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The company makes most of its revenue in fees collected from its benefits and insurance offerings
Nearly every single business in the U.S., literally 99.9% of them, are considered to be small businesses, meaning they have fewer than 500 employees. Not only that, but small businesses created 10.5 million net new jobs from 2000 to 2019, nearly double the 5.6 million that were created by large businesses. In total, small businesses accounted for over 65% of net new jobs in that time.
And, yet, many SMBs still lag behind when it comes to technology adoption: the 2019 State of IT report from Spiceworks found that large enterprises were up to 10 times more likely to adopt emerging technologies.
Justworks was built to help those companies with automating some of the most onerous parts of their business, providing software to help them with benefits, payroll, human resources, and compliance.
"For SMBs, particularly those with less than 100 employees who collectively represent over 40 million people in the United States, the vast majority of HCM tasks are manual or paper-based. These tasks can require an outsized amount of time for managers, distracting them from what matters most—running their businesses," the company wrote in its S-1 filing with the SEC.
"Given their size, SMBs also often struggle to attract and retain top talent due to the relative cost of securing benefits packages in-line with what larger organizations are able to offer. Meanwhile, regulations often place a disproportionate burden on SMBs, particularly those with geographically distributed teams, forcing them to deal with complex compliance hurdles they are ill-equipped to handle."
Justworks' features include access to health insurance plans from carriers such as Aetna, Kaiser, and United, as well as MetLife dental & vision insurance; wellness perks with One Medical, Health Advocate, and Talkspace; and fitness memberships like ClassPass.
The company also provides compliance support software, which helps with workers’ compensation, W-2 and 1099 filings, liability insurance, and unemployment insurance filings, while also automating payroll tasks such as automatic direct deposit payroll, paying vendors and contractors, and tracking hours. It also provides HR automation for managing paid time off, onboarding new employees, storing important documents, and tracking business metrics.
The company offers two plans, the cost of which depends on how many employees the company has. For example, Justworks' Basic plan costs between $39 and $49 per employee per month, and includes payroll and payments, HR consulting, 24/7 support, employer tax forms, and filings, workers’ compensation coverage, employment practices liability insurance, 401(k) retirement services, life insurance plans, pre-tax commuter benefits, fitness memberships, and access to HR tools and resources.
Revenue from these subscriptions makes up only a small fraction of Justworks' revenue, though: the company made $87.4 million from this stream for the year ending May 31, 2021, up 28% year-to-year from $68.4 million, but still just 9% of the total $982.7 million.
The vast majority of revenue comes from what the company calls, "Benefits and insurance related revenue," which "consists of insurance-related billings and administrative fees collected from customers related to health insurance plans provided by insurance carriers, workers’ compensation, state unemployment insurance, and other employee benefits."
The transaction price for SUI is based on the payroll costs of employees serviced and the applicable state’s tax rate, while workers’ compensation insurance is determined as a percentage of payroll processed by the company, and health insurance benefits are based on the number of employees serviced, the individual benefits, and the fees established by the company for those benefits.
Founded in 2012, Justworks has raised $143 million in revenue from investors that include Union Square Ventures, Redpoint, Spark Capital, Thrive Capital, Index Ventures, Bain Capital Ventures, and FirstMark.
(Image source: justworks.com)
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