're eyeing recordkeepers who can lighten their load—especially with tasks like SFTP setups or payroll file uploads. 

Plus, SMB sponsors are cost-sensitive, meaning they want top-notch service on a budget. To remain competitive and profitable, recordkeepers need to trim down their operational overheads while outsourcing much of the administrative work of these sponsors.

Related reading: Challenges of Managing Small Business Retirement Plans 

Increased need for connectivity

Today, an average organization has more than 16 HR solutions in its tech arsenal. As the tool count climbs, employers are prioritizing integrations more than ever. In a recent survey of over 1,000 HR professionals, a whopping 97% said they want their systems to work seamlessly with others, and 51% confessed that juggling multiple employment systems throughout the day leaves them feeling overwhelmed, frustrated, or stressed. Today’s sponsors know that integrations can help them improve the employee experience as well as boost plan participation.

Increasing difficulty of compliance

Streamlined compliance is crucial to keep 401(k) plan users happy. But manual processes, heavy workloads, and tricky regulations make it tough for sponsors and recordkeepers to stay compliant. Old-school methods like SFTP and manual file transfer don’t work in real-time. Both make compliance difficult by causing delays in data exchange, and manual methods like sharing data via email or tools like Dropbox are both insecure and increase the likelihood of typos and errors. 

Compliance is even trickier under SECURE 2.0, with its complex plan designs and nuanced eligibility rules. Plus, retirement regulations are always changing, requiring constant monitoring and adaptation from recordkeepers. Any mistake, delay, or oversight can result in heavy penalties for sponsors and diminish their experience as users. It’s safe to say that recordkeepers need efficient, automated ways to minimize risk and manual tasks when sharing vital employment data.

How recordkeepers can use API integrations to optimize the 401(k) plan sponsor experience

Easier access to payroll data can solve nearly all of the challenges associated with plan management and enable recordkeepers to optimize the user experience.

Many forward-thinking recordkeepers are changing the game with API-based payroll integrations. These integrations let recordkeepers fetch data straight from sponsors' payroll systems, skipping all the manual steps. 

API integrations have several advantages when it comes to improving 401(k) sponsor and participant experience. They can help recordkeepers:

• Simplify sponsor onboarding and auto-enrollment
• Reduce administrative hassle for sponsors
• Make compliance easier
• Automate routine tasks 

Simplify sponsor onboarding 

To craft a winning user experience, recordkeepers need to start by simplifying the onboarding journey for sponsors. But it's no walk in the park. With employee census and payroll data locked away in their HR and payroll systems, recordkeepers either need to collaborate with both the sponsor and their payroll provider to establish an SFTP connection, or they need to rely on the sponsor to routinely download data from the payroll system and share the files in a timely manner. 

Building SFTP connections can drag on for months, and manual file transfers are prone to delays and bad data. Recordkeepers need to implement a simple, more efficient way to make it easy for sponsors to authorize access to their employment data. A smooth onboarding process builds trust with sponsors from the get-go and paves the way for an exceptional user experience.

Related reading: How to Simplify 401(k) Sponsor Onboarding 

Reduce administrative burden for sponsors

Sponsors are over the manual grunt work that comes with managing a 401(k) plan, like data entry and creating CSV files to share with recordkeepers. Replacing antiquated data-sharing methods like SFTP with payroll API integrations enables recordkeepers to ease sponsors' workload, cutting down on admin tasks, eliminating constant back-and-forth, and streamlining data transfer.

By granting secure and direct access to their HRIS and payroll data through direct integrations, sponsors arm recordkeepers with the accurate and timely information they need to run the show efficiently. Better yet, API integrations are a one-time task for sponsors—once they’re granted access to the payroll system, the recordkeeper can pull all the data they need without ongoing involvement from sponsors.

Increase participation with auto-enrollment

Since SECURE 2.0’s passage, the 401(k) sponsor experience has become closely tied to how efficiently employees can be automatically enrolled into specific plans upon eligibility. This is also critical for increasing plan participation and engagement. Vanguard plans with automatic enrollment features had a 93% participation rate, compared to 70% for plans with voluntary enrollment. 

But without payroll integrations, auto-enrollment gets dicey and cumbersome. New eligibility criteria for part-time and older employees introduced in SECURE 2.0 make this situation even trickier for recordkeepers that follow a manual approach. But with direct access to sponsors' data, recordkeepers can program their systems to spot when employees are eligible to join the employer's plan as well as send out automated notifications—further boosting the user experience of 401(k) sponsors and participants.

Make compliance easier

Even when the recordkeeper isn’t to blame, compliance penalties can have a harsh negative impact on the sponsor’s opinion of their provider. Manual data-sharing methods are rife with typos and errors; plus, the recordkeeper rarely has control over when they receive the data from the sponsor, which can adversely impact when contributions are made. 

API integrations give recordkeepers the power to fetch all required data in real time, ensuring no eligible employee is overlooked and that their investment contributions are correct and made on time. With a 360° payroll integration, recordkeepers can even update deduction changes directly within the sponsor’s payroll system, reducing the risk of compliance slip-ups.

Automate routine tasks

As user experience becomes a top priority in 401(k) plan management, recordkeepers must focus their efforts on delivering a standout digital experience. To do this, they need to first free up their operational and engineering bandwidth that is currently spent on inefficient manual processes and building technical bridges between systems. API integrations streamline regular data pulls from sponsors' HR and payroll systems. That way, the recordkeeper avoids otherwise manual tasks, including tracking down files, data validation, eligibility verification, enrollment, investment calculations, and so on. 

Improve 401(k) user experience with payroll API integrations

Bottom line, integrating with sponsors' HRIS and payroll systems is no longer a choice, but a must for recordkeepers to operate faster and better. 

However, building and maintaining API integrations with multiple payroll systems is costly, resource-heavy, and often not scalable. This limits recordkeepers’ ability to automate processes. Using integration tools like unified APIs to scale payroll integrations can help recordkeepers access data from hundreds of payroll systems with a single integration, reducing the time and cost associated with integration builds. 

Unified APIs also help recordkeepers save further operational bandwidth by standardizing fetched data into a common, more manageable format that’s easier to work with. These benefits are ultimately paid forward to the users, creating a best-in-class experience for sponsors and participants alike.

Check out our latest whitepaper, "The Changing Retirement Landscape," to dive deeper into these industry trends and discover how recordkeepers can adapt and thrive in the era of SECURE 2.0.

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Since its debut in 1978, the 401(k) plan has become a prized perk for big corporations to attract top talent. However, the steep setup and upkeep costs, administrative issues, and the lack of suitable small business retirement plans have since limited small and mid-sized business (SMB) employers’ ability to offer such plans. Today, while more than 90% of employers with 500+ employees offer a 401(k), the opposite holds true for those with fewer than 100 employees. Only a third of these companies offer their employees a 401(k) option.

Fortunately, the tides are turning. Recent legislative updates like SECURE 1.0 and 2.0 introduced several initiatives for SMB sponsors like Pooled Employer Plans (PEPs) and start-up tax credits. This sparked a wave of new SMB employers entering the retirement market, increasing the demand for personalized small business retirement plans.

While the influx of new sponsors is a positive development for retirement service providers like recordkeepers, third-party administrators (TPAs), and plan advisors, it also presents its own challenges. SMB sponsors often need extra support and watch their costs closely. Managing numerous small business retirement plans also adds to the workload of recordkeepers. 

To succeed in this changing landscape, recordkeepers need to find innovative solutions and build efficient automated workflows to handle the increasing demands while maintaining profitability and steady growth. In this article, we'll explore the challenges of serving first-time SMB sponsors as a retirement service provider and how recordkeepers can serve them efficiently.

Common challenges of serving new, first-time SMB 401(k) sponsors

To reduce the coverage gap and manage small business retirement plans better, it’s crucial for recordkeepers and TPAs to understand what makes some small firms offer a 401(k) plan while others don’t. This involves considering factors like revenue stability, business size, 401(k) plan costs, and how much administrative work it takes to manage the plans. 

Managing 401(k) plans for new small and medium-sized business (SMB) sponsors poses several challenges for recordkeepers, including:

• SMB sponsor’s limited awareness of retirement plans and available incentives 
• Increased need for ongoing customer support
• Cost sensitivity among SMB sponsors
• Higher demand for customization
• Difficulty accessing data from SMB payroll systems
• Increasing operational workload with more SMB clients

Challenge 1: SMB sponsors lack awareness of retirement plans and available incentives

Many small firms aren't familiar with the range of retirement plan options available to ease their cost and administrative burdens. While most know about 401(k)s, few are acquainted with SIMPLE, SEP, and MEP/PEP plans, and 72% reported being unaware of tax credits that could help offset the startup costs of launching a new plan. They also tend to overestimate the financial and time commitments needed to offer a plan.

Lack of awareness and misconceptions about retirement plans make SMB employers hesitant to start their own retirement plans. Although SECURE 2.0 aims to increase the number of SMB employers offering 401(k) plans, recordkeepers will need to put in significant effort to overcome the inertia in the untapped SMB market.

Challenge 2: SMB sponsors need more ongoing customer support

SMB sponsors often lack the know-how and resources needed to effectively support a retirement plan. From selecting the right plan to handling ongoing management, the prospect of starting a plan can overwhelm already busy business owners and small HR teams. In fact, 63% of SMB employers not offering retirement plans cite resource constraints as the reason.

Under this scenario, recordkeepers stepping in to assist small businesses must simplify routine activities like plan enrollment, compliance testing, contribution investment, and deduction management. They should also provide ongoing support to help sponsors navigate the complexities of 401(k) plans and stay abreast of regulatory changes with the necessary resources.

Challenge 3: SMB sponsors are cost-sensitive

Small businesses are usually hyper-focused on costs. A lot of owners and HR managers assume that traditional retirement plans are too pricey and involve additional fees and hidden costs. In fact, about half of small businesses with 99 or fewer employees say they find it hard to afford retirement plans. Their cost sensitivity is further amplified due to the volatile cash flow of small businesses.

Recordkeepers aiming to help them out need to support modern plan options like PEPs to help new sponsors cut down administrative costs of setting up a plan. They also need to figure out better pricing models, innovative solutions, and operational strategies that balance making a profit with offering competitive rates and top-notch services.

Challenge 4: SMB sponsors need greater customization 

Similar to big companies, small and mid-sized businesses (SMBs) have diverse employee demographics with varied financial goals. This leads SMB employers to seek personalized retirement plans akin to larger organizations. However, because of limited resources and budget constraints, achieving enterprise-level customization is often challenging for them.

To win more SMB businesses, recordkeepers need to tailor their services to suit these diverse needs and preferences. They need to adopt ingenious approaches, flexible systems, and automated processes that can accommodate a wide range of unique client needs at a lower cost.

Challenge 5: Difficulty accessing data from SMB payroll systems

As a whole, the retirement industry is still heavily reliant on outdated data-sharing methods for accessing sponsor payroll data. Currently, the most common method recordkeepers use is SFTP, which is manual and inflexible, like any file-based data-sharing method. This hands-on method adds more stress to sponsors who already lack the bandwidth to manage a plan. With SFTP, sponsors often need to routinely create, update, and share data files with recordkeepers to keep everything running smoothly. 

On top of that, setting up SFTP connections is time-consuming and resource-intensive, which further burdens recordkeepers with manual tasks and extensive back-and-forth communication.

In this scenario, automated solutions like API integrations can be a superior alternative for recordkeepers to seamlessly access sponsor data from their payroll systems. However, the SMB payroll market in the U.S. is highly fragmented, with nearly 6,000 payroll providers, and only a few of them allow other applications to integrate directly. In fact, the vast majority of payroll providers either have a gated API or no API at all—adding to the pain of accessing payroll data.

Challenge 6: More SMB sponsors means a greater operational burden 

With more SMB employers offering retirement benefits, the daily workload for recordkeepers’ Operations, Engineering, and Client Success teams is set to skyrocket. Balancing this surge in workload while maintaining service quality becomes paramount for recordkeepers striving to meet their clients' needs effectively. The current industry norm relies heavily on manual processes, from validating sponsor data to managing fund investments—adding friction to each step of plan administration. This leaves recordkeepers facing a crucial decision: substantially grow their Operations headcount or seek more efficient solutions.

How 401(k) recordkeepers can streamline small business retirement plan management

To enhance their service delivery and better meet the needs of SMB sponsors, recordkeepers can take several steps. They can:

• Automate processes to improve operational efficiency
• Simplify data access to develop smoother and faster workflows
• Leverage modern technology to offer best-in-class customer support

Automate processes to improve operational efficiency

First and foremost, to effectively handle the growing workload, recordkeepers should prioritize automating tasks that are currently done manually: automatically enrolling employees based on eligibility, quickly determining what dollar amount to invest, and pushing changes directly back to the payroll system. This allows recordkeepers to reallocate Operations headcount to other teams and invest more resources into strategic initiatives like attracting new customers and improving their product offerings. Read our latest whitepaper to delve deeper into how recordkeepers can streamline the processes involved in managing 401(k) plans through automation.

Simplify data access

Much of the manual labor involved in managing 401(k) plans revolves around creating and sharing data files with each pay period. To truly automate plan management, it's crucial to leverage innovative solutions that streamline data access. Recordkeepers can greatly benefit from using integration tools like unified APIs, which offer quick and reliable access to multiple payroll systems through a single integration.

Unified APIs also standardize data from various providers into a common format, making it easier to work with. Take Finch’s Unified API for instance, which integrates with multiple payroll providers, including niche, long-tail platforms tailored to serve small and mid-sized businesses. Automated integrations enable recordkeepers to automatically fetch income and deferral rates each pay cycle and seamlessly update deduction changes back to the payroll system without involving the sponsor—while significantly reducing engineering costs. Such efficiency greatly eases the burden on the recordkeeper’s Operations team and ensures a smooth user experience.

Offer best-in-class customer-support

As mentioned earlier, many SMB sponsors don’t offer retirement plans because they aren’t familiar with the available options, incentives, and fiduciary responsibilities. Recordkeepers who can offer a better user experience, simplify plan setup and management, and reduce the administrative burden of already overworked HR teams will emerge as the most employer-friendly solutions and win the long game of customer retention and loyalty in an increasingly competitive U.S. retirement market.

Unlock access to hundreds of payroll and HRIS systems with Finch

Finch’s Unified Employment API streamlines operations for retirement and benefits providers by eliminating the need for manual data processing. It helps you spend less time building technical bridges and more time tailoring your product and services to better serve SMB sponsors. With access to over 200 payroll and HRIS systems powered through a single integration, Finch offers the widest and deepest coverage available—4x more than any other unified API. Schedule a call with our sales team to learn more, or try it yourself for free.

The retirement landscape in the U.S. is evolving rapidly. While an aging population is grappling with the possibility of outliving their savings, the average household retirement funds are falling significantly short of creating a safety net for future retirees. At the same time, the influx of tech-savvy Gen Z employees and legislation updates are changing sponsor expectations, highlighting the need for smooth digital experiences. Together, these shifts are driving the defining retirement industry trends of the moment.

We anticipate four key trends will shape the future of retirement for the next decade:

• There will be a greater emphasis on better connectivity that’ll make it easier for sponsors, plan administrators, and participants to share information in real time. 
• Automation is set to become a bigger part of operations for plan administrators, allowing them to streamline processes, reduce manual tasks, and boost overall efficiency. 
• Recordkeepers and TPAs will prioritize improving user experiences to win in an increasingly competitive market. 
• Lastly, staying on top of changing regulations will get trickier, demanding proactive strategies and innovative solutions to stay compliant and reduce risks.
  

In this article, we'll explore these key retirement industry trends, their drivers, and what lies ahead for retirement service providers in 2024 and beyond.  

What’s driving the shift in the retirement industry

Before diving into the top retirement trends, let's explore the key drivers behind this transformative shift:

• The looming retirement crisis in the U.S.
• Recent legislative changes
• Evolving sponsor expectations

The looming retirement crisis in the U.S.

The retirement crisis in the U.S. is starkly evident. In 2023, surveys showed that Americans feel they'll need around $1.27 million to retire comfortably. However, half of American households have no retirement savings at all. Among those who do, the savings are often insufficient, with less than $90,000 in retirement accounts on average. Over half of small to mid-sized business (SMB) employees lack access to a 401(k) plan, making it difficult to save for retirement through automatic payroll deductions. What’s more, 64% baby boomers today report moderate to high levels of stress about their retirement savings.

If not addressed soon, this crisis could result in a future in which many retirees heavily rely on government assistance programs. This strain on public resources could lead to increased taxes and budget deficits in the years to come.

Recent legislative changes

To combat the impending retirement crisis, the federal government introduced several new pieces of legislation in recent years, including the Setting Every Community Up for Retirement Enhancement (SECURE) Acts 1.0 and 2.0. Some states have augmented the SECURE Acts with state-mandated retirement plans. 

As these new laws aim to expand access to workplace retirement plans and boost individual retirement savings, they’ve introduced a host of new rules that affect plan eligibility, compliance standards, and plan designs. This is driving plan administrators to quickly adapt to the changing protocols and revamp their operations to stay compliant and profitable. 

Shifting sponsor expectations

To reduce the coverage gap, SECURE 2.0 encourages SMB employers to start new 401(k) plans by offering several incentives like tax credits and Pooled Employer Plans (PEP). Naturally, these initiatives have led to a surge in first-time SMB sponsors looking to set up retirement plans. But unlike larger enterprise organizations, they don’t have dedicated HR teams to execute these plans. As a result, SMB employers are searching for plan administrators that make sponsoring a plan as easy as possible. They are on the lookout for retirement solutions that can handle admin tasks and work seamlessly with their existing payroll tools—payroll integrations are the primary motivator for one-third of plan sponsors seeking to work with a digital recordkeeper.

In addition to painless administration, today’s sponsors have greater expectations when it comes to their 401(k) plans—they expect greater personalization in their retirement plans as well as a tailored and targeted experience for their employees throughout the life of the plan. This demand is likely to grow as tech-savvy Gen Z participants account for a larger and larger share of the workforce.

Key retirement industry trends to watch out for 

To effectively respond to the needs of the hour, plan administrators need to watch out the four major retirement industry trends we previously mentioned, which impact compliance, sponsor experience, automation, and connectivity. 

Trend 1: Compliance is going to be difficult

The first major trend that will affect plan administrators in the next few months is the increasing difficulty to stay compliant, owing mainly to SECURE 2.0.

SECURE 2.0’s focus on participant eligibility will push administrators to rethink how they handle compliance. For example, Section 101 of SECURE 2.0 mandates automatic enrollment for all participants, while Sections 125 and 603 introduce new criteria for part-time employees and catch-up contributions—making eligibility checks more critical and complex. 

This means more data will be shared between sponsors and administrators than ever before. Recordkeepers need to stay sharp on eligibility changes and set up automated workflows to quickly enroll participants to avoid falling out of compliance by accidentally leaving out newly eligible employees.

Note: Read our latest whitepaper to learn how plan administrators can use automation to improve compliance under SECURE 2.0.

Trend 2: Sponsor experience will be a top priority for recordkeepers and TPAs

The proliferation of SMB sponsors, coupled with the changing expectations of sponsors of all sizes, are driving a greater focus on customer-friendly retirement services and technology to gain a competitive edge in the rapidly growing retirement market.

Employers are going to pick retirement service providers based on the types of plan they support and how much of the administrative work they can outsource. Plan features like automatic enrollment, self-service tools, faster onboarding, payroll integrations, and on-demand customer support are going to be top priorities for sponsors.

Needless to say, recordkeepers and third-party administrators (TPAs) that offer significantly better service to their clients will win the long race of new customer acquisition and increased customer loyalty. However, this is likely to put a strain on the plan administrator’s Operations, Engineering, and Customer Success teams to improve user experience and operational efficiency. 

Trend 3: Automation will become key to efficient 401(k) plan administration

Under these circumstances, all plan administrators need to quickly scale their operations to keep up with the compliance changes and shifting sponsor expectations. They will be required to move on from the status quo of manual admin work and automate much of the day-to-day operations, from validating sponsor data and automatic enrollment to investing funds and automated deduction updates. In fact, studies show that 93% of advisors agree working with a tech-forward recordkeeper will make it easier to manage their plans.

Hiring to keep up with an increasing workload isn’t scalable or sustainable, so plan administrators will be driven to invest in technologies like API-based payroll integrations to operate more efficiently. The need for tools that provide reliable, accurate, and automatic access to participant and deferral data will continue to rise as manual data-gathering methods like SFTP fail to keep up with the rising automation needs of plan administrators.

