Gusto is increasing the base entry price of its payroll service for all existing customers, starting October 1. With this step, it’ll have finally moved everyone over to the uniform pricing model that the company started rolling out in June. Gusto’s monthly base price now starts at $39 plus $6 per person, an increase from the previous rate of $29 plus $6 per person.
To put this into perspective, a 20-person firm will now pay a monthly fee of around $159, compared to $149 previously.
In an email to customers, Gusto rationalized the increase as the result of “major enhancements” that have been made to its product “over time.” It cited recent improvements, such as the launch of integrated health benefits, an “enhanced” employee on-boarding experience that includes I-9 support and welcome emails, paid time-off tracking, and multiple pay rate tools. CEO Joshua Reeves explained to VentureBeat that the increase was made to achieve Gusto’s goal of having one price that’s easy for everyone to understand.
One customer we spoke with expressed disbelief at such a price jump and said they felt Gusto no longer represented small businesses and had become the new ADP or Intuit, when it comes to payroll processing. “I don’t think there’s a ‘little guy’ anymore,” the person said, requesting anonymity because of their ongoing business relationship. As a result of this price increase, the same customer stated that they will be pulling their business from Gusto, as they feel there are other companies providing the same level of customer service and features, but now at a lower price.
By comparison, Zenefits — Gusto’s “tech” competitor (currently in private beta) — offers free payroll services through the end of 2016. Once this promotion ends, it’ll charge $25 and $4 per person each month. Another company, Simple Payroll, typically charges $15 and $3 per person per month. Most affected by this price increase will likely be small businesses, as any price change can have a big impact on their budgets.
Reeves said that his company strives to offer the best service in the market and “never endeavored or wanted to be a cheap product.” He shared that services of the incumbents in the space, such as ADP and Paychex, are much more expensive and argued that at a price point of $6 per user per month, Gusto is the best product out there.
And while Gusto’s payroll service may be more expensive now, Reeves stressed that the company offers more than just a single service — it provides support around human resources, benefits, workers compensation, life and disability insurance, I-9, and more. The company has even extended grace periods for the price increases to some customers. “We want to be a single people system for your company,” he said, adding that Gusto “still offers compelling value at the new price.”
Gusto said that customers’ invoices will automatically be updated in October to reflect this change.
Updated as of 5:34 p.m. Pacific on Wednesday: Corrected original pricing of Gusto from $24 and $5 per user to $29 and $6 per month. Also clarified that Zenefits’ payroll service is still in private beta.