Trend 4: Robust connectivity will play a crucial role

The U.S. retirement industry is witnessing a growing demand for better connectivity. Today, employers, as users, demand greater connectivity between the tools in their technology stack, including retirement systems. Our 2023 survey of over 1,000 HR professionals found that 97% expect their systems to integrate with other tools, and half of them feel stressed by switching between tools all day. 

Moreover, as technology evolves and new regulations like SECURE 2.0 focus more on participant engagement, it’s becoming increasingly important for sponsors, their payroll providers, and plan administrators to easily connect and share data in real time to simplify enrollment, investment monitoring, and drive engagement. 

These new demands will continue to push plan administrators to adopt new technologies that offer increased connectivity and streamline the user experience, even within a highly fragmented U.S. payroll market.

What’s next

SECURE 2.0 is only the beginning of a wave of legislative changes headed our way. According to predictions at this year's NAPA Summit, we can expect more significant legislation like the Automatic IRA Act of 2024 that’ll continue to shape plan requirements and eligibility criteria over the next decade, impacting everyone involved—from advisors and sponsors to TPAs and recordkeepers. 

It's a dynamic time for the industry, and staying informed and adaptable will be key for all stakeholders. Investing in new technology is the number one way for recordkeepers—and really, any business offering retirement services—to thrive in this evolving landscape. To learn more about these trends and get actionable tips on how to adapt, check out Finch’s latest whitepaper: The Changing Retirement Landscape: How 401(k) Recordkeepers Can Thrive Under SECURE Act 2.0.

Sean Kelly is a seasoned retirement executive with more than 25 years of experience in the industry. Throughout his career, Sean has influenced every angle of 401(k) management, from plan administration to contribution oversight. He has served as VP, Head of Sales at Goldman Sachs Advisor Services, VP of Retirement Services at Fulton Bank, and Director of Retirement Solutions at WisdomTree. Today, Sean is a Senior Growth Partner for the Pension Resource Institute and a retirement industry consultant. 

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The biggest retirement advisors conference of the year took over Nashville last week, with more than 2,500 industry insiders descending on the Music City for three days of learning and networking. 

I joined the Finch team at the NAPA 401(k) Summit this year, where we met with dozens of advisors and sat in on the sessions and workshops they attended. We brought back plenty of insights and anecdotes about what advisors are worried about, what they’re looking for in the recordkeepers they work with, and how they’re thinking about the future of retirement. 

Here are my three biggest takeaways from NAPA 2024.

1. SECURE 2.0 is just the beginning: more legislation is on the way

It’s no surprise that the latest federal legislation affecting the retirement industry was front and center at NAPA this year—after all, SECURE 2.0 takes full effect in a few weeks. But it was also clear that SECURE was only the beginning. 

New legislation that would amend SECURE 2.0 is already in the works—both to close the loophole that could have eliminated catch-up contributions and to expand startup tax credits to employers joining existing plans. On top of that, the Automatic IRA Act of 2024, introduced as a bill in February, would require employers with 10 or more employees that don’t sponsor a retirement plan to automatically enroll employees in IRAs or other automatic contribution plans.

The bottom line is that we’re poised to see continued changes to plan requirements over the next several years that have the potential to impact compliance and eligibility rules, affecting not just advisors, but recordkeepers and TPAs as well. All retirement stakeholders need to ensure they’re prepared to adapt—not just to adhere to SECURE 2.0, but to navigate a period of continuous change over the next decade. 

2. PEPs and small employer plans are a volume play

Several of the sessions at this year’s conference focused on Pooled Employer Plans (PEPs), the new plan structure introduced by SECURE Act 2.0. Across the board, attendees seemed to agree on two things: 

1. Micro- and small-business plans are poised to flood the retirement industry in the coming years, and 
2. Figuring out how advisors can maintain margin from these plans is a top priority. 

PEPs were created to encourage small and mid-sized businesses to offer retirement benefits by allowing them to pool their plans, offsetting the plan administration costs; but with smaller asset pools to manage, advisors voiced concerns about how best to charge sponsors.

At least one session panelist offered a new perspective to advisors struggling with small-sponsor plans: it’s a volume play. He suggested that advisors look not at the incremental gains from each plan, but rather the benefits of amassing a large portfolio of small plans, and encouraged the audience to “do your part” to keep the retirement industry private. 

So, how does this matter to recordkeepers? In order to take on a large number of PEPs and other small plans, advisors will seek to minimize their management responsibilities with these plans. That means they’ll prefer to work with recordkeepers that reduce the advisor’s involvement—both by easing the burden on the sponsor and by providing hassle-free access to sponsors’ data. 

Simply put, as advisors look for ways to profit off of small plans, they’ll increasingly begin referring sponsors to recordkeepers that automate more of the work of plan administration.

3. Advisors are hungry for payroll integrations

The need for better payroll integrations was a common theme I heard across the exhibition floor and in breakout sessions throughout the conference. All of these conversations boiled down to one of two key needs among advisors:

1. The need for better access to sponsor data from recordkeepers — It was the gripe heard ‘round the Music City Center: advisors are tired of struggling to get the data they need from recordkeepers. 

Most of the time, it’s not the recordkeeper holding critical information behind lock and key, but rather a compounding problem—the recordkeepers are also struggling to collect the data they need from sponsors. Without reliable payroll integrations, recordkeepers spend countless hours going back and forth with the sponsors and validating and standardizing data, which makes it difficult to share clean, timely data with advisors. 

2. The drive to offer a better sponsor experience — At the end of the day, the advisor is an advocate for the sponsor—so improving their sponsors’ experience was a core goal for many of the advisors at NAPA. 

The advisors I spoke with shared that one of their biggest challenges is finding recordkeepers that integrate with their sponsors’ existing payroll providers, since sponsors are typically adamant about keeping their existing payroll solution. 

Advisors seemed agnostic to the nuts and bolts of how the payroll integrations worked or whether they were built in-house or powered by a third party, as long as the flow of data from sponsor to recordkeeper was fast and accurate. 

NAPA 401(k) and the 2024 state of retirement

This year’s conference focused heavily on the three major trends shaping the future of retirement, all of which are primarily being driven by new legislation: changes to compliance regulations, a renewed focus on the sponsor experience, and the increasing adoption of automation. 

Finch dives into each of these trends—and offers tips for how recordkeepers can best adapt—in its latest white paper, The Changing Retirement Landscape: How 401(k) Recordkeepers Can Thrive Under SECURE Act 2.0. 

And if you’re attending the Broadridge 360 Advisor Conference May 19-21, come see me! Find me ahead of time on Linkedin. 

Unlock 360° payroll integrations with Finch

Finch's Unified Employment API allows 401(k) recordkeepers to integrate with hundreds of payroll providers, enabling streamlined sponsor onboarding, automated enrollment, and seamless deductions management. Learn more about our solutions for retirement administrators.

Like any regulated industry, the retirement field is thick with jargon and complicated nuance. Even pros that have been in the business for a long time have to keep up with ever-changing legislation and technology terms to stay ahead of the curve.

We've meticulously created this retirement glossary to be your go-to resource for mastering fundamental terms related to savings plans, compliance regulations, 401(k) payroll integrations, and beyond. Whether you need a quick refresher on common retirement terms or you're diving into the retirement industry for the first time, this guide will provide you with the knowledge you need to make informed decisions and strategic adjustments.

Let’s get started.

Fundamentals of Retirement

Plan Sponsor

Plan sponsors are entities, generally employers, that offer retirement plans to their employees.

Plan Participant

Employees contributing to and receiving benefits from retirement plans are plan participants. Beneficiaries or dependents who are nominated by the employee to receive benefits are also considered plan participants.

Plan Administrator

Plan administrators are the parties responsible for overseeing the day-to-day operations of 401(k) plans for participants and beneficiaries. While the employer could be the administrator, the work is often outsourced to a third party. Responsibilities of plan administrators include:

• Designing the plan
• Monitoring plan activities
• Compliance testing
• Providing customer support to plan participants (and, when outsourced, to sponsors)

Third-party Administrator (TPA)

Third-party administrators, or TPAs, are companies that provide qualified retirement plan administration services to employers. They typically oversee transactions, handle the documentation requirements and legal compliance of running a retirement plan, and offer guidance on the plan design. TPA responsibilities include: 

• Preparation of Form 5500
• Creating match and profit-sharing calculations
• Performing non-discrimination and other compliance testing
• Designing the plan and monitoring plan transactions
• Providing customer support to employers and employees

Recordkeeper

401(k) recordkeepers manage retirement plan records, including participant details, payroll data transfers (like employee deductions and employer matches), and notice distribution. They act as bookkeepers tracking funds, contributions, loan payments, tax deferrals, and rollovers. The recordkeeper is the employee-facing element of retirement plans, providing the website for participants to access their accounts. Recordkeeping services are offered either as standalone services or bundled with TPA services.

• Full-service recordkeepers (bundled) — Offer comprehensive 401(k) plan management, from design to administration to recordkeeping
• Recordkeeper only (unbundled) — Maintain plan records only, while other management services are handled by either the sponsor or other third-party advisors and administrators.

Custodian

The custodian for a 401(k) plan acts like a bank. They handle fund transfers, payments, and asset safekeeping in a 401(k) plan. They don't provide investment advice. While the plan administrator or a TPA monitors these transactions to keep compliant, the custodian is the entity that actually holds assets and invests the funds in a plan.

Key Employee

In 401(k) plans, key employees are crucial business figures with significant ownership or decision-making roles. According to the IRS, key employees must fulfill at least one of the following criteria:

• Ownership stake of 5% or more
• Ownership stake of 1% or more with annual compensation of $150,000
• Officer with annual compensation exceeding $215,000 in 2023

Highly Compensated Employee (HCE)

Retirement plan participants are divided into two buckets: highly and non-highly compensated employees. The IRS defines a highly compensated employee as any individual who either:

• Owned over 5% stake in the plan sponsor’s business at any time during the current or preceding year, regardless of compensation
• Ranked among the top 20% of highly paid employees in the company and received compensation exceeding specified dollar amounts in the previous year:some text
  • $155,000 for 2024
  • $150,000 for 2023
  • $135,000 for 2022

Businesses must identify HCEs for 401(k) plans to pass IRS-mandated non-discrimination tests and keep their deferrals within permissible limits. 

Additional Resources

What is a Highly Compensated Employee (HCE)?

Non-Highly Compensated Employee (NHCE)

A non-highly compensated employee or NHCE is any employee that doesn't meet the highly compensated employee (HCE) criteria required by non-discrimination testing.

Distribution

When plan participants withdraw funds from their retirement accounts, it's termed distribution. Most distributions are taxable by the IRS based on the participant's tax bracket. There are different types of distributions based on the type of retirement plan and the timing of the distribution. For example:

• Normal Distributions are withdrawals made by participants when they reach the retirement age specified by the plan, typically around 59.5 years.
• Required Minimum Distributions (RMDs) are withdrawals mandated from all employer-sponsored retirement plans and IRA-based plans when a participant reaches the age of 72. If the account holder doesn't withdraw the full RMD amount on time, they may be subjected to a 50% excise tax. However, SECURE 2.0 reduces this tax rate to 25%, and possibly even to 10% if the RMD is rectified within two years.
• Rollover Distributions are a special type where individuals withdraw funds from one retirement plan and deposit them into another. These are not subject to taxes.
• Periodic Distributions are regular payouts such as the monthly pension received by pension plan participants or beneficiaries.

Many rules govern retirement plan distributions, with financial penalties for noncompliance. For instance, withdrawing funds from a tax-advantaged retirement plan before reaching eligibility age often triggers penalties, except in select circumstances.

Rollover

A rollover occurs when plan participants transfer all or part of their 401(k) balance from a previous employer's plan to a new retirement plan or IRA within 60 days. Rollovers are typically tax-free unless the rollover is to a Roth plan. Typically, recordkeepers are responsible for overseeing rollovers in a retirement plan, making it simpler for employees to manage and track their retirement investments while offering greater control over assets. 

Vesting Schedule

While participants own their contributions immediately, employer contributions to qualified retirement plans often follow a vesting schedule defined in the plan document. This schedule determines when participants gain full non-forfeitable ownership rights to the plan assets. 

Employers implement vesting schedules to encourage employees to stay with the company longer. Typically, these schedules span three to five years, ensuring that all employees are fully vested by the time they reach normal retirement age or before the plan ends. 

Form 5500

Form 5500 is an annual document prepared by plan sponsors. It discloses sponsor details and organization data like participants’ legal names and employer identification numbers (EIN), and plan details like plan characteristics, assets, fees, and eligible employees to the IRS and Department of Labor. Sponsors usually hire TPAs for this job. Meeting this filing requirement is crucial to staying transparent and compliant with regulations.

Regulatory Frameworks

ERISA (Employee Retirement Income Security Act)

The Employee Retirement Income Security Act (ERISA), established in 1974, is a federal law that requires plan administrators to provide participants with information about the plan, comply with fiduciary responsibilities, offer legal protections, and more. The law mandates that plan providers uphold specific standards, such as:

• Clear communication of plan details to participants
• Minimum standards for participation, vesting, benefit accrual, and funding
• Procedures for participants to make claims and appeals to access their benefits
• Standards for fiduciaries managing plan assets to protect participants' interests
• Participants' right to legal recourse for breaches of fiduciary duty

Fiduciary Responsibility

Under ERISA, entities that are involved in retirement plan management—including plan sponsors, administrators, and investment advisors—must fulfill several fiduciary responsibilities:

• Acting solely for the benefit of plan participants and beneficiaries
• Carrying out duties with care, prudence, and diligence
• Diversifying plan investments and following plan documents 

Notably, fiduciary responsibilities only include the standards to be followed for carrying out the plan functions, not the results. For example, fiduciaries are not responsible for the degree of success of a plan investment as long as they ensure a well-diversified investment portfolio and follow a prudent process for documenting and communicating plan activities. 

Fiduciary

According to ERISA, a plan fiduciary is any entity that has discretionary authority and control over the management and administration of retirement plans and investments. Based on their roles, fiduciaries can fall into three categories:

• 3(16) fiduciary: A 3(16) fiduciary is a service provider hired by an employer to manage the day-to-day administrative work for a 401(k) plan. Any 401(k) service provider that elects to offer fiduciary administrative services can be labeled a 3(16) fiduciary. 
• 3(21) fiduciary: A 3(21) fiduciary provides advice about how the plan can invest its assets.
• 3(38) fiduciary: A 3(38) fiduciary has the authority to actually manage the investments.

SECURE Act

Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted in December 2019, aims to address Americans’ lack of retirement savings by making retirement savings plans accessible to more employees. 

Updated in December 2022, SECURE 2.0 introduced several new rules to encourage wider plan adoption and enhance retirement security. Some of the mandates with the biggest impacts on 401(k) plan administrators are:

• Section 101: Automatic Enrollment—The legislation requires that every 401(k) or 403(b) plan created after Dec. 29, 2022, automatically enroll eligible employees in the plan with a starting contribution rate of 3-10% of the employee’s pay. The contributions are then automatically increased by 1% each year until they reach a minimum of 10%, but not more than 15%, of the employee’s pay.
• Section 603: Catch-up contributions— Section 603 requires employees aged 50 or older who earn more than $145,000 yearly to make catch-up contributions on a Roth basis—in other words, after taxes. This helps them boost retirement earnings by making them eligible for tax-free withdrawals at retirement.
• Section 125: Long-term, part-time employees— The original SECURE Act required employers to let part-time employees who completed 1,000 hours of work in their first year, or 500 hours of service over three consecutive years, join their 401(k) plan. Section 125 of SECURE 2.0, effective for plans starting after December 31, 2024, lowers the second time frame to two years. It also guarantees that eligible long-term, part-time employees have access to 403(b) plans that are subject to ERISA. Employees that qualify for a plan under Section 125 are entitled to a year of vesting service for every 12-month period in which they work a minimum of 500 hours.

Additional Resources

SECURE 2.0 Overview for Plan Providers

SECURE Act 2.0 Timeline

Section 603 Implementation Plan

401(k) Recordkeeper’s Guide to SECURE Act 2.0 Start-up Tax Credits

Non-discrimination Testing

Non-discrimination testing, required by the IRS, assesses whether all employees have equal access to a retirement plan. It requires that key employees and highly compensated employees (HCEs) stay within a specific contribution rate, which is determined by the contribution rate of non-highly compensated employees (NHCEs). Non-discrimination testing involves several assessments:

• Actual Deferral Percentage (ADP) Test—The ADP test compares HCEs' and NHCEs' average salary deferral percentages to ensure fairness in contribution rates. The ADP of HCEs must not exceed the ADP of NHCEs by more than two percentage points.
• Actual Contribution Percentage (ACP) Test— The ACP test is similar to ADP, but instead of assessing employee deferrals, ACP focuses on the employer’s matching contributions or employees’ after-tax contributions. 
• Top-heavy determination—If key employees hold over 60% of the total plan assets, the plan is considered top-heavy. Under top-heavy plans, the employer is required to pay a minimum of 3% of non-key employees' compensation to their 401(k) accounts.
  

Additional Resources

Non-discrimination Testing: 401(k) Compliance

Types of Retirement Plans 

Employer-Sponsored Retirement Plan

Employer-sponsored retirement plans operate by automatically deducting a portion of an employee's earnings from each paycheck and placing it into a retirement fund. Employers can also pitch in, either matching a fraction of the employee's contributions or making a fixed contribution. There are different variations of employer-sponsored retirement plans like 401(k)s, defined benefit plans, simplified employee pension (SEP), etc. These often come at minimal or no cost to employees and provide significant tax benefits to employers.

Defined Benefit Plan (Pension)

A defined benefit plan, more commonly known as a pension, is an employer-sponsored retirement plan that guarantees a specified monthly payout for employees at retirement. This can be a fixed dollar amount or calculated based on factors like salary and years of service. Most defined benefit plans are protected by federal insurance from the Pension Benefit Guaranty Corporation (PBGC).

Defined Contribution Plan

Defined contribution plans are voluntary employer-sponsored retirement plans that allow tax-deferred contributions from employees and employers. Each pay period, a fixed percentage of the employee's pay goes into their retirement account, with these funds being invested on their behalf. 

However, unlike defined benefit plans, defined contribution plans do not promise a specific benefit, and the plan's value can fluctuate based on investment performance. Examples of defined contribution plans include 401(k), 403(b), employee stock ownership plans, and profit-sharing plans.

401(k) Plan

Among all the employer-sponsored defined contribution plans, 401(k) is the most popular. 401(k) plans enable employees to save for retirement through payroll deductions. Employees can choose to defer a portion of their salary (up to a set limit) into the plan before taxes, which is then invested on their behalf. Employers may also match employee contributions, making it a valuable retirement savings tool.

403(b) Plan

While 401(k) plans are available to employees of for-profit, private organizations, 403(b) plans, also dubbed tax-sheltered annuity plans, are a defined contribution option for eligible employees in public schools, churches, and tax-exempt organizations under Code Section 501(c)(3). Like 401(k) plans, 403(b) plans allow employees to defer money from their paychecks, with the added perk of potential employer matching contributions.

Savings Incentive Match Plan for Employees (SIMPLE) IRA

The SIMPLE IRA Plan (Savings Incentive Match Plan for Employees) is a tax-deferred retirement plan tailored for small businesses with fewer than 100 employees. Similar to 401(k) plans, employers have the option to match employee contributions that go into individual retirement accounts (IRAs) or annuities. However, SIMPLE IRA plans typically have lower contribution limits compared to larger employer-sponsored plans like 401(k).

Simplified Employee Pension (SEP) Plan

Simplified employee pension (SEP) plans offer employers of any size, including self-employed individuals, the opportunity to contribute to traditional IRAs set up for their employees. With lower start-up and operational costs than other workforce retirement plans, SEPs allow employers to contribute up to 25% of each employee's pay, up to a limit of $66,000 in 2023. Contributions are tax-deductible, and investments grow tax-deferred until retirement. Notably, SEPs only permit employer contributions.

Multiple Employer Plan (MEP)

A multiple employer plan (MEP) is a retirement savings arrangement where multiple employers participate in a single plan, typically sponsored by a professional employer organization (PEO) or an association. By sharing a common affiliation, such as membership in an association or engagement with a PEO, participating companies collectively enjoy several benefits, such as:

• Simplified reporting: MEP eliminates the requirement for individual Form 5500 filings
• Reduced audit requirements: MEP removes the need for annual plan audits
• ERISA bond protection is not necessary under MEP arrangements
• Lower costs due to outsourced administrative tasks

However, customization options are limited compared to single employer plans.

Pooled Employer Plan (PEP)

Introduced by SECURE Act 2.0, pooled employer plans (PEPs) are a variation of multiple employer plans (MEPs). In a PEP, participating employers delegate all administrative responsibilities to a designated pooled plan provider (PPP, or P3) acting as a 3(16) fiduciary. Unlike traditional MEPs, PEPs don't require participating employers to share a common affiliation.

Key Points:

• Shared resources and outsourced administration lead to cost savings
• Flexibility and customizability are limited compared to single employer plans
• Despite their potential benefits, PEPs are relatively new and face low awareness and adoption rates

Safe Harbor 401(k) Plan

A safe harbor 401(k) plan is a tax-advantaged retirement option that requires the employer to make tax-deductible contributions on their employees’ behalf, either through a match of the employee’s contributions or through a non-elective contribution. The funds must also be fully vested at the time of contribution. These plans help employers automatically pass the IRS-mandated non-discrimination tests and allow employees to contribute the maximum permissible amount to their 401(k) accounts. 

Roth 401(k)

The Roth 401(k) is an employer-sponsored retirement plan allowing contributions to be made after taxes. Contribution limits mirror those of traditional 401(k) plans, while qualified participants enjoy tax-free withdrawals upon retirement. 

Catch-up Contributions

Catch-up contributions, established by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), enable individuals aged 50 or older to exceed the usual contribution limit as they approach retirement. In 2023, eligible employees could contribute an extra $7,500 annually to qualified retirement plans like a 401(k) or 403(b).

SECURE Act 2.0 introduced new rules for catch-up contributions:

• Starting in 2025, individuals aged 60 to 63 can contribute an additional $10,000 or 150% of the standard limit, whichever is greater.
• Section 603 requires participants earning over $145,000 annually to make catch-up contributions on a Roth basis for tax-free withdrawals in retirement.

Additional Resources

How to Prepare for Section 603 of Secure Act 2.0: An Implementation Plan

Process Optimization Terms

Automated Payroll Processing

Automated payroll processing uses technology to streamline payroll calculations, management, and payment distributions. This modern approach to payroll offers numerous advantages:

• Reducing errors from manual data entry
• Ensuring timely payment to employees by eliminating processing delays
• Automating payroll deductions and contributions management to increase compliance
• Enhancing recordkeeping for auditing purposes

Error Handling or Plan Error Correction

Inefficient data handling practices can lead to errors in eligibility checks, documentation, or contribution management—resulting in compliance issues and penalties. Error handling or plan error correction involves identifying and rectifying all the inconsistencies in employer-sponsored retirement plans. For information on common 401(k) mistakes, solutions, and prevention, check out the IRS's 401(k) Plan Fix-It Guide.

Automatic Enrollment

Automatic enrollment is a mandate stipulated under Section 101 of SECURE Act 2.0 that requires employers to enroll eligible employees in qualified retirement plans by a specified date unless they opt out. 

Section 101 is effective beginning January 1, 2025, which means that 401(k) and 403(b) providers must soon put in place and test the technology they will need to automatically enroll and increase the contributions of millions of participants. Failure to do so correctly and on time could result in noncompliance, stiff fines, and legal fees associated with disputing any penalties in court.

Additional Resources

What Retirement Plan Providers Need to Know about Secure Act 2.0 Section 101

Eligible Automatic Contribution Arrangement (EACA) 

Eligible automatic contribution arrangement (EACA) is a method for automatically enrolling employees in 401(k) plans. Unlike basic automatic enrollment, EACAs:

• Require employers to notify all employees before enacting the plan's default automatic contribution percentage
• Allow employees to withdraw automatic enrollment contributions (with earnings) based on the plan's terms

Payroll API Integration Terms

401(k) Payroll Integrations

401(k) payroll integrations allow recordkeepers or plan administrators to access the data held within the sponsor’s payroll system and facilitate seamless data exchange between systems. Integrating payroll systems with 401(k) plans streamlines plan management by:

• Allowing 360° or bi-directional data synchronization, so plan administrators can automatically fetch and push deferral updates within the sponsor’s payroll system
• Enhancing data accuracy and plan efficiency 
• Maximizing operational efficiency by reducing the need for data reconciliation efforts and increasing responsiveness throughout the retirement plan cycle
  

Additional Resources

Guide to 401(k) Payroll Integrations

Secure File Transfer Protocol (SFTP)

Secure File Transfer Protocol (SFTP) is a method that uses shell encryption to securely send and receive sensitive information, like employment data, between businesses using a shared server. SFTP involves preparing data in a flat file format (like CSV or JSON), encrypting it, and then transmitting the files through a secure connection between two platforms. While SFTP is the most commonly used data-sharing method in the retirement industry, it requires a long, expensive setup process, cannot facilitate real-time data exchange, and is prone to errors caused by human intervention.

Application Programming Interfaces (API)

APIs, short for Application Programming Interfaces, act as bridges that enable communication between two different applications. They create a standardized pathway for two softwares—such as a payroll system and a recordkeeping platform—to exchange data and information, regardless of the programming languages they're built on. API integrations offer the same security as SFTP as well as near-real-time data access, but eliminate the need for time-consuming manual processes.

Additional Resources

SFTP vs API: Which Integration Method is Best for Employment Data?

Payroll APIs

Payroll APIs are simply APIs that are specific to payroll systems. They offer:

• Accurate transfer of payroll data to retirement accounts
• Real-time updates on contributions and deductions
• Automated tracking of employee retirement savings and loan status
• Simplified administration and improved accessibility for plan administrators, participants, and sponsors

Unified APIs

Unified APIs are a technology layer that provides access to many different applications and systems through a single API integration. Unified API providers sell pre-built connections to a multitude of applications within a category of software, meaning that users need only build one integration to the unified API provider to access the data within all of the systems the unified API has connections to. Unified APIs are standardized, meaning that all the data that flows through the API arrives in the same format, regardless of its origin. They’re an alternative to building dozens or hundreds of integrations in-house, which require high upfront capital investment, lengthy building periods, and long-term maintenance.

Additional Resources

Build vs Buy: Leveraging Employment Data Via HRIS and Payroll Integrations

Employment Ecosystem

The employment ecosystem is the collection of B2B software providers that employers use to manage their workforce. The ecosystem is vast, but any system that touches employment data is part of the employment ecosystem. These companies fall into 2 main categories:

• Employment Systems of Record: Employment Systems of Record are centralized sources of truth for employment records, usually owned by HR. HRIS and payroll are the two primary systems of record. However, for some applications, Applicant Tracking Systems (candidate) and Benefits Administration Systems (election, dependents, etc.) may also contain employment data needed for their use case.
• Third-Party Applications: These are SaaS applications that rely on employment data to function but primarily focus on additional services that help with human resource planning, management, and retention. Some examples include HR technology like talent management tools, employee benefits solutions, and finance applications like expense management tools.

Unified Employment API

A unified employment API is a vertical-specific unified API focused on the employment ecosystem. Unlike generalized unified APIs, unified employment APIs offer targeted market coverage, deeply granular data sets, and both read and write functionality to developers that require expertise in the employment ecosystem—along with the typical features of a generalized unified API.

These APIs are best suited for B2B products where the end users have administrative access to employment systems, such as HR admins, people operations professionals, benefits managers, or even finance team members. These users can then authorize a secure connection to key sources of employment data housed in their HRIS or payroll system. Developers can then leverage that data to create deeply integrated and personalized solutions for their customers.

Additional Resources

The Emergence of Unified Employment API

Authentication & Authorization

API authentication is vital in retirement technology to confirm users' identities when accessing sensitive employment data. Authentication is the process of verifying the identity of a user making an API request. It involves presenting credentials such as a username and password, API key, or digital token, which are then accepted or rejected.

Various authentication protocols, such as API keys, JSON Web Token (JWT), OAuth 2.0, user credentials, token-based authentication, and two-factor authentication protect sensitive data by reducing potential risks like data breaches, corruption, deletion, and denial of service (DoS) attacks.

However, authentication alone isn't sufficient for total security. It needs to be paired with authorization, which determines the level of access users should have based on their credentials.

Data Mapping

Data mapping is the process of reconciling data from different API endpoints to seamlessly sync data between systems. Even if two fields contain the same information, they might be named or structured differently. The process involves literally “mapping” two distinct data fields that hold the same information to one another, so the data can be automatically synced.

For example, when handling "employee address" in two different HRIS, what's referred to as 'location' in one system might be called 'residence' in another, causing confusion and making it harder to use the data. Data mapping involves training the API integration to recognize that the data held under ‘location’ in one system should sync with the data field called ‘residence’ in the other.

Data mapping can be tedious, especially when dealing with multiple APIs from different providers.  This is where a unified API can help—it lets vendors map data from different providers to one common model. Users can then request data from various providers without fretting over their differences.

Data Standardization

Data inconsistency among payroll systems can occur due to different data storage protocols followed by different providers. Data standardization normalizes data formats across endpoints to prevent loss of data due to mapping errors. Recordkeepers often opt for unified APIs for standardizing data obtained from multiple HRIS and payroll systems.

Data Synchronization

Data synchronization is the process of automatically updating data changes between two or more systems to maintain consistency. Frequent and timely data synchronization is vital for effective collaboration and compliance. Most automated API integrations sync data every 24 hours but will allow users to sync the data on demand.

Encryption

Encryption is the practice of disguising sensitive data in transit so it cannot be intercepted or accessed by unauthorized entities. In the retirement industry, end-to-end encryption protocols like AES 256-bit or TLS 1.2 are essential to safeguard sensitive employment data such as personal identifiable information (PII) and bank details and ensure compliance with data protection regulations.

What’s next?

Visit the Finch Blog to learn more about the best practices and trends shaping the retirement industry and discover what the experts are saying.

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Runae Lee is the Head of Partnerships at Finch. He’s spent years working in the human resources industry, where he’s seen first-hand the evolution of employment technology. At Finch, Runae leads our efforts to partner with leading HRIS and payroll providers as we work to create a more standardized and connected employment ecosystem.

Want to collaborate with us? Get in touch with our team and join industry leaders like Gusto, UKG, BambooHR, HiBob, and more.

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I didn’t have “watch a live performance by Flo Rida with a cameo from Flavor Flav” on my 2024 bingo card, but that’s the thing about Transform—the HR conference of the moment is full of surprises. 

Some Finch colleagues and I attended the Las Vegas event last week, where we got to talk shop, meet hundreds of like-minded HR tech professionals, and celebrate Finch being named a finalist in the Transform Awards’ Innovators category: “Transformative Tech of the Year.” 

Most importantly, we came back energized and with fresh insights into the state of employment technology. Here are my key takeaways from Transform 2024.

1. Enthusiasm for AI remains high, but the best is yet to come

Artificial intelligence, like many emerging technologies (crypto, Web3, 3D TVs, AR/VR, etc.), was a bit oversold last year, when seemingly all vendors added "AI-powered [fill in the blank]" to their marketing materials. That was scaled back a touch this year, as most tech companies refocused their attention on their core products, but there is no doubt in anyone's mind that AI is coming. 

I had more than one friendly debate with other attendees in which I sided with the skeptics, but we all agreed that it’s critical we prepare our workforce for the fundamental changes AI will bring in the coming years. That means it’d be prudent to invest in the employees who are most likely to see their jobs disrupted by training them on new skills or upleveling their current strengths. 

Bottom line, AI is having its “moment” with technologies like ChatGPT and DALL-E already in the hands of consumers; but the reality is, it's been around for years. It's already being used, but in ways that are behind the scenes and mundane. However, investment in AI is accelerating and undoubtedly creating the next wave of disruptive tech that will change the way we work and play. Let's start preparing for that future.

2. Is the HRIS undergoing a renaissance?

A slew of employment technologies across various verticals, from people analytics to ATS, have recently launched their own HRIS: Chartop, Workable, and Lattice to name a few. Seemingly a trend, it begs the question—why?

I have a few theories. 

First of all, HRIS is easier to build than a full-fledged payroll system. But alongside payroll, HRIS has true platform power. Point solutions need to be in sync with systems of record like BambooHR or HiBob, since they also house important employee data. So it would make sense that these point solutions want to bring HRIS in-house to deliver a more seamless, unified experience to customers. 

In speaking with these companies, a recurring theme became abundantly clear: customers who are fanatical about your products and services want you to solve more of their problems. Tech companies are very sensitive to customer pain, and will build adjacent products where there is strong demand and where they feel confident that they can deliver something unique and truly special.

3. Integrations are table stakes

This one wasn’t much of a surprise, but it’s worth mentioning just how much this concept permeated the entire conference. Long gone are the days where integrations were a value-add. Employers want modern solutions, and every vendor touts their "seamless" and "automated" workflows to attract new buyers. This means that today’s leaders need to adapt their integration and API strategies to fend off new-age, tech-forward upstarts that feature integrations out of the box for customers. 

For many of the new solutions on the block, the SMB segment is still paramount; but all big companies started out small, and as the winning SMBs grow, even the tech-forward platforms will likely need to look to outside solutions like Finch to continue scaling their integrations and expanding upon the integrated experiences they offer to their customers.

4. Invest in people, not products

This probably won’t come as a surprise to any seasoned venture capital folks, but it was definitely a strong learning for me. I attended several VC panels during Transform, and at least one of the speakers noted something that stuck with me: Products change over time; founders do not. 

Their point was that when investors are evaluating a company, what they’re also asking themselves is if they believe in the people that are building the product. You can’t exactly fire a founder. Meeting in person is crucial, because it helps both parties gauge each others’ personalities and the other intangibles that don’t stand out on a Zoom call or in a slidedeck. 

This doesn’t only apply to VC. Meeting remotely is fine, but there’s something electric about meeting prospects, customers, or partners in person that we need more of. We all want in-person events to come back because there’s no better way to build rapport and trust.

5. Transform brings the energy

A conference is a conference is a conference—until it’s not. Transform really took the monotonous and breathed some life into it. I was so invigorated by the passionate group of People leaders and early stage founders in attendance, from CHROs and their teams to CEOs pounding the pavement for their companies with fire in their bellies (and probably too much caffeine).

To put it simply, Transform just had good vibes. Who could argue with a welcome reception complete with hors d'oeuvres served under a massive tent and a live drum line? 

Where will we see you next?

While we eagerly await Transform 2025, our team is busy preparing our conference schedule for the next few months. If you’re attending the NAPA 401(k) Summit or SHRM Annual Conference, swing by our booth to say hi and learn about Finch’s Unified Employment API. Or try it yourself for free. 

A lack of integrations between your product and other software-as-a-service (SaaS) tools can be a dealbreaker for potential customers. In Gartner's 2023 report, B2B buyers ranked integration with their existing tech stack as the third most crucial factor in provider selection. To stay competitive, companies are increasingly turning to integration partnerships.

Simple integrations aren’t enough. Today’s customers demand seamless data exchange, but they also expect customizability and that the features of each tool will work in harmony to create a whole greater than the sum of its parts. Integration partnerships lay the foundation for creating this kind of user experience.

In this article, we'll discuss everything you need to know about building successful integration partnerships—from how to choose the right partner and best practices to common challenges and how to overcome them. We'll also answer some frequently asked questions.

Let's dive in.

What is an integration partnership?

Partnerships don’t always involve integrations, and vice versa. Software providers can form partnerships with one another for a variety of reasons—to cross-promote their solutions or share resources, like splitting the cost of a co-branded industry report. Similarly, two companies can integrate their applications through an open API under developer terms and conditions governing use. 

An integration partnership is the combination of a formal business relationship and a software integration between systems. These partnerships can support stronger, more strategic integrations and formalize a working agreement between both companies that empowers both to grow.

Companies that offer distinct but complementary services and share the same ideal customer profile (ICP) will partner to blend services, technologies, and resources that make both products stronger and enhance the customer experience. This offers a distinct advantage over competitors whose products don’t work with the other tools in their customers’ tech stacks.

Often, integration partnerships also involve cross-promotion efforts—they may list each other on their product marketplaces, share leads, or establish referral programs to mutually grow one another’s business.

The benefits and business value of integration partnerships

A good integration partnership opens new revenue opportunities and fosters business growth for both parties in several ways:

• By accelerating business growth and expanding your total addressable market (TAM)
• Through reduced churn and increased product stickiness
• By leveraging deeper industry relationships to raise brand awareness 

Accelerate business growth

The ultimate goal of integrations and partnerships between SaaS applications boils down to driving more revenue, which is achieved through better products and an elevated customer experience. Integration partnerships can add to your bottom line in several ways:

• Mission-critical product integrations expand the total addressable market of one or both companies. For instance, Calendly expanded its TAM by integrating with Google Calendar, allowing the massive Google Calendar user base to leverage their calendar data, greatly improving the utility of the app itself.
• Integrations can help products to stand out among the competition—those that integrate with the existing pieces of their customers’ tech stack are more useful for new users, since the integrations make it easier to layer a new piece of technology into an existing tech ecosystem.
• Partnerships expand your market reach and build credibility through cross-promotion, marketplace listings, and referral programs with your partner. For example, if a customer uses ADP and is looking for a new 401(k) recordkeeper, they’re most likely to first look at the list of ADP partners on the integration marketplace since data needs to be shared securely and accurately between the two systems. 

Reduce churn and increase stickiness

Integrations help applications improve their product offering and automate workflows. This increases the utility of your app—making it integral to your customer’s tech stack and difficult to replace. 

For instance, tax credit platform MainStreet uses Finch to integrate with their customers’ payroll and HR systems, which allows MainStreet to programmatically pull the data they need from each customer in moments. This means the end user no longer has to get on a support call with MainStreet to integrate their payroll system, dramatically improving the user experience.

When two companies establish an integration partnership, they may be able to offer more useful integrations by collaborating on use cases and common customer requests.

Deepen industry relationships

Establishing strong partnerships with industry leaders can bolster your company’s reputation, potentially paving the way for future partnerships. These partnerships can include referral agreements that send leads to your company when your partner has a customer who would benefit from your solution.

Integration partnerships also lead to co-selling opportunities by creating a bespoke solution that combines both companies’ strengths. For example, last year Workday and ADP announced an extended partnership to improve data visibility between systems and provide a technology-first experience to their joint customers. 

The bottom line is that building integrations and creating strong, lasting partnerships can offer both direct and indirect benefits that will help your business to grow.

When should you consider integration partnerships?

Given their time and resource-intensive nature, whether or not to enter an integration partnership is a strategic business decision that should be made carefully and depends on how important the use case is to your ideal customer.

You should consider opting for an integration partner in the following scenarios:

• When you are losing customers or sales because your application lacks connectivity to the other tools your customers use
• When you need to quickly add support for a product feature that's not core to your business but is essential for attracting and retaining customers
• When there’s an opportunity to make your product more valuable by syncing seamlessly with a customer’s systems of record

Step-by-step guide to establishing integration partnerships

While the details may differ by industry, the general process for building integration partnerships is roughly the same. Here's what a standard integration partnership process entails:

Step I: Reaching out to potential partners

The first step is finding a potential partner and starting the conversation. Many vendors have an established partner program and an intake form on their website; others may require more direct outreach to Partnership or other company executives. Be prepared to explain what you’re looking to accomplish and how a partnership would benefit you both.

Step II: Negotiating terms of partnership

Next, you need to outline how you want to collaborate, which may include setting timelines and goals and agreeing to both technical and commercial terms. Some common conversations at this stage include:

• How both parties will measure success
• Partnership exclusivity
• Conditions for terminating the partnership
• The level of access and functionality available through the API
• How to address product updates and new versions of the API, and how those will be communicated
• If and how the companies will co-sell, cross-promote, or co-market their products

Step III: Legal discussions and contract submissions

Most companies will have a standard set of legal contracts, such as NDAs, licensing agreements, terms of use, privacy contracts, liability and indemnity clauses, and so on. These contracts clearly define ownership, intellectual property usage, and risk mitigation clauses.

Step IV: Building the integration

Once all parties are in agreement, the engineering teams can begin testing technical compatibility, synchronizing data, and building the integration. In some cases, developers can leverage an integrations platform like Finch to eliminate the need to build a bespoke integration and go live with their partnership in much less time.

Step V: Leverage the partnership

Now that the integration has been established, both companies can leverage the benefits of their new partnership, whether that’s through co-selling a robust solution, co-marketing the new integration features, advertising one another on their marketplaces, or whatever other benefits the partnership entails.

Best practices for forming and maintaining integration partnerships

Remember: integrations and partnerships are distinct, and they’re not mutually inclusive—one can exist without the other. Applications can integrate with each other without a formal partnership, and partnerships can be established without ever connecting technologies. 

When two companies form an integration partnership, they connect their applications and institute a formal agreement that leverages the integration to help both companies grow.

So, best practices for a successful integration partnership include best practices on both the technical side (the integration) and the business side (the partnership). The following best practices may apply on one end, the other, or both, as we’ll discuss below:

• Identify and assess the right integration partner
• Invest in your partner relationships
• Carve out revenue opportunities
• Onboard the partner
• Establish agreements about how both parties will maintain the integration throughout its lifetime
• Use tools to expedite building new integrations

1. Identify and evaluate the right integration partner

Integration partnerships require a lot of work to do well, so the first step is to choose the right partner—one that will offer long-term value to your business. 

To choose the ideal partner, you’ll have some considerations that are specific to the integration, some that are specific to the partnership, and some that apply to both. We’ll explore the best practices based on where they fall on each side of this coin. 

Both the integration and the partnership

• Objectives — Identify shared business objectives and how an integration would help both parties satisfy them. Understand how integrating the applications will provide a better user experience. Integrations that involve a partnership will need to benefit both parties, or there will be no basis for, or value to be gained from, a partnership. 
• ICP overlap — Partner with a company that offers a distinctly different solution than your own to a similar user base. Ideally, you’ll both be able to introduce new users to each other’s platforms through the integration partnership and address your respective TAMs more effectively.

Integration-specific

• Technical discovery — Consider the other company’s technical and resource requirements and confirm their technical setup, API type (like REST or SOAP), and the quality of API documentation. This ensures a smooth experience when building, maintaining, and using the integration.
• Integration difficulty — Once you have performed discovery and determined the level of effort, assess your bandwidth and capabilities to determine whether the project is feasible.

Partnership-specific

• Reputation — Evaluate your potential partner’s reputation in the industry. Analyze what their customers have to say about their reliability by checking reviews on sites like G2 and Capterra. Gather testimonials, check social media, and get a holistic view of their tool’s performance and their business values to ensure you’re partnering with a brand that reinforces your own brand values and reputation.
• Priority alignment — Ensure the other company is willing and able to engage in a lasting partnership. Discuss how you’ll help each other achieve your business goals once the integration is built.

2. Build relationships and appoint a Partner Manager

Once you’ve identified the right partner and both parties have agreed to work together, you’ll need to build trust to be effective partners. 

Large organizations recruit entire partnership teams to effectively develop and maintain relationships. If you’re a smaller organization without a dedicated Partnership team, start by assigning partnership responsibilities to someone who can own the relationship with the partner organization. These Partner Managers play a pivotal role in maintaining healthy relationships between the companies—they’re responsible for identifying opportunities to drive mutual revenue and user growth with your partner. 

3. Find revenue opportunities

There are two things to consider here: how the integration itself may be monetized, and how the partnership can lead to new revenue from customers.

Many SaaS tools charge direct and indirect fees to their partners, like API usage fees and flat partnership fees. In this case, one company or both may pay for the right to use the integration they’ve built. Be aware that while they’re common practice, API usage fees often lead to friction and frustration between the two parties. 

On the other hand, the business partnership may include agreements to promote each other’s products, with incentives like referral bonuses or customer discounts. These formal agreements can help one or both companies grow their user base at a lower customer acquisition cost. 

Separately, partners may engage in co-marketing commitments like co-hosting events, campaigns, and webinars, which typically don’t involve exchanging money. These collaborations can build mutual trust and goodwill while bringing each company new leads.

4. Set up a solid partner onboarding process

Partner onboarding can be helpful both for building the integration and defining the partnership. For example, you may exchange product walkthroughs so both you and your partner develop a better understanding of each product and how they can best work together before engineering the integration.

Once the integration is built, sharing enablement resources and marketing collateral as well as  establishing support paths can help each partner to effectively serve shared customers and engage in cross-promotional efforts. 

5. Establish a plan to maintain the integration over time

Integration partnerships, like any long-term relationship, require ongoing maintenance—both to the technical bridge and the human one. It’s good practice to assign dedicated points of contact to your partnerships—you may even establish routine meetings—to keep both parties on the same page about:

• Technical maintenance to keep integrations updated, fix bugs, handle versioning or user migrations, etc. 
• New products and services or shifts in focus and strategy
• Enablement opportunities like lunch-and-learns to strengthen the relationship and learn about each other’s offerings

6. Leverage a unified API to scale your integrations 

The dual nature of integration partnerships can make them especially taxing, because they require the effort of building the integrations and the effort of establishing and maintaining a business relationship.

Unified APIs like Finch can alleviate the strain on your team, empowering you to build integrations at scale. Instead of investing time, money, and resources in one-off integrations, companies that use Finch build just one integration to access hundreds of systems of record for HR and payroll. Finch’s Unified Employment API is intentionally focused on the employment ecosystem, but there are other unified APIs that serve additional markets and verticals.

Once you’re able to support connections to hundreds of providers through a unified API, you may choose to augment some of those connections with a formal partnership. In that case, unified APIs like Finch can speed these partnerships' time to launch by eliminating the technical element and giving your team the freedom to focus on building relationships and investing more heavily in your core product.

In short, you should consider a tool to leverage more integrations in the following scenarios:

• When customer data is falling out of date because you don’t have the necessary integrations to systems of record
• When your customers are forced to make manual updates to their data
• When you’re losing deals or churning customers because your integration coverage isn’t sufficient
• When you need to focus your engineering resources on core products and not integration work

Common integration partnership challenges

Finding the right integration partner that is collaborative and fits your strategic roadmap can pose several challenges:

• Lengthy negotiation process
• Technical checks
• API integration challenges
• Monetary burden
• Difficulty of scaling

Lengthy negotiation process

Negotiating legal contracts and commercial terms can take weeks or months to finish—often delaying time to market. This is especially difficult for startups or companies who want to go live with partnerships quickly and launch integrations with customers.

Technical assessment

Some companies may require their prospective partners to undergo technical evaluations to ensure compatibility, security compliance, and adherence to data protection standards—this is especially true of systems of record that hold sensitive data like PII. 

Many also require their partners to have a minimum number of shared customers before allowing them into the integration marketplace, which acts as a barrier to entry into the partnership ecosystem for early startups.

API integration challenges 

Most integrations are built through APIs. Integrating with a provider’s API is challenging for multiple reasons, including data mapping errors, API versioning, ongoing maintenance, and more. We expand on these hurdles in our article "Common Challenges of Building Multiple API Integrations."

Additional cost 

Integration partnerships are often a source of additional revenue for systems of record. As a result, partners may charge a flat fee or incremental fees for API usage—adding to the monetary burden for budget-conscious companies.

Difficult to build and maintain at scale 

A lot of time, energy, and resources go into building just one integration partnership. Companies that want to establish many integration partnerships face long timelines, tricky resource allocation decisions, and compounding long-term maintenance work—rendering it nearly impossible to scale without sufficient resources. 

Scale your integrations with Finch

Few companies have a surplus of time, talent, and capital. Invest those precious resources in your partnerships and product by using Finch’s Universal Employment API to access integrations to 200+ HR and payroll systems. 

Finch partners with industry leaders like Gusto, Paycor, Personio, UKG, and others, empowering innovators to focus on building their core product while leveraging our partner network to deliver a smooth user experience.

‍Talk to our sales experts or sign up for free.

Common FAQs

What makes integration partnerships successful?

Almost all successful integration partnerships involve the following:

• A clear value proposition and revenue-sharing model for long-term partnership planning and getting executive buy-in
• A commitment to technical support from each provider to ensure a smooth customer experience
• A demo environment to educate customers
• Co-marketing materials 
• (Preferably) Dedicated partnership resources

How long does building partnerships with top HR and payroll providers take?

Partnership efforts—identifying a partner, vetting them, developing outreach programs, building integrations, and implementing a shared go-to-market strategy—can take a few months to a few years.

Who does Finch partner with?

Finch is a unified employment API that helps you scale HR integrations faster. You can unlock integrations with 200+ HRIS, directory, and payroll systems by building and maintaining just one integration with Finch. Finch also partners with multiple HR and payroll providers your customers use, including Gusto, Paycor, Personio, UKG, BambooHR, HiBob, and more. By leveraging Finch's extensive network, you can save months of integration-building efforts and reduce time-to-market while creating a more integrated, seamless customer experience.

What are the technical requirements for an integration partnership?

Typically, integration partnerships involve:

• Application programming interfaces (APIs)
• Clear and concise documentation
• Data-sharing protocols
• A sandbox environment
• Security compliance checks
• Legal contracts

To protect their customer data, sometimes applications will decline partnership offers if data and security standards are not met. It’s crucial to ensure you meet the technical requirements, such as encrypting data in-transit and at-rest, before entering into a partnership.

HRIS integrations are crucial for streamlining essential HR functions such as employee onboarding, performance management, benefits administration, compliance, etc. They also support broader business operations like accounting and enterprise resource planning (ERP).

Integrating operational tools with HRIS systems can eliminate the need for employers to switch between different applications. It also boosts the adoption of new SaaS tools and minimizes manual data entry errors.

In this article, we will explore what HRIS integrations entail, discuss popular use cases, and examine both the challenges and benefits associated with them. We will also touch upon the common methods for building and maintaining these integrations.

Additionally, we'll introduce how Finch allows you to unlock integrations with 200+ HR and payroll systems using just one API. Tools like Finch are especially valuable when dealing with the complexity of building three or more HRIS integrations.

What are HRIS Integrations?

Today, an average-sized organization utilizes 6-8 HR applications. This requires employees to spend significant time keeping their employment tech stacks up-to-date. Based on our research of 1000+ HR professionals, seven in ten HR admins (68%) say they routinely switch between different employment systems throughout the day. Half (51%) admit doing so leaves them feeling overwhelmed, stressed, annoyed, frustrated, or angry. 

HRIS integrations facilitate seamless data exchange between the primary HRIS (housing employment records) and other software applications. This means that any changes made in one system will automatically appear in another, and actions in one application can trigger workflows in another. This reduces the need for employees to switch between apps frequently.

Types of HRIS integrations

HRIS integrations fall into two main categories based on their purpose. 

• They can be customer-facing and connect your application with a third-party HRIS used by your customers. Employers can authorize your tool to exchange data with their HR systems. For example, whenever a new employee joins an organization, a sequence of onboarding activities must be completed—from enrolling their details into payroll and benefits systems to completing onboarding training and providing access to key business tools. With HRIS integrations, all of these can be automated. 
• Alternatively, HR integrations can be developed for internal use within an employer’s org. This facilitates seamless data sharing with business tools like ERP, accounting, or communication systems. It reduces unnecessary app-hopping for employees and HR managers. For example, you can integrate your HRIS or HCM system with Slack to send automated reminders.

Top HRIS Integrations

HR and payroll represent one of the most fragmented markets in the United States, boasting nearly 6,000 providers processing around $3 trillion in payroll annually for SMBs alone!

Adding to the complexity, the functionalities of HR systems vary widely among different providers. Some offer only HRIS or employee directories, while others provide a comprehensive suite encompassing HRIS, payroll, benefits, and collaboration tools.

As of 2023, Quickbooks, ADP Run, and Paychex Flex collectively hold over 40% of SMB payroll  market share. However, newer tools like Gusto, Zenefits, and BambooHR leverage innovation and integrations to offer diverse HR, payroll, and benefits solutions to SMB employers through a single platform.

Note: Given the abundance of HR and payroll providers, it's essential for any company serving the SMB market to integrate with as many HR providers as possible. 

Building a few integrations with the top five or ten HRIS may cover a decent portion of your customer base, but to serve the remaining half or tap into new regions and industries, you would need to build hundreds of other HRIS integrations. Needless to say, this is tremendously time and resource-intensive. 

To address this coverage challenge, many employment tech companies seek solutions to streamline the development and management of HRIS integrations. If you're developing a solution that requires access to employment data from multiple sources, Finch’s Unified Employment API can unlock hundreds of HRIS integrations in as little as 3 days. Contact us.

Now, let's explore some common use cases of HRIS integrations.

Common HRIS Integration Use Cases

Payroll

Integrating an employer's HRIS with a payroll provider is the most efficient approach to handling payroll functions efficiently. Especially when an employer’s HRIS does not include a payroll module. This integration automates tasks such as setting up new employee payroll, tracking tax regulations, and managing benefits deductions based on employee directory data. 

401(k) and retirement plan providers

Providers of 401(k) plans, record keepers, or third-party administrators can integrate with an employer's HRIS and payroll systems. This integration streamlines auto-enrollment to retirement plans, facilitates seamless deductions management and yearly recordkeeping audits.

Benefits administration

If an HRIS lacks benefits administration features, employers can connect with a benefits administration tool to automate employee enrollment, modifications, and cancellations. Learn more.

Talent acquisition tools

Recruitment tools, like applicant tracking systems (ATS) or background verification tools, often collaborate with HRIS’s to offer all-in-one talent acquisition solutions. This enables employers to manage recruitment tasks from a single platform. For instance, when a candidate's status changes to "Hired" in the ATS, HRIS integrations can automatically create the employee profile and trigger onboarding functions.

Compliance and security

Compliance tools can use employee census details (job title, department, employment status, etc.) to build security training programs, auto-enroll employees, send periodic reminders, and update results directly to the HRIS, ensuring increased participation.

Also read: How Secureframe used HRIS integrations to simplify compliance for thousands of employers.

User provisioning & de-provisioning

Tools like compliance, expense management, employee recognition, and identity management must stay updated with the latest employment details for accurate employee access. HR integrations ensure accurate access to employee records, making it easy to grant or remove user access to essential tools. This maintains compliance and reduces the risk of data leaks.

Employee onboarding & offboarding

As soon as an employee joins, a series of onboarding workflows ensure that employees have access to all the equipment, software, and documents they need to get started on their first day at work. Effective employee onboarding also includes company orientation, training, and in some cases, specific certification processes. HRIS integrations automate these workflows by swiftly capturing employee details, eliminating the need for manual ticket generation. The same automated efficiency applies to the triggering of offboarding workflows.

Read: How tools like Trainual simplified employee onboarding with HRIS integrations. 

Time tracking and leave management

Time tracking and leave management applications use HRIS integrations to automate hours worked and time off updates based on employee census data. This reduces HR admin workload by eliminating manual data syncs.

Employee engagement and performance management

Integrating workforce management solutions with HRIS’s creates a centralized platform for daily tasks and performance management. For instance, HRIS integrations help employee engagement and performance management tools to track employment information like employee roles, organizational structure, manager information and use them to trigger relevant workflows.

Read: How employee rewards tool PerkUp launched HRIS integrations in a sprint.

Personalized employee learning

Integrating learning management systems (LMS’s) with HRIS’s simplifies managing the professional development of employees. Customizing their learning experience based on employee data, such as role, department, and manager details, facilitates skill gap identification and discovery of training needs. Moreover, completion reports are automatically sent back to HRIS, allowing employers to stay informed about employee learning without manual effort. For example, with an LMS-HR integration, employees can be auto-enrolled in role-based learning programs following role changes or promotions.

Internal use cases of HRIS integrations

• Communication and collaboration tools: HR integrations with communication and collaboration tools like Slack. Microsoft Teams, Zoom, Dropbox, etc., can streamline organizational communication, such as quick announcements, file sharing, and other important team updates. 
• ERP: Organizations often build HRIS integrations with their enterprise resource planning (ERP) tools to share employee census data with other business tools like finance, operations, and accounting systems. This facilitates collaboration between different business units. For example, with integrated systems, HR and accounting teams can access real-time data. This allows for quick and accurate reporting on financial metrics related to payroll, expenses, and budgeting. Some external ERP or accounting tool offer HRIS integration for this purpose. 

Read: How accounting software Rillet leveraged HRIS integrations for better employer experience.

How to Build HRIS Integrations?

The most effective approach to building HRIS integrations depends on the number of integrations needed, the purpose of integration, scalability needs, engineering bandwidth, and budget. Common HRIS integration methods used by SaaS tools include:

Custom API integrations

Application programming interfaces or APIs serve as connectors for seamlessly exchanging information between different software tools. Custom-built API integrations simplify setting up automated triggers for custom HR workflows. APIs offer greater flexibility, personalization, and customization of the end-user experience. However, each integration requires significant development and partnership efforts, creating scalability issues. Moreover, any API changes require updates to HRIS integrations, adding complexity and fragility to this approach.

Unified APIs

In recent years, new solutions like unified APIs have been developed to meet the demand for scalable API integrations. Unified APIs consolidate APIs of applications within a specific software category. This enables developers to connect with multiple platforms simultaneously. Also, these APIs standardize data from different applications into a common format, making it more accessible to developers.

For instance, Finch’s unified employment API simplifies integration with 200+ HRIS and payroll providers through one integration. Managing a single integration with Finch may prove to be the quickest and most cost-effective method for scaling HRIS integrations.

Native integrations

Some HRIS tools form partnerships with vendors to offer native integrations. However, these integrations are often limited in number, and the level of customer service may not be satisfactory. Additionally, accessing these integrations may involve extra fees.

iPaaS solutions

Integration platform as a service (iPaaS) solutions help companies integrate HRIS platforms into their applications, streamline workflows, and facilitate data synchronization. iPaaS is a fairly low-code solution suitable for organizations with limited tech resources. But the process can be slow and challenging to scale. Plus, they are often tailored for specific use cases. If your needs do not perfectly match, this approach can be very limiting. 

Point-to-point integrations

Point-to-point HRIS integrations, while cost-effective, are the least efficient option. They involve connecting an employer's HRIS with operational tools without using APIs or third-party solutions. These integrations are challenging to maintain and scale. Any change in one system requires adjustments to multiple connections. However, if the integration needs are minimal and a high level of personalization is essential, point-to-point integrations may be a viable solution.

Challenges to HRIS Integrations

Ensuring data quality and standardization

Challenges in HRIS integrations involve maintaining data quality, accuracy, completeness, timeliness, and consistency across multiple HR providers. These are crucial to avoid compliance and security issues. To address this challenge, establishing data standards is essential, ensuring compatibility among data from different sources. 

Note: If you are building integrations with multiple HR systems, consider using a specific tool to normalize data into a common format to save significant engineering resources.

Gated APIs and partnership complexity

Many HR platforms lack public APIs, requiring a partnership agreement to access API keys, documentation, and sandboxes. These agreements often involve security checks, lengthy negotiations, and additional fees. Some providers even demand a minimum customer count before partnering, posing a challenge for resource-limited startups seeking essential integrations for their products.

Post-integration maintenance

Ongoing maintenance is vital for the accuracy and quality of integrated data, especially for customer-facing integrations. Key maintenance issues include:

• API versioning: Custom API integrations must address versioning challenges to ensure continued compatibility with HRIS APIs, even after updates.  
• Documentation updates: Some HR API providers may not regularly update developer documentation. They may also not provide it in your language. This places additional burden on the development team.
• Monitoring and logging: To offer a smooth customer experience, you need to establish mechanisms to track the health and performance of each integration. You should also allocate engineering resources to regularly check logs and promptly address errors. 

Cost of building and maintaining 1:1 integrations

Creating and maintaining 1:1 integrations demands a substantial investment of time and resources. The entire process, from planning and testing to development and ongoing updates—can consume hundreds of developer hours and tens of, if not hundreds of thousands of dollars annually for just one integration. Unfortunately, this approach lacks scalability, as resources dedicated to integration maintenance could be better utilized to enhance product features.

Refer to our whitepaper Build vs. Buy for a detailed discussion on the merits of building integrations in-house versus using a commercially available unified API.

Scalability

When handling in-house HR integrations, scalability becomes a significant hurdle. Developers must delve into various providers' API/developer documentation, decode data intricacies, craft custom codes for each integration, test them, and offer indefinite support. Managing more than three integrations can become a monumental task. Leveraging an integration tool or API aggregator improves scalability, allowing you to concentrate primarily on product development projects 

Also read: How equity management tool Carta scaled their integration strategy overnight with Finch.   

Benefits of HRIS Integrations

HRIS integrations offer numerous advantages, reducing time, cost, and resource requirements for app developers while notably enhancing employer experience.

Benefits for HR applications/ service providers

• Increased total addressable market (TAM): The number of integrations is pivotal in SaaS tool purchasing decisions. In fact, 97% of HR admins believe that connections with employment systems, such as HRIS, are important to them. Supporting more HRIS integrations can broaden your platform's reach, enabling you to effectively serve more employers and shorten deal cycles. Utilizing unified APIs can accelerate your integration roadmap with minimal effort.
• Improved customer experience: HRIS integrations automate data synchronization between applications. This means when an employee joins the organization or achieves a milestone, they can be automatically enrolled in specific programs without manual intervention. This frictionless experience increases customer satisfaction and loyalty, encouraging more consistent app usage.
• Better compliance: Automated data synchronization between your product and the customer's HRIS ensures that any changes in either application are promptly captured and communicated. This minimizes the risk of overlooking crucial alterations in employee or organizational details, leading to better compliance.

Benefits for employers 

• Streamlined HR administration: Automating repetitive tasks and workflows reduces HR administrative burden, freeing up valuable time for strategic initiatives.
• Enhanced data accuracy: Data entry for HRIS integrations occurs only once in the HRIS and automatically syncs with other application systems. This significantly lowers the likelihood of costly data entry errors, such as delays in updating data, entering incorrect information, or forgetting to make necessary changes manually.
• HR data visibility (eliminate data silos): Integrating the HRIS with other oft-used platforms ensures a centralized system for managing all employee and employment data. This fosters greater visibility and eliminates data silos, enhancing overall organizational efficiency.
• Enhanced employee experience: HRIS integrations boost HR operational efficiency. It provides employees with a single platform to update and monitor their employment details. This eliminates the need for toggling between multiple platforms to manage benefits, performance, and payroll information.

Simplify HRIS Integrations with Finch

If you need to build multiple HRIS integrations, Finch offers a unified employment API that simplifies the process with a single integration. Finch provides a standardized data model, eliminating the need for developers to handle different data formats, development complexity, and API variations.

• Industry-leading coverage: Finch is the leader in the HR and payroll integrations space in terms of coverage and depth. It connects with over 200 HR and payroll providers—covering 88% of the US employer market—and helps you unlock easy and secure access to employment data overnight. See our integration catalog. 
• Easy, secure employer experience: The Finch Connect feature streamlines employer onboarding into two simple steps: selecting the HRIS and authorizing permissions. It takes just 30 seconds for employers to connect their HR systems with your tool. Plus, Finch improves employer experience by eliminating the need for manual data entry and reducing occurrence of errors.

Please contact us if you are looking for a comprehensive HRIS integration solution. 

If you are looking to automate payroll deductions, Finch can help. Talk to sales. 

Payroll deductions refer to the money withheld from an employee's paycheck each pay period to cover taxes, benefit premiums, and other financial obligations. Whether you're a business establishing your payroll, a SaaS tool offering employee benefits, or an employee seeking clarity on paycheck adjustments, it's crucial to grasp the different types of payroll deductions and how they differ.

This article explores common payroll deductions, their legal requirements and addresses some frequently asked questions. Plus, for those involved in employee benefits, retirement, health insurance, and more, we have a bonus section that explains how to seamlessly adjust deductions within the employer's payroll system.

Now, let’s decode different types of payroll deductions one by one. 

What are payroll deductions? 

Payroll deductions involve subtracting money from an employee's total wages each pay cycle to cover both mandatory and voluntary employment expenses, including taxes, benefits, and garnishments. 

Each deduction has distinct calculations, regulatory requirements, and is applicable in different scenarios.

The deduction amount depends on multiple factors like federal or state tax laws, withholding information supplied by the employee in their Form W4: Employee’s Withholding Certificate, and the benefits programs the employee is subscribed to. The calculation process can be manual or automated.

Some types of benefits deductions are taken out of a paycheck based on the written approval of the employee. However, statutory deductions and garnishments are withheld by the employer as mandated by law.

Types of payroll deductions

Here are the common payroll deductions to keep in mind if you are working for an employee benefits or payroll company that does business in the United States. 

Mandatory deductions 

Mandatory deductions are commonly called withholdings. Some examples of statutory payroll deductions include state and federal taxes, wage garnishments, and FICA. 

• Income taxes: Employers must withhold federal and state income taxes each pay period. Federal taxes have seven brackets (ranging from 10% to 37%), applied incrementally. Taxable income depends on the employee's filing status (single, married, head of household) and claimed allowances in Form W4.  Based on which state the employer operates in, the state income tax rate changes as well. Some states follow federal tax brackets, while others have different local tax protocols. Some states charge progressively, while some charge none. Employers must follow local payroll laws to avoid penalties. Calculating taxes is a complex process and if you are doing it manually, it can be a nightmare.

• FICA (Federal Insurance Contributions Act): FICA includes Social Security and Medicare, with a standard rate of 7.65% per paycheck (6.2% for Social Security and 1.45% for Medicare). Social Security has an income-based upper limit, and employers are mandated to match this contribution. Medicare tax, on the other hand, pays for doctor’s fees, hospital care, and nursing care for 65 years or older as well as for those who receive social security benefits. Employees earning over $200,000 annually must pay an additional Medicare tax.

• Garnishments: Employees may owe a portion of post-tax wages to cover unpaid dues in areas like child support, alimony, defaulted loans, or tax obligations. Employers can be legally ordered to withhold these amounts by courts, government agencies, or the IRS. Failure to accurately handle these payroll deductions can hold employers financially responsible.

Voluntary deductions

Employees can choose from various employer-offered benefits programs and agree to deductions from their paychecks on either a pre-tax or post-tax basis. These programs encompass 401(k) and retirement plans, health insurance, health savings accounts (HSA) and flexible spending accounts (FSA), life and disability insurance, commuter benefits, wellness programs, college savings plans, and other common voluntary payroll deductions. 

Note: Employers need written authorization from the employee for the following deductions:

• Health insurance: Employees with employer-sponsored health, dental, or vision plans have premiums deducted on a pre-tax basis from each payroll, typically with employers sharing the cost.
• 401(k) & retirement benefits: The two most common employer-sponsored retirement benefits plans are 401(k) and Roth IRA contributions. 401(k) is deducted from payroll on a pre-tax basis but subject to FICA taxes. While Roth IRA contributions are deducted on a post-tax basis. As the complexity of the retirement benefits industry increases, more employers and plan providers are relying on 401(k) payroll integrations. This helps them automate payroll deductions, save time, and significantly reduce compliance risks. 
• HSA and FSA contributions: Health Savings Accounts HSA) and Flexible Spending Accounts (FSA) are both employee health benefits that are typically deducted from payroll on a pre-tax basis. Employees can opt to deduct a certain amount of their paychecks each payroll towards paying HSA to cover specific medical expenses like copay, prescriptions, dental or eye care. HSAs are called “triple advantaged” benefit plans, because 1) the money that employees contribute is tax-exempt, 2) the money isn’t taxed while it’s in the Health Savings Account, and 3) it is also tax-free when employees use the money for qualified medical expenses. This triple advantage makes HSAs one of the most popular payroll deduction types by employers. Unlike HSAs, FSAs cannot be transferred, and have a lower contribution limit.
• Commuter benefits: Employees can use tax-free funds from their paychecks for commuting expenses, including mass transport, ride shares, and qualified parking.
• Wellness programs: Employers may offer health promotion and disease prevention plans, like diabetes management, vaccination, weight loss plans, etc. Sometimes wellness programs include employee’s spouses as well. Wellness program-related payroll deductions can be calculated pre-tax if the employee does not have any unreimbursed medical payments related to the payment. 
• College savings plans: Employees can allocate a percentage of their paycheck to state-sponsored 529 plans (known as college savings plans or qualified tuition plans) for a beneficiary's education, which may be state tax deductible. Note: they are not federal tax deductible.
• Life and disability insurance: This includes employee contribution towards group life insurance plans and short or long term disability insurance premiums.
• Others: Voluntary payroll deductions also include U.S.Savings Bond purchases or any money owed to the company for tools, uniforms, loans, etc. 

Pre-tax and post-tax deductions

Voluntary and mandatory payroll deductions can be further classified as pre and post-tax deductions. 

Pre-tax deductions are subtracted from an employee's gross paycheck before any state or federal taxes are withheld, lowering the taxable income. Common examples include health insurance, commuter benefits, group term life insurance, health savings accounts (HSA), flexible spending accounts (FSA), and retirement benefits plans. While participation is optional, it is generally beneficial for employees. Note that there's an annual limit set by the IRS on how much can be contributed to these pre-tax plans, such as 401(k).

Conversely, post-tax payroll deductions are adjusted from an employee's paycheck after taxes have been withheld. Examples include Roth IRA retirement contributions, charitable donations, disability insurance, and garnishments. These deductions don't reduce an employee's tax burden. Employees can choose not to contribute to these plans, except for wage garnishments.

How do payroll deductions work?

Employers typically rely on benefits partners to inform them about various deduction details. These deductions are then processed through a payroll provider to determine an employee's net take-home pay. Payroll providers also ensure that necessary payments are made to the appropriate government entities on time. 

The payroll deduction process follows a standard sequence:

• Deduct pre-tax contributions (e.g., health insurance, 401(k) retirement benefits, and other eligible voluntary payroll deductions) from the gross pay.
• Calculate and withhold federal tax deductions based on the employee's W4 and IRS tax bracket requirements.
• Withhold 7.65% for FICA and an additional 0.9% for Medicare tax if the applicable threshold is met.
• Determine and deduct state tax according to state tax regulations to arrive at the net pay.
• From the net pay, withhold garnishments, dues, and post-tax contributions for other employee benefits such as Roth IRA and disability insurance.

As you can see, to successfully manage payroll deductions, there’s a lot of information exchange required between the employer, payroll provider, and benefits plan partners. Manual processes can render this experience even more redundant and error-prone. Tools like Finch help automate payroll deductions to ensure a seamless experience end-to-end. Learn more.

FAQs about common payroll deductions

What are some examples of wrongful payroll deductions?

With so many deduction types, mistakes can happen. Common errors include:

• Inaccurate deduction amount: Employees often make choices about voluntary benefits plans, like how much to defer from their paycheck or which plan to enroll in. Any error in documenting these details can lead to incorrect premium deductions.
• Incorrect tax calculations: Misclassifying deductions as pre-tax or post-tax can result in employees being assigned the wrong tax brackets. Errors in adjusting these deductions can lead to overpayment or underpayment of taxes. Also, if an employee's filing status (single, joint) or employment details change but are not updated in the systems, it can cause inappropriate tax liability for the employee.
• Getting employee details wrong: Whenever an employee experiences a qualifying life change like the birth of a child, getting married or divorced—employees get the option to update their benefits deduction details mid-year. With multiple benefits providers involved, employers might miss these updates, leading to inaccurate payroll calculations.
• Other common payroll mistakes include non-compliance with local payroll laws, miscalculations of pay or overtime wages, and filing delays. 

Automating payroll deductions is highly beneficial as it captures changes and updates employee information, employment status, and contribution details promptly between systems, reducing errors in deduction calculations. Learn how Finch's automated deductions can reduce deduction errors altogether.

What happens when payroll deductions are calculated incorrectly?

If payroll is calculated with incorrect deduction details it can result in employees being enrolled into the wrong tax brackets. This can result in higher taxes, penalties, or lost interest for employees. 

If withholding calculations are not compliant with state and federal laws, employers need to compensate for back payments, not the employees. 

What is the difference between core benefits and fringe benefits?

Core benefits are the primary benefits employees receive for being employed by an organization. This includes retirement benefits, health insurance, etc. Fringe benefits are the extra perks that some employees get like free meals, childcare (up to $5,000), gym memberships, mental health benefits, group term life insurance, employee discounts, etc. 

While most core benefits are mandated by federal and tax laws, employers offer fringe benefits to retain talent and infuse a positive work culture. The fringe benefits that are translated into cash form are usually deducted from employee wages. 

How do you simplify payroll deductions for employers?

Finch is committed to making payroll deductions easy and automated for employers. It aims to do this by helping innovative SaaS tools in the retirement, benefits, and insurance sectors build solutions that can be integrated with 200+ HR and payroll systems using a single unified employment API. By allowing benefits providers to fetch data from the employer’s source of truth, Finch ensures data accuracy and timely contribution updates to payroll. 

Streamline deductions management: Finch eliminates the need for flat files, SFTP, or manual data entry to fetch employee census data and contribution details. It automates the entire process of payroll deductions by connecting the employer’s payroll systems with the benefit providers' tool. 

Enhance accuracy through automation: Today, every employer is looking for automated deductions management. It frees up employer admin time as they don’t have to manually enter data into the provider’s system each time employment status changes. 

Similarly, all contribution details can be written back into the payroll system without manual intervention. Automated adjustments increase data accuracy and help employers avoid the common payroll deduction mistakes we discussed earlier.

If you are a SaaS tool looking to automate payroll deductions, reach out to us, we’d be happy to help.

The wait is finally over. Download the 2023 State of Employment Tech Report for free below.

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In June 2023, Finch surveyed 1,004 HR pros from a variety of industries and company sizes. Our aim was to uncover emerging trends while exploring the relationships between HR pros, their tech stacks, and the employment data they manage. 

Inside, you’ll find powerful insights into the state of employment technology:

• The rate of adoption of generative AI in HR
• The fluid landscape of hiring and return-to-office trends
• The wishlist of HR pros and the surprising item that topped the list
• How companies are approaching data security and regulatory compliance
• And so much more! 

Download the report to discover how HR pros are navigating a tumultuous year, and what they want from the businesses that serve them. 

The payroll ecosystem in the US is fragmented, with over 5,700 providers serving the country alone. Meanwhile, the employment ecosystem has never been more competitive, with best-of-breed applications catering to employers of all types. While both employers and employees stand to benefit from this trend, it also raises the bar for applications in the space to uplevel their customer experience, or risk losing customers. Connectivity to other apps in the ecosystem, especially critical systems such as payroll systems, is a big piece of this customer experience.

We’re thrilled to share our latest whitepaper, The Emergence of the Unified Employment API, which documents the evolution of popular data sync options, from manual entry to flat file transfers to direct integrations to unified APIs to specialized unified APIs such as the unified employment API.

Inside, you’ll learn:

• A brief history and the range of data sync options, including APIs
• Definitions and examples of common types of APIs
• Why employer-facing businesses need vertical-specific unified APIs 
• How companies like Mosaic, Trainual, and PerkUp have benefited
• And so much more! 

Download the whitepaper learn more about the emergence of the unified employment API today!

Finch recognized for achievements in the Unified API space

CB Insights today named Finch to its sixth-annual Fintech 100 ranking (previously the Fintech 250) - showcasing the 100 most promising private fintech companies of 2023.

“Representing 24 different countries across the globe, this year’s Fintech 100 is shaping the future of real-time payments, spend management automation, embedded finance, and more,” said Chris Bendtsen, Lead Fintech Analyst, CB Insights. Together, they are not only increasing the pace of innovation, but launching new products and features to revolutionize the industry as a whole. I cannot wait to see what this cohort accomplishes next.”

“We are pleased to be featured in this list alongside other Finch customers. This ranking is further validation of Finch’s vision to make all applications in the employment ecosystem connected, so employers have the data and insights they need without unsecure and manual data transfers,” said Jeremy Zhang, CEO of Finch. 

Utilizing the CB Insights platform, the research team selected these 100 winners from a pool of over 19,000 private companies, including applicants and nominees. They were chosen based on factors including - including equity funding, investor profiles, business relationships, R&D activity, news sentiment analysis, competitive landscape, proprietary Mosaic scores, and Yardstiq transcripts - and criteria such as tech novelty and market potential. The research team also reviewed thousands of Analyst Briefings submitted by applicants.

Finch is the #1 unified API for employment systems, with industry-leading coverage across 200+ payroll and HRIS providers. Our technology underpins the employment ecosystem, helping employers share organization, pay, and benefits data securely. Finch powers integrations for hundreds of platforms including Brex, Carta, and Betterment.

Quick facts on the 2023 Fintech 100: 

• Equity funding and deals: The Fintech 100 includes a mix of companies at different stages of maturity, product development, and funding. The cohort has raised nearly $22B in equity funding across 381 deals since 2019.
• Unicorns: There are 31 companies with $1B+ valuations on the list.
• Global Reach: This year’s winners represent 24 different countries across the globe. Forty-three percent of the selected companies are headquartered in the US. The UK comes in second with 12 winners, followed by Singapore with 7. Additionally, some emerging markets stand out with multiple winners this year. For example, India has 3 winners, while Indonesia and Egypt each have 2.

About CB Insights
CB Insights builds software that enables the world's best companies to discover, understand, and make technology decisions with confidence. By marrying data, expert insights, and work management tools, clients manage their end-to-end technology decision-making process on CB Insights. To learn more, please visit www.cbinsights.com.

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Contact:
chris.orlando@cbinsights.com

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Sign up here to be the first to receive the full report once it's published in October 2023:

Recently, Finch commissioned a survey exploring the relationship human resources (HR) professionals have with their tech stacks, specifically the employment systems they use to manage employee data. To get a clear picture of the industry, the survey polled 1,004 HR professionals throughout the United States. The full report will be published in October but, in the meantime, here’s a sneak peek into some of the findings. 

Note: Our team defines employment systems as tools that store data centered around the employee lifecycle. Examples of employment systems include but are not limited to Human Resource Information Systems (HRIS), payroll, benefits, business finance, tax, compliance, and insurance applications.

The Growing Tech Stack: Making the Case for More Connected Systems

In the survey, we found that 49% of HR professionals say they leverage seven or more employment systems of record, inclusive of their HRIS, ATS, benefits administration, payroll, and time-tracking systems. This becomes more complex with larger organizations: 38% of HR professionals whose organizations have more than 1,000 employees report having ten or more employment systems in their tech stack.

While nearly all respondents (97%) say it's important for their employment systems of record to integrate with other tools in their tech stacks, 84% say this connectivity is very or extremely important. Yet, 55% of HR professionals say that between one and six of their tools automatically sync employment data from their systems of record. 

With so many disparate and siloed tools to manage, there’s a strong need for greater connectivity throughout the employment ecosystem. For HR professionals, better system integrations will be the key to boosting efficiency, enabling them to do their jobs more effectively and with more ease.

Wasted Time and Errors Found

Our survey found that 58% of HR professionals spend more than seven hours in employment systems each week. 68% say they regularly or constantly switch between different employment systems throughout the day. 51% of those who toggle between different employment systems admit doing so leaves them feeling overwhelmed, stressed, annoyed, frustrated, or angry.

Interestingly, HR executives spend more time in their employment systems than their workers. Whereas 72% of VP- and C-level leaders say they spend seven or more hours logged in, just 46% of individual contributors say the same. Surprisingly, executives also report spending more time manually entering employment data and toggling between different systems than the individual contributors who work for them.

Not as surprising, 64% of HR professionals say they spend between four to nine hours manually entering data per week. This is somewhat expected and unfortunately accepted in the HR industry given the highly-sensitive nature of information that needs to be inserted into these employment systems. However, these manual processes clearly aren’t meeting the mark when it comes to accuracy: 56% of HR professionals say their team finds incorrect or outdated information in employee data at least once a week.

This data tells us that there’s a huge opportunity to improve the many employment systems that HR professionals have to manually enter data into. 

Security Issues Come From the Top

On the topic of entering data into employment systems, we decided to see how securely HR professionals gather and manage sensitive employment data. We found that the top two channels HR professionals currently use to communicate sensitive employment data are email (65%) and video conferencing tools, such as Zoom or Google Meet (51%).

Shockingly, 41% of HR professionals admit they communicate sensitive employment data via text message or SMS. Findings further reveal the biggest offenders are those who should know better: 50% of HR professionals with Chief Human Resource Officer, VP of HR or Head of HR titles admit to communicating sensitive employment data through text message or SMS. 

While most respondents (68%) admit they’re worried about employment data breaches, a greater percentage (76%) is concerned about complying with data security regulations, with 57% of HR professionals saying they are very or extremely concerned. 70% of those in executive roles such as CHRO, VP or Head of HR say they’re very or extremely concerned about complying with employment data security regulations. In comparison, fewer of those in individual contributor HR roles (39%) express the same high levels of concern about complying with employment data security regulations.

The takeaway is clear: HR professionals need to find a more secure way to share employment data. 

Conflicting Views on AI

With nearly three in five HR professionals already utilizing generative AI technologies, there is a decidedly large awareness of AI’s potential within the human resources field. Yet, notably, there’s a significant disconnect between HR executives and individual contributors when it comes to whether AI technology is actually being used on a regular basis: The vast majority (84%) of HR executives at the VP level or higher (e.g., Head of HR, CHRO, etc.) believe their teams are using generative AI, yet only 34% of individual contributors report doing so.

Meanwhile, views around the impact and implications of AI tools continue to be mixed. While a majority of HR professionals rate artificial intelligence as being both relatively powerful and a competitive advantage, many still perceive AI as being relatively expensive, exclusive, and risky to use. There is also a great deal of fear about the potential of the human resources occupation being outsourced to AI, as indicated in numerous open-ended responses. Yet, where AI takes the HR field going forward remains to be seen.

What’s To Come?

Finch will be announcing the full results of this survey in October, which will include in-depth breakouts of the above data. Interested in seeing the full report once it’s published? Sign up below to be notified.

This survey was conducted online within the United States from June 21 - 30, 2023 among 1,004 human resources professionals, all of whom were employed full-time. 

The vast majority (78%) were team leaders in director, vice president, or c-level executive roles. The other 22% were individual contributors, many of whom specialized in a specific domain within human resources, such as people operations, talent acquisition, or DEI. 

Surprisingly, 63% of respondents were neither remote nor hybrid workers, instead being required to come into the office five days per week.

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Hundreds of employees were just denied life insurance benefits. Finch could have prevented it from happening.

In May 2023, the Wall Street Journal reported that hundreds of families who had diligently paid life insurance premiums were denied millions of dollars in death benefits. This unfortunate outcome stemmed from paperwork missteps made by both employers and insurance companies.

However, this situation could have been avoided with the assistance of Finch’s unified API, which bridges data silos to connect mission-critical employment data. In this blog post, we’ll delve into what happened and how Finch can help prevent such issues from happening again.

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What exactly happened?‍

The report revealed that a leading life insurer had made errors resulting in over 200 denied claims, amounting to as much as $7 million, in recent years. The denial of these claims left families in a distressing situation, as they were rightfully expecting financial support during a difficult time.

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Why were their claims denied?‍

Despite diligently paying life insurance premiums, employees were denied their life insurance benefits due to "paperwork errors" made by their employers. These errors specifically involved the failure to submit "evidence of good health" questionnaires, which are often required for employees to qualify for supplemental insurance beyond the basic coverage. As a result, the life insurance company did not approve the employees for supplemental life insurance, and their claims were denied.

For background, group life insurance is a common employee benefit, with coverage typically ranging from 1-2 times an employee's salary. Employers often offer supplemental insurance beyond the basic coverage, and employees contribute to it through their paychecks. However, to be eligible for this additional coverage, employees must fulfill certain criteria.

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Who's responsible for this outcome?

According to the carrier, the responsibility lies with employers, who must submit the required “Evidence of Good Health” form.

Employers often handle administrative tasks, including the calculation of premiums and ensuring that employees complete the necessary health forms for additional coverage. This allows insurers to offer life insurance to workers at relatively low costs and has been the standard practice for years according to the American Council of Life Insurers.

But doesn’t the carrier also bear some responsibility too? While it may seem logical that the carrier should be accountable for the payouts since they accepted the premiums, the truth is carriers are often encumbered by siloed systems and flawed processes—which lead to clunky and error-prone data exchanges with employers. For example, premiums are often aggregated rather than individually specified in employer-administered programs, making it difficult to link specific premiums to individuals. Furthermore, some carriers only conduct audits when a death claim is filed, rather than beforehand.

The courts say both parties have a role to play in preventing these issues going forward. Carriers must improve communication with employers regarding their responsibilities, and employers must submit the appropriate paperwork on behalf of their employees. In this case, the carrier  has agreed to notify its employer clients that they must confirm the approval of health forms for workers' supplemental coverage before deducting premiums from paychecks. At the same time, if employers fail to fulfill their obligations, they may be held liable for payouts to the beneficiaries.

At the end of the day, it’s about miscommunication between the carrier and employers, and inadequate sharing of data between them. And this problem isn’t unique to this case. Insurance carriers everywhere struggle with similar issues when it comes to collecting and managing data on individuals through their employer. In many instances, even leading insurers don’t have access to the technology they need to effectively tackle these challenges.

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Moving forward, who will be held accountable?

The responsibility for preventing such issues is increasingly falling on employers and their employees. Employers must be more diligent in filing paperwork, ensuring eligibility criteria are met, and obtaining approval for coverage before collecting premiums from employees and forwarding them to insurance carriers.

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Why hasn't this been automated?

Despite the advanced technology we have access to in 2023, the administration of employee benefits still poses challenges. Sharing employee data between systems is still in its infancy and although thousands of apps have been created over the past decade to help employers manage employee data—no underlying infrastructure exists to connect all this data together. In fact, with over 5,700 employment systems in existence today, the market remains highly fragmented, making it nearly impossible for a third-party solution to solve the problem comprehensively.

Consequently, employers are forced to manually enter and transfer employee data between multiple systems. This manual process is time-consuming and prone to error. And to make matters more complicated, each system has its own rules and standards regarding data formats, leading to inconsistencies and compatibility issues when transferring information. As a result, crucial details often fall through the cracks, causing problems such as the denial of life insurance benefits.

Employers need to demand that their HR systems communicate with each other, eliminating the need for manual data entry and ensuring a streamlined process. It's time for the industry to embrace interoperability and leverage its buying power to make automated employee benefit administration a reality.

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How can Finch help solve this problem?

Finch provides the vital infrastructure to connect disparate systems, facilitating secure and efficient movement of sensitive employment data between them. By integrating with Finch, third party organizations like insurance carriers gain direct access to relevant employee data from an employer's systems of record, such as HRIS and payroll software. This connectivity is extremely powerful for companies with the fiduciary duty to report on individual employee evidence of insurability—streamlining the exchange of information, and making it easier for carriers and employers to exchange employee data accurately.

For example, after integrating with Finch, carriers can prompt employers to connect their employment systems of record, granting permission for the carrier to access relevant employee data. The carrier can then automatically pull the required information, evaluate eligibility and approve coverage. Employers can proceed to collect and pay premiums, ensuring employees receive the coverage they are entitled to.

However, it’s important to note that no two implementations ever look the same. That’s why, at Finch, we’re here to help advise.

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What’s the bottom line?

Simple administrative errors shouldn’t be the reason life insurance benefits are denied. And with employment data that’s connected and programmable, they don’t have to be. In fact, everybody wins with effective data sharing. Carriers and employers can both ensure they’ve done their part, reducing their risk of future litigation, and employees get their rightful benefits, at a time when they need them most.

To learn more about how Finch can help prevent life insurance benefit denials, reach out to our sales team.

In a recent webinar, Ansel Parikh, Co-Founder and COO of Finch, demonstrated how a unified employment data API can unlock multiple advantages for insurance providers, including pay-as-you-go premium models, and increase overall operational efficiency.

According to a recent study by Corinium, 65% of insurance executives aren’t fully confident in the data that’s being used for quoting and claims validation. When insurance providers don’t have timely access to accurate data—especially employment data—millions of dollars are left on the table. The problem is, traditional processes to access employment data involve manual, time-consuming tasks and a heavy amount of resources.

That’s where Finch comes in.

On April 4, 2023, Ansel Parikh, co-founder and COO of Finch, led the webinar Insuring a Future: Keep Your Insurance Product Cutting Edge in 2023 to demonstrate how insurance providers can improve operational efficiency, benefits coverage, premium collections, and customer experience through the use of a unified employment data API.

He covered the following topics:

• The definition of employment data
• How employment data is applied to different types of insurance workflows
• How insurance providers access employment data today
• How to automate access to customers’ employment data, specifically the data locked in payroll systems

Below, we provide highlights from the webinar. You can also watch the complete recording by filling out the form below.

What is employment data?

Employment data is the entire scope of information that sits in different systems of record across the entire employee lifecycle.

Employment data includes:

• Employee directory information like name, contact information, date of birth, manager, salary, and start/end date
• Employee income information, including hours worked, salary, wages, deductions, and taxes

Finch focuses on the employment data that's housed in HR and payroll systems. And this information—particularly the granular information in payroll records around individual pay statements, specific deductions, past wages, and tips—has the power to streamline the process of insurance workflows and open up new customer segments for different types of insurance lines.

3 key use cases of employment data for insurance providers

There are three prevalent ways insurance providers can use employment data to innovate their processes:

1. Determining the risk profile of a company to streamline quoting
2. Using employee information, like employment start and end dates, to validate claims
3. Checking if the right premiums are being charged during the policy, based on actual employees and their pay, to unlock pay-as-you-go models

We go further into the details for each use case below.

1. Streamline quoting

The insurance industry is always looking to improve the quoting process for different lines of insurance such as worker’s compensation, commercial, group life, and group health.

Typically, quoting for these lines includes asking prospects to complete 10+ manual forms that require them to log into different systems or pull detailed information like an EIN to find gross wages per employee for the last month. In total, prospects have to input over 25 lines of data—including location details, company information, and employee salaries—just to generate a quote.

This manual labor slows down the quoting process and prohibits the likelihood of conversion.

“We've talked to many insurance providers who see a considerable drop off…when people have to continually fill out form after form after form. At Finch, our goal is to turn it into a 30-second process, where that prospect syncs their employment data instead, specifically the information needed for quoting, [by pulling] it straight from the source of truth,” said Ansel.

Access to this data allows insurance providers to pre-fill many form fields, so they can deliver quotes faster using real-time data from the prospect’s payroll system. Because employment data from payroll systems goes to the IRS every three months, the information has already been validated, helping to produce more accurate quotes in addition to streamlining their delivery.

2. Validate claims

Similar to the quoting process, data collection for submitting a claim is onerous for the policyholder. Claims forms require dozens of different lines of data that need to be self-reported by the employer and the employee, which then have to be individually verified by insurance providers’ claims processing teams. All of that time adds up.

Alternatively, insurance providers can pull this information directly from payroll systems via API, including fields like date of employment to confirm that a claim is being made by a current employee. Having programmatic access to this data helps insurance providers verify claims eligibility quickly, seamlessly, and accurately by pre-filing forms to save time and reduce self-reporting errors.

In other words, when employment data comes directly from the HR or payroll system—the source of truth—it helps insurance providers determine if the claim is valid right from the start. The insurance provider knows exactly who the person making a claim is, that the date of the claim aligns with their actual employment dates, and if they’re even eligible to file a claim, all within minutes.

3. Unlock pay-as-you-go premium payments

When it comes to workers compensation, insurance providers often leave premiums on the table—especially for highly seasonal businesses—by waiting until the end of a policy to reconcile payments. This also creates surprise bills for customers and reduces customer satisfaction.

Alternatively, when insurance providers check to ensure the right premiums are being charged throughout the course of the policy, as opposed to the year-end audit period, they have the ability to change their customers’ payment structures when appropriate.

For example, if a ski resort’s policy starts in the summer, underwriting is based on the number of employees they have during that time. It takes a full-year cycle and a premium audit to notice the number of employees increased three-fold during the winter months. As a result, risk is mispriced, the ski resort doesn’t pay an accurate premium for their policy, and they receive an unexpected bill after the audit to shore up costs.

When insurance providers have the ability to unlock a pay-as-you-go model, real-time employment data creates more accurate premiums and more efficient cash collection throughout the policy’s term without mispricing risks for a large chunk of the year. Premiums can be adjusted as the risk profile evolves, the policyholder doesn’t receive surprise bills, and customer satisfaction increases. This becomes especially important during the renewal cycle, when insurance providers are looking to retain customers.

A pay-as-you-go program that utilizes automated employment data feeds provides a more efficient, cost-effective, and accurate solution for insurance providers, agents, and policyholders.

“When [employment] data is accessible, and the process is streamlined, it reduces friction for the policyholders’ renewal. The data also is processed in a much more standardized, ingestible format. But what’s most exciting about this pay-as-you-go model is that policyholders love it. It allows them to have more working capital, and that’s incredibly valuable,” said Ansel.

However, as valuable as employment data can be across the policy lifecycle, it’s a major problem to access this information even today.

What is the main challenge of accessing employment data?

The main challenge of accessing employment data is market fragmentation. There are over 5,700 HR and payroll systems being used by U.S. businesses today, and the top 10 payroll systems only account for about 55% of the market.

So, even if an insurance provider integrates with all 10 of these systems, the employment data of almost half of businesses in the U.S. would remain inaccessible. Ensuring proper coverage of an insurance provider’s target market means integrating with hundreds of HR and payroll systems. That’s no small feat.

3 ways insurance providers try to access employment data

There are three different ways insurance providers try to gather information from HR and payroll systems:

Build individual integrations one by one

The problem is, individual builds take up a lot of engineering resources, costing hundreds of thousands and even millions of dollars over the life of the integration.

“We've seen teams spend over a year just to build one integration, but then you still have to maintain that integration for the future. That’s a consistent resource drain,” said Ansel.

Set up a secure file transfer protocol (SFTP)

Other times, insurance providers will get customers’ IT teams involved to set up an SFTP. This means that the systems involved need to exchange flash files, which usually leads to a configuration problem, because every system has a different format.

“You're introducing a ton of friction for every single customer in order for them to share the key information you need to streamline these workflows,” said Ansel.

Manually upload different data sets

Asking customers to manually upload employment data from their HR and payroll systems isn’t just labor intensive. Manual uploads introduce more risk because there’s a chance that the data isn’t up to date. It also increases the chances of people misreporting data, not out of malice, but because the process itself lends itself to human error.

None of these options create seamless experiences for insurance providers or their customers, who expect systems to be able to talk to one another.

The top benefits of an employment data API

APIs allow secure data transfers between two or more systems to happen in real time, and different kinds of APIs exist to serve different datasets. An employment data API provides secure access to sources of employment data: HRIS and payroll systems. And they do it with a single integration, so it’s as easy for customers to transfer data as it is for them to sign into their payroll accounts.

Utilizing an employment data API like Finch for integrations leads to substantial material benefits that can boost return on equity (ROE).

Improve efficiency and reduce operational costs

Integrating with Finch’s standardized API schema unlocks programmatic access to hundreds of HR and payroll systems. Compared to building one-off integrations in-house, the time and cost savings are tremendous.

One Finch client, for example, now has direct employment data connections with more than 3,000 of their customers, and they were able to reduce their development costs by 75% by aggregating that access through Finch instead of building those integrations one by one.

Save on support resources

Without an API, accurately syncing data between systems via SFTP or manual uploads often requires an investment of at least 1.5 hours in support calls and dedicated support team resources to walk customers through the specific syncing instructions for different payroll providers. These approaches don't scale well, and they divert insurance providers’ resources away from core objectives like driving ROE and renewal rates.

In contrast, setting up API-enabled employment data feeds is quick and easy, reducing the number of support inquiries that policyholders make and requiring less support resources.

Unlock new customer segments

By allowing insurance providers to offer more customers seamless quoting, onboarding, and claims experiences, universal employment data APIs like Finch increase insurance providers’ potential to unlock new customer segments.

“There's a halo effect of saying, ‘I'm compatible with your payroll system,’ because customers trust that payroll system for very core pieces of information and operations. Your association and compatibility with that system extends that credibility to your product. Potential customers are more likely to trust your product because it talks to systems they already trust,” said Ansel.

Improved accuracy, transparency, and risk management

Unlike manual data entry, which is prone to human error, automated employment data feeds via API allow for improved data accuracy and visibility, both of which are crucial to the calculation of workers’ compensation premiums and claims payments. In turn, insurance providers can better manage risk and make more informed decisions.

A working example: Finch and InsurePay

InsurePay is a technology company that offers a cloud-based payment platform for workers' compensation insurance premiums. Their platform integrates with insurance providers, payroll providers, and brokers to automate and simplify the premium calculation and payment process.

Finch’s API ensures data is flowing compliantly and securely from the policyholder's payroll system of record to InsurePay as well as the insurance provider.

“We enjoy partnering with InsurePay, because they understand all the different pieces of the policy lifecycle and where improvements can come from. InsurePay wanted to partner with Finch, because we understand the value of automating payroll connectivity and unlocking a pay-as-you-go model,” said Ansel.

How Finch serves insurance providers

Our goal at Finch is to simplify access to HR and payroll systems with one simple, streamlined integration.

With Finch, insurance providers can map to one unified data structure, capture more edge cases, and expand their integration network anytime we add a new system. We’re singularly positioned to provide insurance providers with mission-critical infrastructure for employment data across a wide range of verticals, including read-and-write compatibility with 200+ HR and payroll systems used by more than 88% of U.S. businesses.

To learn how Finch can serve your insurance product, reach out to our team or have your developers sign up for a free account to begin building Finch today.

To learn more, visit tryfinch.com.

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Health and wellness benefits in the United States are at an inflection point. And if you’re a health and wellness benefits provider, that puts you in a favorable position.

The reason? Converging factors have prompted many employers to reconsider their approach to benefits–not only to entice great employees but to help existing employees stay healthy and productive. Among them:

• Changing expectations around the types of benefits employers should provide
• “The Great Resignation” and the unique bargaining power it has afforded workers
• The prioritization of core health benefits, mental health benefits, and telehealth benefits in light of the COVID-19 pandemic

Meanwhile, employers also continue to face old problems like outdated benefits management systems, costly and time-consuming manual processes, and health benefit underutilization.

To gain traction and earn market share, emerging and established health benefits providers can use integrations with payroll and HR systems to create best-in-class health and wellness benefit experiences that help employers meet their complex needs and mitigate some of their most pressing issues.

A trend toward technology

A review of employers’ attitudes around benefits technology suggests that the time is ripe for integrations.

Studies show that employers are demonstrating an increased willingness to pay for digital initiatives. According to a recent survey, spending on HR and benefits technology grew 15% between 2017 and 2021, with 70% of employers reporting a renewed focus on benefits technology following the pandemic.

Reports also suggest employers are intrigued by the power of data and how it can help them optimize their HR functions. In fact, 76% indicated they would consider sharing basic employee information with insurance providers in order to create more personalized, tailored health benefits experiences for their workers.

Integrations for the win

With employers receptive to data’s potential and poised to pursue new benefit technologies, health benefits providers would be smart to use integrations to help address some of employers’ most pressing wants and needs.

Here are just some of the ways that integrations can serve your customers:

1. Automated enrollment and benefits management

Historically, processes like benefits enrollment and payroll deduction changes have been time- and labor-intensive for both employers and employees. With integrations, enrolling an employee in any benefit takes just a few clicks–no manual paperwork required!

Integrations also allow you to push information to payroll and HR systems, making tasks like payroll deduction changes practically friction-free. In short, manual tasks that once took days or weeks and a lot of effort can now happen in minutes.

2. Higher benefit utilization

Ask almost any employer and they will say achieving high utilization rates for key health benefits like health insurance, HSAs, FSAs, and employee assistance programs (EAPs) is a struggle. Studies suggesting that one in three workers would rather talk about their weight than their employee benefits and others that show average EAP utilization does not exceed 10% support their anecdotal claims. Workers not taking advantage of the benefits they’re entitled to might put them at increased risk for worse health outcomes and financial hardship. For employers, underutilization can mean higher premiums and tax bills.

Part of the problem seems to be that many legacy benefits systems were not designed with user experience in mind. If a system is difficult for HR teams and workers to navigate or unpleasant to engage with, utilization will suffer. Benefits education is another issue, with 68% of employers calling it “a challenge,” and 37% believing that employees don’t understand the value of benefits well enough to justify the cost.

Innovative benefits providers know that integrations are a key component of good product design. By making it simple and seamless to onboard new employers and manage workers’ benefits (i.e., no more CSV files), integrations contribute to an all-around better user experience, which can help employers realize improved utilization rates, healthier and happier employees, and cost savings.

Take HSAs as an example. Because integrations make it easy for HR teams to enroll an employee in an HSA and manage their HSA payroll deductions, more employees are likely to take advantage. In turn, employers can realize lower HDHP premiums and lower FICA taxes.

3. More insights and personalization

From their social media feeds, to their Netflix recommendations, to their subscription cosmetic boxes, Millennial and Gen Z consumers are accustomed to being catered to with highly personalized experiences, and they’re bringing those expectations with them to the labor force. In response, employers are looking for ways to offer more tailored health benefit experiences to their employees, and they are willing to trade data to get there.

Integrations allow that exchange of data to happen securely, seamlessly, continuously, and in real time, so innovative health benefits providers can build the next generation of custom benefits experiences. As a bonus, integrations can also provide benefits providers with granular visibility into how benefits are being used (or not) across customers and systems, making possible data-substantiated strategies for improving engagement and utilization.

4. Better benefits packages

Offering attractive benefits is a research-backed strategy for finding and retaining talent. At a time when there are nearly 11 million U.S. job vacancies and workers are quitting jobs in droves, employers are starting to evaluate the benefits they offer and look for ways to improve. In today’s climate, that means offering things like mental health assistance and telemedicine services but also focusing on the quality of core health benefits like insurance, HSAs, and FSAs.

This is especially critical in a country like the United States, where employer-sponsored health insurance is not a given. In fact, among businesses with 10 to 24 employees, only 52% offer health insurance. In the case of businesses with fewer than 10 employees, that number drops to 23%.

By automating countless health benefits tasks and processes, integrations free up time and help employers reduce administrative costs, making it possible for employers to offer more and better benefits to their workers. This is especially true for small businesses, who generally don’t have the bandwidth to manage traditional HR packages in house. Consequently, if a benefits provider makes it easy (with the help of integrations), offering health insurance can suddenly become feasible. And with 46% of workers saying health insurance strongly influenced their decision to accept a job, the ROI to employers is practically assured.

5. Employee retention

Integrations can also aid in worker retention. In fact, 56% of workers reported that the quality of their employer-sponsored health coverage is a key factor in their decision to stay at their job.

However, there might be something else at play as well. By automating tasks that were once the purview of internal benefits administrators, HR teams have more time to allocate to the human side of human resources–that is, helping individual employees not only understand and engage with their benefits but also develop professionally and grow in their careers. In turn, employees are more likely to feel seen and valued, and that can be reason enough for anyone to stay put.

The build vs. buy debate

In summary, integrations are essential to building industry-leading benefits products and services for your customers and their employees. But being responsible for your own integrations is a mammoth undertaking. The payroll and HR management systems industry is so fragmented (5,700+ providers - read our whitepaper here) that you would need to build and maintain dozens (if not hundreds) of integrations just to cover your total addressable market–not to mention, figure out how to properly scrub and standardize the data input and properly format it for consumption. Talk about a distraction from your core competencies.

The better solution is Finch, which provides integrations to major and boutique HR-management and payroll systems like QuickBooks, ADP Run, Workday, and Paylocity via one universal API. Finch unifies access to and smoothes over the differences among these systems to support many innovative use cases. And as we add new systems to our coverage network (which is always), you can turn them on in one click.

How Finch works

On the front end, Finch presents as a friendly, intuitive module that lets employers grant your application secure, instant, and regulation-compliant access to their payroll and HR systems. The process takes less than 30 seconds:

• Finch asks your user to link their payroll or HR system.
• Your user finds their system and enters their login credentials or API keys.
• The connection is established.

The connection allows your application to read information like census data, which streamlines onboarding and enrollment, as well as write information like contribution and deduction adjustments, which streamlines benefits management.

Basically, Finch makes innovation possible for health benefits providers that want to disrupt an industry that clearly stands ready for change.

But don’t just take our word for it

Learn how Finch is making it possible for Lane Health to offer first-of-their-kind, tax-advantaged loans to workers with HSAs–saving both Lane Health and its customers time and money in the process.

Want to know more about integrations for health benefits?

Click the black Request Access button in the upper-right of this webpage to submit a question or ask to see our API documentation.

By not dividing your team’s attention between your core product and the ancillary technologies that support it, you can build smarter, get to market faster, and create an exceptional experience for your customers.

As an innovative retirement benefits provider, you already know that the retirement benefits industry has room for improvement. Legacy business models and outdated management systems are prevalent and prohibitive–serving as barriers, in many cases, to employer and employee adoption.

Consider the numbers. Some 68% of private-sector workers have access to retirement benefits through their employer, and, of them, 51% elect to participate. At first blush, the data doesn’t seem half bad. However, it belies the fact that more than 38 million workers aren’t being offered retirement benefits at all, and 40 million more aren’t opting in for one reason or another. Meanwhile, among those who do participate in a retirement plan, more than half are behind on their retirement strategies, either because they aren’t contributing enough or they’re raiding their plans in times of emergency.

This statistic also obscures the reality that access to retirement benefits is far from inclusive. In service industries, for example, workers with employer-sponsored plans drops to 40%, and in some verticals, like restaurants, it’s as low as 18%.

Clearly, something’s not working as it should. When you couple that with employers’ struggle to attract and retain employees and the challenges of remote and hybrid work models, the need for viable HR technology solutions in the retirement benefits space is apparent.

A product-led approach

While there’s no one solution that will address every issue, focusing your efforts on building a best-in-class platform for your customers is a great place to start. The reason? HR professionals are overwhelmed by the tedious transactional tasks associated with retirement benefits management and consider it one of their most pressing challenges. That makes retirement benefits ripe for digital disruption. In fact, HR leaders are more likely to realize benefits from HR technology when it’s applied to benefits administration than any other HR function.

Staying ahead of the pack is another reason. Whether you choose to optimize your retirement benefits platform or not, your competitors certainly will. The HR tech market is booming, and that means next-generation benefits solutions–with best-in-class platforms–are regularly hitting the market.

Synced is superior

At its core, a best-in-class retirement benefits platform is a connected one, meaning it can exchange information with employers’ HR and payroll systems (e.g., Paychex, ADP RUN, Gusto), for a highly synced, coordinated, and automated benefits management experience.

From onboarding and enrollment to deduction management and compliance reporting, a well-connected platform–one with sophisticated software integrations–minimizes friction at every step of the benefits lifecycle, alleviating your customers of their benefits management burdens and making engagement with your platform an enjoyable and reliable experience. In turn, you realize higher employee participation and contributions.

In-house inefficiencies

Chances are, this is not new information to you. You’re probably building or already have built integrations with market-leading HR and payroll systems. At the same time, you’ve probably experienced one or more of these common headaches along the way:

• Maintenance difficulties
  No matter how successful your initial build-out, integrations are bound to break at some point, whether due to a system change on your end or the data source’s. Staying on top of and solving for these changes is a full-time job that your team doesn’t have the bandwidth to handle in a reasonable timeframe –  they’re too busy focusing on your core product. Ultimately, it’s your customers’ experience that suffers.
• Ongoing costs
  In addition to taxing your team’s time, integrations come with a heavy price tag when you consider the average salary of your employees and the hours they spend building and maintaining your connections. In some cases, an initial build-out can cost $300,000 or more, not including upkeep. There are also opportunity costs to consider; how much more could you accomplish and how much faster could you get to market if your team’s attention wasn’t split between your product and the ancillary technologies that support it?
• Suboptimal performance
  Then there’s functionality. The more integrations you build, the more difficult it becomes to get them to work optimally for your purposes. That’s because disparate data sources have different data models, and each source value has to be mapped to a target data field to make it operable for your system. The more source values you’re working with, the more complicated things get. If mapping is not done correctly, it can end up requiring a lot of manual interventions. What’s more, unless you have an integrations specialist on staff, it’s unlikely that your team has the niche expertise to optimally enrich the data you retrieve for your particular use case. In other words, the data you’re accessing isn’t reaching its potential.

Outsourced and optimized

So, how do you leverage the very best of system integrations and all the benefits they offer your customers while avoiding the pitfalls that come with in-house build outs and maintenance? The answer is outsourcing.

In a fragmented industry with 5,700+ employment systems, outsourcing your integrations saves time and money. Instead of building integrations with dozens of payroll systems yourself, an integration partner does the work for you, while also providing ongoing support and maintenance. This outsourced infrastructure lets your team focus on fine-tuning your product, executing your roadmap, and creating the best user experience possible.

That said, the right integration partner won’t just relieve you of headaches; they will add extraordinary value to your platform. For that, you need a use case specialist.

Benefits specialists > data generalists

Say hello to Finch, the only integration platform solely focused on connecting applications to their employer clients’ payroll and HR systems. This means all of our efforts are spent optimizing and scaling integrations to cover all the edge cases relevant to your business.

Finch offers a unified API with 360° integrations into an ever-growing list of HR and payroll systems (125 at the time of publication). In this context, 360° means  read and write access, so you can pull census and pay statement information as well as push payroll deductions depending on employee contributions. Since Finch abstracts away inconsistencies across systems, all these actions can be accessed through a single set of endpoints.

Aside from streamlining technical workflows, Finch offers high-touch support, ensuring any issues are dealt with swiftly and, most importantly, without intervention from your team.

From 30 days to 30 seconds

Perhaps the most immediate benefit of Finch is the hyper-streamlined onboarding it enables. With Finch, it only takes a moment for customers to authorize you to retrieve and send data from and to their payroll and HR systems. Here’s how:

• Finch Connect (our secure front-end modal) prompts your customers to choose their payroll or HR system.
• Your customers authenticate their account and authorize a set of permissions by entering their admin or API credentials to that system.
• The connection is established, and you start reading and writing data.

That’s all it takes. In seconds, you have what you need to begin enrolling employees in retirement plans and managing their payroll deductions.

Automated onboarding and compliance

Once you’re connected, you can access live census data to streamline onboarding and offboarding of eligible employees. From day one (or the first day they can participate), you’ll have their key contact information, location, and worker status to ensure they can start contributing to their retirement as soon as possible. Similarly, when someone is no longer employed or eligible, you can offboard them from the system automatically and transition their account to a non-employee access so they can still manage the plans they do have.

For retirement benefits applications that also act as recordkeepers, you can access current and historical pay statement details down to the line item to ensure proper tracking of all contributions (pre and post-tax), enrollments, and TINs required to comply with IRS regulations.

End-to-end deductions management

Now that employees are onboarded, you’ll want to make sure they start contributing to their retirement goals with their first paycheck. You’ll need to create benefits, enroll participants, and make changes directly in payroll as their retirement savings plans shift.

Using Finch’s Benefits endpoint, you can create benefits (pre-tax, post-tax, recurring, one-time deductions), enroll individuals to one or many benefits, and select their $ or % contributions with employer matches where applicable. Throughout this whole process, the sponsor’s HR admin doesn’t have to lift a finger to upload deduction files or manually enter changes. That can amount to hours per month saved and dozens of potential human errors avoided.

Onward and upward

Best of all, Finch is dynamic, responsive, and built to scale.

For new edge case systems that come up in customer conversations, Finch can unlock support in as little as two weeks. That means, on the off chance you’re trying to land a customer that uses a system not yet covered by Finch, we have a gameplan to expand coverage so you don’t lose a sale.

Finch is also designed for large-scale synchronization with tens of thousands of employers, from small startups to massive public companies. Our team has accumulated expertise in constructing mission-critical infrastructure over many years, enabling us to surface large quantities of sensitive information reliably and securely.

Want to know more about integrations for retirement benefits?

Click the black Request Access button in the upper-right of this webpage to submit a question or ask to see our API documentation.

The employment landscape is undergoing dramatic changes, and data integrations are crucial to keeping pace. But maintaining them in-house is a drain on your resources and a distraction from your core competencies. Here’s what to do instead.

Not so long ago, it seemed like all it took to earn a reputation for a great work environment was a few ping pong tables, some quirky seating arrangements, and a gourmet cafeteria. Then COVID-19 happened and the story changed dramatically.

Now, old standards have given way to new expectations about what it means to provide an exceptional workplace. For employee engagement platforms, it has been a clarion call, prompting innovative players to build next-generation platforms that solve the challenges employers face today and are predicted to face going forward.

One aspect of great platform design is integrations. They are foundational to best-in-class functionality and user experience, but not all approaches to integrations are created equal. In this blog post, we’ll cover how to approach integrations more efficiently and effectively, so you have greater bandwidth to focus on your platform’s core technologies and deliver a superior experience to your customers and their employees alike.

But first, let’s talk landscape

To understand how and why integrations are so important, we have to consider the current state of affairs. It likely goes without saying that COVID-19 and the concurrent social and political movements of the past few years have seismically changed aspects of our collective work life in ways that fundamentally impact how employers approach people management and employee engagement. Some of the most important include:

A shift in the power balance

We would be remiss not to mention what you probably already know: workers are quitting and switching jobs at record rates, or leaving the workforce entirely, and there are now more available jobs than there is talent to fill them. Experts don’t expect the tide to change anytime soon. While many employers are responding to the pressures by offering higher salaries and wages to new hires, an effective, longer-term strategy may be investing in a “sticky” workplace culture—one marked by regular, effective communication—that promotes employee retention.

The rise of remote and hybrid work models

Office closure mandates at the onset of the pandemic forced many employers to allow employees to work from home, and it seems employees have come to favor the arrangement. According to recent polls, 45% of full-time U.S. employees continue to work remotely all or some of the time, including 67% of office workers. Of them, 91% would like to work at least some of the time from home even after the pandemic fully subsides, with 30% disclosing that they are extremely likely to seek a different job if they lose their option to work remotely.

Another factor to consider is that remote and hybrid work models can mean fewer friends in the workplace, which can lead to weaker emotional ties and less social pressure to stay with a company. Moreover, without any geographical constraints, remote workers have a wider pool of employers and job opportunities to choose from, making it easier to find alternative work. As a consequence, employers who don’t develop viable solutions to manage, engage, and build connections among remote talent not only risk operational inefficiencies, they also risk losing valuable employees.

Higher DEI standards

As activists continue to bring renewed and revolutionary attention to issues of racial and gender justice, employers are being called on to look critically at their own diversity, equity, and inclusion practices and execute proactive, ongoing plans to remedy their gaps and shortcomings. Many, it seems, are heeding the call. A recent analysis of S&P 500 earnings calls found that CEOs have discussed DEI 658% more frequently since 2018, and 40% of organizations report having hired a DEI specialist, the majority of which were added to their rosters in the past year and a half. As a result, DEI initiatives will naturally extend to employee engagement strategies, including measures like surveying employees on DEI issues, tracking and analyzing measures of workplace diversity, and instituting inclusive career growth paths and coaching opportunities to ensure everyone has the same access to success.

An emphasis on mental wellness

The collective and individual trauma and stress employees have experienced in recent years has had a toll on their mental health, making it more clear than ever that employers can no longer afford, from an ethical or financial standpoint, to ignore the overall wellbeing of their workforce. As talking about and seeking help for mental health challenges becomes increasingly normalized, especially among younger generations of workers, employers are increasingly expected to not only provide resources and benefits to support employees in crisis but also cultivate an environment that supports employee mental health. According to one study, employers (and the employee engagement platforms that serve them) would be wise to focus on reducing job boredom and monotony, supporting employees’ work-life balance, improving workplace communication practices, and fostering connections and networks of support among colleagues and managers.

These trends and others have led thought leaders to call for a large-scale humanization of the workplace. Now more than ever, employers should create opportunities and leverage technology to drive connections, inspire creativity, and help individual workers achieve their potential.

The role (and challenges) of integrations in employee engagement

Clearly, this new world order presents a litany of challenges for employers, and employee engagement platforms are working to deliver best-in-class solutions and experiences that address those pain points.

For many employee engagement platforms, this includes integrating with employers’ HR and payroll systems (e.g., Workday, ADP, etc.) to automate data connectivity and unify data across disparate sources as a means of reducing friction and optimizing the performance of their product.

But integrations are not without challenges, especially if you choose to build them in-house. For starters:

They’re expensive

It takes many engineering hours to build one integration, let alone the dozens or hundreds required to connect with systems in highly fragmented markets like HR and payroll software, where some 5,700+ systems have shares (check out our whitepaper on the landscape here). When you consider the average salary of an in-house developer, you’re looking at an investment of hundreds of thousands of dollars, excluding the considerable and ongoing expense of maintaining integrations over time (a full-time job unto itself).

They’re a distraction

All that time spent on integrations is time your team isn’t spending on your core technology—a huge opportunity cost. How much more could you accomplish and how much faster could you get to market if your team’s attention wasn’t split between your product and the ancillary technologies that support it?

They’re hard to do really well

If integrations aren’t in your team’s wheelhouse, your integrations are likely not functioning as well as they could be. That’s because different data sources have different data models, and each source value has to be mapped to a target data field to make it operable for your system. The more source values you’re working with, the more complicated things get, and if mapping is not done correctly, it can end up requiring a lot of manual intervention to make right.

Then there’s the issue of data enrichment. It takes a specialist to add value to the data you retrieve and make it optimally usable and actionable for your particular use case. In other words, it’s likely that the data you’re accessing via in-house builds isn’t reaching its potential.

Outsourcing your platform’s integrations enables you to take advantage of all the benefits while avoiding these common challenges.

One API, dozens (and dozens) of integrations

Innovative employee engagement platforms looking to build best-in-class experiences and get to market faster turn to Finch—the only integration partner focused on HR and payroll systems via the employer access point.

Finch works via a single, universal API that offers 360° integrations with an ever-growing network of HR and payroll systems (125 at the time of publication), so you can cover more of your addressable market than ever before.

By building your platform on the Finch API, your customers can authorize you to retrieve data from their payroll and HR systems in just a few clicks. Here’s how it works:

• Finch Connect (our secure front-end module) prompts your customers to choose their payroll or HR system.
• Your customers authenticate their account and authorize a set of permissions by entering their admin credentials to that system.
• The connection is established, and you start retrieving data.

That’s it. With Finch, what was once a 30-day process of tedious CSV file uploads, phone calls, and back-and-forth between your support team and your customers is reduced to 30 seamless seconds.

From there, you have access to your customers’ entire employee roster and dozens of data attributes per worker (e.g., hire date, job title, work and home location), allowing your customers to start using your platform immediately.

Not only does that save you time and improve your lead conversion rates, it’s a selling point to customers, who can be easily deterred by a drawn-out onboarding process.

And because the data connection is continuous, your platform is automatically apprised of new hires and other changes in end-user work status. In turn, your platform also makes onboarding and offboarding your customers’ employees easier, faster, and more automated. That can pay dividends for your customers, as studies show that strong onboarding processes improve employee retention by 82 percent.

Additional benefits

The advantages of using Finch don’t stop there:

• We standardize data across our entire coverage network and output it in a unified format for optimal usability, saving you from the hassle of having to worry about the intricacies of your customers’ (many) HR and payroll systems.
• Our API is dynamic and built to scale, which means we can respond swiftly to new edge case systems and unlock support in as little as two weeks, ensuring you never lose a sale because of lack of coverage.
• Finch is designed for large-scale synchronization with tens of thousands of employers. We surface large quantities of sensitive information reliably and securely (check out our Security page for more information).

Last but not least, we handle all upkeep and maintenance of your integrations, so your team can focus on what you do best—helping employers cultivate engaging, connected, and productive workplaces, no matter what the world throws their way.

Want to know more about integrations for employee engagement platforms?

Click the black Request Access button in the upper-right of this webpage to submit a question or ask to see our API documentation.

The Finch advisor and former HCM (Human Capital Management) exec shares his wishes and predictions for the industry he helped shape over the last two decades.

Two years ago, Craig Cohen left his position as general manager at ADP Marketplace for the world of e-commerce. Despite the leap, he’s still very much invested in HCM, both as a financial backer and an impassioned thought leader. He’s also a valuable member of Finch’s advisory board, who has been instrumental in helping us identify our priorities.

We recently caught up with Craig to talk about the state of HCM, including a requisite pandemic analysis and the industry change he’d most like to see.

You left ADP for WooCommerce just before the pandemic hit. Looking back, where do you think HCM was headed and how did the pandemic affect that trajectory?

It was like an asteroid hit and pushed everything in another direction. I think the big focus before the pandemic was, how do I find the best people? What incentives and wellness programs can I offer? Then the world changed. People became entrepreneurs. They realized they can work from home and start their own businesses. I think that people also lost their attachment to their employer. They really started to ask, is this the right company for me?

What's happening now is that the HCM tech base has changed. It's become much more about, how do I evolve to support and keep my people that are amazing? What can I do to make sure that they're productive and successful in the world we live in? And the last piece of that is about providing connectedness. How do we build relationships when we're not in the office together? It’s a huge shift, and the HCM ecosystem is getting bigger as a result.

It sounds like HCM has stepped up to meet the challenge. In what areas, though, is there still room for improvement?

There’s a need to make systems talk together. You don't want a situation where a user has to log in to seven different accounts to enter the same piece of information. So, I think data and data communication is the number one thing.

Do you think the need for connectivity is a given at this point, or are there players that still need to be convinced?

I think the HR people within the organization get it, and I think that the data people in the organization get it. At the same time, the C-level is worried about the top and bottom line. They haven’t seen the benefit yet. So, I think that the HR and the data information people need to have a bigger seat at the table to talk about the Great Resignation and how to get the tools and data they need to create positive experiences for employees. I think leadership needs to better understand that there is a trickle down effect that happens when you have an employee who is not satisfied with their overall experience within the organization.

What will it take to get to a place of widespread acceptance?

It’s interesting, because single sign-on has been around for a while, and everybody appreciates the instant gratification of it. We need to arm HR teams with information that shows what that impact is to the organization. The more tools and resources we can give to them, the quicker change can happen.

As you look to the future of HCM tech, what do you see?

What's happening today is you have big HCM companies—the ones that everybody knows—that took their technology from premise based to cloud based. And as their APIs continue to evolve, it allows more fields and more information to be transmitted, which creates new use cases and new opportunities for growth. So, I think it's a combination of education, like I mentioned earlier, but I also think API technology transformation needs to happen to a certain degree—to allow for new use cases that people are looking for.

You’ve talked about API maturity in the past. Why should HCM stakeholders care about API maturity?

If you think of an API as a pipe with a lot of different cords going through it, then what I mean by API maturity is that someone is making that pipe, but they're only putting 20 cords in it, when it could be 45. And if you want to go in and build out those additional cords, there are implications at various points in the pipe. That's the reason people are scared to make a lot of changes to their APIs, because it could have a significant impact on employee records. You have to be really careful. It could break an area you don't even know about. It takes a lot of testing, there's security layers on top of it, and there's a lot of things that could happen illegally, too. The result is that you have smaller companies that are more willing to take the chance to do something innovative. Then you have enterprise companies that have been around for 50 or 60 years, and they're susceptible to lawsuits, so they're a lot less willing to take the risk that comes with change.

What excites you about HCM’s future?

I believe in the HCM ecosystem; that is my biggest passion. I truly believe that companies are going to go to one HCM company less and less. At one point, the stats showed that an enterprise company touches something like 80 different sources, a mid-market company touches 40, and a small business touches 13. I believe that is going to shift up, especially as you add in wellness apps. Small businesses will touch 20 to 30. Mid-market will go to 80. As that happens, you need the data to flow. Otherwise, you're going to have to hire more people—data pushers—in the HCM space. Something like 56% of HR's manual tasks can still be automated. I think that's where Finch comes in. How do I make everything work together seamlessly, safely, and securely?

What’s your wishlist for the HCM ecosystem?

I would love to see better reporting on the back end. I know there's Tableau and others, but every one of those companies has their own reporting. As you build the ecosystem, you've got to go to this one for a report, and you have to go to that one for a report. I really think that there ought to be one place where you can grab all that data and figure out the overall impact of benefits to your company—how it impacts your turnover and hiring.

Why do you think you developed such an affinity for HCM?

As a sales leader, I spend 50% of my time hiring, onboarding and training, and the other 50% of my time retaining, which is all about motivation, inspiration, leadership, and coaching. These things impact me every day, and the HCM space touches all of that.

Which begs the questions, why did you decide to go into e-commerce?

My career in HCM was about the employee experience and how it impacted people's everyday lives. I saw a correlation between that and my work now, which is about impacting the buyer's life. If I can create a great experience for a mom-and-pop shop, a mid-market shop, or even an enterprise shop to give a great customer experience, so that people aren’t always buying through Amazon, then I have succeeded.

Learn more about HCM connectivity solutions.

To start building with Finch, enter your email address on our homepage here to get API keys today.

How to build a best-in-class learning management system experience with Finch

Since 2020, the pace of experiences going virtual has snowballed – corporate learning and development (L&D) is no exception. Coupled with pressing talent concerns, L&D leaders across industries and verticals are poised to invest in learning management systems (LMS) that meet their need to remotely onboard, train, reskill, and upskill while also solving for their pain points around administration, organization, and analytics. Learning management systems that prioritize exceptional experiences for LMS admins and learners stand to come out on top.

One element of creating a best-in-class LMS experience is payroll and HR integrations. By connecting to the software employers use to manage their workforce, learning management systems can unlock product functions and features that set new bars in the LMS category.

In this blog post, we’ll discuss the L&D pain points HR and payroll integrations alleviate and how you can leverage them to optimize your own LMS platform in ways that meet or exceed your customers’ expectations.

The L&D landscape

Before we do, let’s dig into the mindset of your customers with a brief overview of the corporate L&D landscape, which is taking on new importance in the wake of COVID-19 and the social and economic forces defining our current reality.

For one, companies are struggling—both to keep employees motivated and to close skill gaps internally without resorting to expensive (and often unfruitful) talent recruitment initiatives. They’re also responding to demands to improve the DEI fluency of their teams and foster an authentically inclusive workplace culture. Then, there’s the growth of remote work and the need for virtual onboarding and training solutions to replace in-person experiences.

At many companies, L&D has been expected to bear the brunt of these challenges and more, earning L&D a place among c-suite priorities. The numbers bear this out:

• 72% of professionals polled agree that L&D has become a more strategic function at their organization.
• In Q3 2021, demand for L&D specialists grew 94% compared to Q2 that same year.
• 48% of L&D leaders worldwide, including 51% in North America, expect their budgets to increase in 2022—a six-year high.

Unsurprisingly, L&D teams are feeling more pressure to deliver on performance as well as more demands on their time. A recent survey found that the number of different L&D initiatives being deployed in 2022 has increased across the board, stretching L&D professionals thin.

To cope with their growing pains, L&D teams are looking to technology. Perhaps more than ever, they expect LMS solutions to save them time, drive learner engagement, and offer analytics that help them deliver the results they’ve been tasked with achieving.

L&D pain points

Specifically, L&D professionals are concerned about three key areas of LMS functionality and performance:

• Admin time: L&D professionals want to spend fewer hours onboarding employees into learning management systems, enrolling them in courses, and managing and tracking their progress.
• User adoption: To meet their objectives, L&D professionals need an LMS that employees want to use and do use. This is usually a function of an LMS being easy and enjoyable to navigate and engage with.
• Analytics: It’s critical for L&D professionals to be able to view and assess the impact a particular course or learning module is having, so they can adjust their approach accordingly, report on progress, and prove their value to leadership teams.

Enter integrations

An important element of solving these pain points for your customers is HR and payroll system integrations.

When you integrate with your customers’ HR and payroll systems, your LMS has access to their full trove of employee census data like name, job title, department, location, and much more. In turn, you unlock numerous opportunities to make your product more effective and efficient in ways that meet and exceed your customers’ expectations.

Here are just some of the ways HR and payroll integrations help you build a best-in-class LMS experience for your customers:

• Admin automation: With access to employee census data, HR and payroll system integrations make it possible to build numerous features that take the manual work out of tedious tasks like onboarding users, program invitations, course enrollments, compliance tracking, and user deactivations. Instead of requiring L&D professionals to enter and manage this information themselves, or upload and reconcile clunky CSV files containing sensitive employee data, integrations pull the data instantly and output it in a normalized, actionable format for your LMS to consume and leverage.
• Optimal engagement: In retrieving data like job titles, department, and location, HR and payroll integrations provide the visibility your LMS needs to create hyper-personalized journeys that are tailored to the skill sets, interests, seniority, and location-specific compliance requirements of your customers’ individual employees. By offering employees an experience just for them, they are more likely to enjoy and complete courses and modules, and L&D professionals are more likely to be satisfied with the engagement rates your LMS generates.
• Valuable insights: The data that HR and payroll systems unlock can be used to identify correlations between courses and modules completed and things like compensation, job performance, and promotions. These insights can be pulled into your LMS’s dashboard to provide visibility into ROI and impact. In turn, L&D professionals not only have documentation of the value of their work, they can also make adjustments to their strategies and policies as needed to optimize that value.

Your integration options

Assuming you’re sold on the value of HR and payroll system integrations, you have a couple of options. You can either build and maintain the integrations in-house—a complicated, resource-draining undertaking—or you can outsource integrations to a specialist like Finch.

With Finch, you get all the benefits of integrations without sacrificing your internal bandwidth. Our single, universal API makes it possible to access comprehensive data sets from an ever-growing number of HR and payroll providers (142 at the time of publication) with minimal coding and zero maintenance responsibilities.

Compare that to building in-house, which can cost companies in the vicinity of $300,000, including upfront development and ongoing upkeep.

The unique value of Finch

Aside from cost savings, Finch standardizes data from disparate sources, so it’s immediately and optimally usable without intervention from your team or your customers—allowing you to focus on what you do best without having to worry about which of the many, many HR systems or payroll providers your customers use (check out our whitepaper on the fragmented US payroll landscape here).

Perhaps the most tangible benefit of Finch, though, is its effect on onboarding. What once took 30 days worth of file uploads, hand-holding, and back-and-forth correspondence with your customers is reduced to a quick and easy 30 seconds and completed entirely within your LMS. The process is simple:

• Finch Connect (our secure, embeddable front-end modal) prompts your customers to choose their HR or payroll system.
• Your customers authorize a set of permissions by entering their admin or API credentials to that system.
• The connection is established, and your LMS starts receiving data.

We do all the legwork. For you and your customers, there’s nothing more to it.

Then there’s the matter of upkeep. When you go with Finch, integration maintenance is entirely in our court. So, instead of spending an average of 27 minutes on the phone with an HR or payroll provider trying to connect to their infrastructure so you can troubleshoot any inevitable issues that arise, you shoot us a support ticket, and we take care of it, reducing your effort to something closer to 27 seconds.

Concentrate on your competencies

In essence, Finch ensures you can take advantage of everything HR and payroll integrations offer without any of the internal hassles or capacity issues you’d run into by keeping the work in-house. Consequently, you’ll have more internal resources to dedicate to your core product, allowing you to get to market sooner and accelerate your roadmap.

Want to know more about integrations for LMS platforms?

To start building with Finch, enter your email address on our homepage here to get API keys today.

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Employment system integrations—that is, integrations with HR information systems and payroll systems—typically fall under the purview of product teams, but that doesn’t mean that they are strictly a product concern. In fact, a well executed employment system integration strategy has the potential to affect a myriad of aspects of your organization for the better, including your growth trajectory, opportunities for expansion, and expenses.

In other words, the decision to integrate with employment systems is a business one. As you weigh your options, consider these eight KPIs that employment system integrations often impact:

Growth KPIs

1. New logo acquisitions

Employment system integrations enlarge the field of customers you can work with by enabling instant compatibility with the employment systems they use, allowing you to close more deals with a wider range of organizations.

This is especially true if your strategy entails partnering with a broad-coverage employment system API like Finch that enables connectivity with many systems from a single integration. In turn, your sales team is empowered to pursue segments of the market that would otherwise be uneconomic due to lack of connectivity. With Finch’s 150+ integrations, you can service 88% of U.S. employers—and many international ones—in one fell swoop.

Learn how Green Spaces was able to address 90% of potential customers by expanding its integration coverage with Finch.

With Finch’s single, universal API, Green Places gained real-time connectivity to more than 90% of its customers’ HR platforms. Just as critically, Finch affords Green Places more time and bandwidth to allocate to other areas of product development.

2. Sales cycle length

Increasingly, the availability of employment system integrations is an important purchase criterion. Having integrations in place at the outset of your engagement meets a key expectation of potential customers, which can help fast-track them through the sales pipeline to a signed contract.

On the other hand, if you’re following a bottom-up sales model, you’ll appreciate that employment system integrations enable a seamless data sync process that supports self-serve onboarding and product-led growth. In other words, leads can start using your product without having to speak to a sales rep, bypassing an extended sales pipeline altogether.

See how Mosaic was able to accelerate their sales pipeline and go live with integrations 94% faster than doing it in-house by working with Finch.

3. Average contract value

Many applications realize a boost in ACV when they offer integrations as part of a premium tier of service or product access. Because employment system integrations can save your customers hours of work at onboarding and fuel deluxe features and product enhancements, you can leverage integrations to persuade customers to sign larger deals.

4. Free-to-paid conversion

If your product offers a self-serve motion accompanied by a free trial, data syncing via employment system integrations indicates a lead’s high intent to pay for your product. By granting access to their employment data, they’ve signified that they trust your value proposition and want to see your product drive ROI for their business.

Learn how MainStreet saved $65M+ for small business clients using a self-serve flow powered by Finch.

Expansion KPIs

5. Logo retention

Acquiring new customers is helpful, but keeping them around for the long-term is how you build a sustainable business. Data connectivity via employment system integrations supports retention in multiple ways:

• It makes for stickier customer relationships. Since your product is directly connected to your customers’ source of truth, and they’ve already configured their workflow based on how your product ingests their raw employment data, they’re highly invested.
• By syncing with census data, you can track champions, buyers, and other key stakeholders within a customer organization and proactively reach out when organization changes occur, helping to ensure a continuous relationship.
• If your product drives employee retention, you can measure the impact of your product on individual team and organization-wide retention rates from the time of implementation. That way, when renewals come up, you’re able to concretely demonstrate ROI.

6. Revenue retention

If your product relies on a usage-based business model driven by seats or per-employee-per-month (PEPM) growth, access to customers’ employment data gives you a direct line of sight into the potential size of their contract. It also streamlines the process of expanding usage by giving your customers the ability to track new employees and automate user invites.

Additionally, if your product has multiple buyers across an organization—say, finance and HR—you can leverage your access to real-time organizational structure data to cross-sell your product into other teams.

Cost KPIs

7. Engineering expenses

If you build employment system integrations in-house, the initiative will likely be a drain on your development resources. Assuming that three engineers will work on an integration for three months (or more, if your needs go beyond basic census data), that puts the engineering costs of just your initial build-out in the ballpark of $200,000. Multiply that by the number of integrations you need to adequately cover your customer base plus maintenance costs, and you are looking at a steep, ongoing investment.

Outsourcing employment system integrations to a third-party API like Finch saves you money by eliminating the need for multiple build-outs and drastically reducing the number of hours your engineering team has to dedicate to the project. Our team does the heavy lifting, including maintenance, so your internal talent can focus on your product’s core technology and UX.

Find out how Trainual reduced development costs by 75% by using Finch.

8. Support costs

During onboarding and implementation, customers often require hand-holding—and one of the biggest hurdles they cross is data syncing. That means that your support team needs to be trained in the specific data syncing processes, formats, and idiosyncrasies of each system you integrate with—a monumental and costly training initiative. Even then, it often requires three to four calls with a customer to confirm connectivity. These are costs that don’t scale and can balloon as your customer base expands. Employment system integrations reduce the data syncing process from days to seconds and remove the friction that necessitates hand-holding in the first place, allowing you to save support resources for initiatives that increase customer loyalty.

Learn how Lane Health reduced support costs and eliminated 8-12 hours a month of manual data entry for their customers with Finch.

Accelerating success

Integrating with employment systems isn’t just a slick product enhancement; it’s a strategic business initiative that drives measurable impact across your organization. Much of the ROI, however, depends on prudent execution—namely, partnering with a universal employment system API like Finch that can optimize coverage, performance, and cost efficiencies.

In short, Finch does the hard work of integrating with HRIS and payroll systems for you, so you can optimize the return. Our dynamic, unified API offers read-and-write access and abstracts away inconsistencies across systems for exceptional usability no matter the source.

Talk to one of our experts today to learn how Finch’s employment integrations can drive business outcomes for you.

If you’re a B2B application selling to employers—an employee training platform or employee engagement platform, for instance—then you know that creating additional value for your customers is critical to building a stickier product and, ultimately, ensuring your success. One way to create this value is to offer your customers deeper insights into their employee lifecycle by tracking the metrics customers care most about.

In this post, we’ve collaborated with ChartHop to dive into three employee lifecycle KPIs you can derive from employment data housed in your customers’ HRIS and payroll systems. Read how they are transforming their customers’ employee lifecycles here.

By surfacing similar metrics for your customers, you can help them create a better employment experience.

Let’s get started!

1. Internal mobility rate

As employees move up the ranks or across positions, the path they take can be tracked. Known as career mobility, this movement encompasses both the standard promotional structure (i.e., when employees earn greater responsibility and more senior titles) as well as lateral movement between teams and departments. So, why is this data important?

Tracking employee movement across positions and departments allows you to provide your customers with a detailed summary of their organization’s propensity to create growth and development opportunities for their employees. They can then use this data to give new hires a better understanding of the long-term career paths available to them from their first-day onwards—which can aid in cultivating a workplace culture that’s conducive to employee retention.

This metric also allows you to provide your customers with more granular insights into the flow of employees between departments. By divvying up the data by team, you can weigh how certain sectors of the organization are performing in regard to developing growth opportunities against others and reveal areas in need of improvement.

How to calculate internal mobility

Calculating internal mobility is simple: take the total number of internal movements and divide it by the average number of employees during the same time period. Once you have this number, multiply it by 100 to turn it into a percentage.

Pulling internal mobility rate from Finch

Because many systems don’t show historical organizational structure changes, you will need to record this data over time across the organization before you can calculate internal mobility rate. Here’s how:

1. Call the Directory endpoint to gather all active employees.
2. Pass employee IDs through the Employment endpoint and store the employee types you want to track—this count is the denominator.
3. Refresh the Directory and Employment endpoints regularly to track new employees and any changes to job title, department, compensation, or direct reports to calculate the number of internal movements—this is the numerator. You should also account for new hires and former employees which shouldn’t necessarily factor into this metric.

Learn how to ensure equitable promotions for your customers’ employees.

2. Compensation history

Any income an employee earns in the course of their regular employment is considered part of their compensation history. This can include their salary, bonuses they’ve received, commissions they’ve earned, and tips.

Knowing this information is important because it gives you a deeper understanding of your customers’ compensation distribution. This helps you flag potential areas of inequity or inconsistency across different teams, demographics, and positions, allowing your customers to improve employee retention in the long run and offer competitive compensation packages that draw top-quality talent.

How to calculate compensation history

To calculate compensation history, simply add an employee’s salary, bonuses, commissions, tips/wages, and any other sources of income together for the time period you want to track.

Pulling compensation data from Finch

To gain the most visibility into employee earnings, you’ll want to leverage both Payment and Pay Statement endpoints as well as the Employment endpoint, which contains data like base income and pay frequency.

1. First, call the Directory endpoint to gather all active employees.
2. Then, call the Payment endpoint and input the date range you are interested in to pull in earnings for that period.
3. Lastly, call the Pay Statement endpoint, and aggregate gross income for each employee.

Alternatively, many providers can also provide access to historical compensation changes which Finch surfaces in the Employment endpoint under the income history array. This array will include the unit, amount, currency, and effective date of previous income changes.

Read more about how companies can build responsible compensation plans.

3. Turnover rate

Employee turnover rate is the percentage of employees that leave an organization within a given period. You can use this data to drill down into more specific subsets of your customers’ organizations like individual departments or demographic groups.

If your product is centered around increasing engagement or employee retention, this data is crucial, as it allows you to spot potential issues that can save your customers money and improve employee morale and retention over the long term.

How to calculate turnover rate

To calculate an organization’s turnover rate, you’ll want to divide the employees that left over a particular span of time by the average number of employees for that same period.

Pulling turnover rate from Finch

Pulling the data you need to calculate turnover rate from Finch is a simple process:

1. As with the other entries on this list, you’ll first make a call to the Directory endpoint to gather all employees.
2. Then, call the Employment endpoint to aggregate start and termination dates.
3. Lastly, take all the employees whose termination dates fall within the last year, and divide it by the average number of employees who were active during that same period.

Find out what turnover rate can tell you about your customers’ business.

Align insights with your customers' goals

By leveraging the above insights, you’ll be able to better add value to your customers’ organizations—helping them streamline employee development, increase employee engagement, and boost team cohesion. This creates a better work experience that makes them more likely to retain their workers—and retain your platform’s services.

Discover how Finch helps you harness the power of employment data to provide your customers with key insights in real time. Click here to sign up for free.

Want to get in touch with our friends at Charthop to unlock people insights for your organization? Click here to learn more about what you can do when all your people data is in one place.