At the height of the epidemic in Italy, Eynat Guez, CEO of Papaya Global, received an urgent call from an Israeli start-up. They were agitated and told her that the local supplier who manages their salaries in Italy was not answering, and that they now feared they would not be able to pay their employees there on time.
They thought that Papaya, which provides wage management software, might be able to help out. “It’s surprising that paying wages is often done by one person who works alone, using Excel and paper folders. There are even some public companies that work like that. When that person is sick, the company risks holding up wages – it is in fact dependent on that one person,” says Guez.
Papaya has been soaring in recent years, with its revenues climbing by 300 percent a year. It has 280 clients and has attracted the attention of many top investors. The coronavirus caught Guez at the heart of things. Her company’s system funnels the wages, taxes and insurance payments made by companies in 140 countries. Her clients rely on Papaya in order to understand their main expense and for making cost-cutting decisions.
Today the company announced the completion of a $40- million Series B round of funding led by Scale Venture Partners. Also participating in this round were the strategic investment arm of Workday, the financial and human capital management giant, ClalTech - the Israeli vehicle of Access Industries, and Papaya’s current investors: Insight Partners, Bessemer, New Era, Group 11 and Dynamic Loop. The money comes 10 months after the previous round, bringing the total amount raised by the company to $95 million.
Guez founded Papaya in 2016, together with Ofer Herman, Chief Technology Officer, and Ruben Drong, Chief Product Officer. The company developed software for salary management by global companies. Currently, companies need to be familiar with policies specific to local employees and with regulations regarding payments such as taxes, insurance and social benefits, which need to be transferred to different agencies. Companies usually do this by working with local providers, who send in reports in different languages. The result is that many resources are invested in deciphering these reports, with much work, done by hand, devoted to monitoring. “Our unique feature is that we deal with all kinds of salaries,” says Guez. “There should not be such a wide separation between how you manage the wages of your permanent employees and those of contractors or freelancers.”
Guez claims that companies find it difficult to answer two simple questions – what are their salary costs and how many employees they have. This makes it difficult to make optimal decisions regarding budgets. Papaya’s software presents employers with a real-time dashboard, divided according to countries, departments and the respective cost of wages they are paying. “You’re able to view the components that comprise your salaries’ expenses in each location, per each employee. During the coronavirus epidemic we’ve seen managers doing simulations on our dashboard on a daily basis, in an attempt to see where and how they can cut costs.”
With Papaya, managers and salary accountants can look at the planning of monthly wages on a local basis, including accounting for local constraints and holidays in each country. “Ultimately, having your salary land in your bank on the right day is a complex matter, especially when it comes to international transfers” explains Guez. “We now work in 140 countries, and late payments are a violation of the law. A simple classification error can lead to higher bank commissions, in some countries also affecting mortgage payments. All this has to be done while working with state authorities, and avoiding fraud – Wirecard (the giant German financial services provider which recently collapsed after it was discovered that $2 billion had disappeared from its balance sheets) is our biggest nightmare.”
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Who’s seen my payslip?
Reports on employees’ vacation and expenses are also provided by the system. An employee can also view his or her contract and pay stubs. Guez says that surprisingly, this area is currently wide open, with employees receiving their pay slips by email or in envelopes placed on their desks. Contracts and photos of identity documents are also sent by email or on paper. “Currently, decision makers in organizations we work with are not just financial officers. They are often IT people who want everything to move through secured lines,” she says.
Last July, Papaya bought the technological assets of the Israeli HR management start-up Mensch.io, which was shutdown, taking in all 20 of its employees, most of whom are located in Kiev. Guez hopes that in the company’s new update, scheduled for January, the integration with Mensch will be completed, introducing into the software an interface providing communication with employees, including punch clocks, feedback from managers and organizational charts which show the organization’s hierarchy, making it easier to understand large organizations. These charts show who is where and how to contact them, who any person reports to and what their responsibilities are, as well as other relevant information such as who is on vacation at any given time. “Mensch closed and we had an opportunity to get a team that works well, with an excellent technological leader,” says Guez.
Dealing with salaries and employee management forced Guez to offer her clients quick solutions for contending with the uncertainties of the coronavirus epidemic. The company’s website collected policies and benefits provided by different countries throughout the crisis, with detailed explanations on how to obtain these benefits.
Israeli entrepreneurs are telling me that the coronavirus forced them for the first time to be involved and responsive to what’s happening with their distant employees. Weren’t they managing a global company all along?
“Unfortunately, in Israel there is still a widespread phenomenon of ‘us and them.’ It’s very noticeable, for example stock options are too often given by Israeli tech firms only to ‘us’ and not ‘them.’ In the R&D center in Israel this is a must, but who has the energy to deal with administrative and tax implications of giving options to an employee in London or in Spain?
“Covid-19 is a unique situation where the lived reality of all your employees changes at once, and you are required to address everyone’s needs. During the epidemic, we set up a situation room to follow what’s happening around the world – what’s closed and what’s open – so that managers stay up-to-date about each country. One client was planning to downsize in Italy, but before making the final decision it was announced that no one could be laid off there.”
What grade does Israel get in terms of contending with benefits to employers, compared to what you see around the world?
“I thought it was crazy that Italy was saying that layoffs were forbidden, but doing this in exchange for incentives would work better than what happened here with sending people on unpaid leaves [but with access to unemployment pay]. In many cases this still involved people continuing to work. No one gains from these unpaid leaves. Israel took a stance that doesn’t reward anyone except people who don’t feel like working.”
What’s happening to high-tech bastions in an era of working at a distance?
“Generally, there is much traffic away from Silicon Valley and New York since it’s become very expensive there, with American companies announcing that they are not returning to their offices before December 2021. I talked to an Israeli entrepreneur who moved to Austin Texas. I asked him what he was doing there. He said that there he at least had space, with a lower cost of living and much fewer taxes, so why would he remain in New York? Returning to Israel wasn’t even an option for him, since being in Israel for six months would cancel his ‘disconnection-of-residency’ status, forcing him to pay two years’ back taxes.
We’ve just seen VMware reducing the salaries of distant employees who are leaving Silicon Valley. Do you see this happening in Israel as well?
“Salaries in Israel are not determined on a regional basis. Companies take in employees from Jerusalem or Be’er Sheva, paying them the same as someone in north Tel Aviv. The cost of living is not a factor and taxes are the same.
“I currently don’t see salary adjustments beyond those already made. There have already been 10%-30% pay cuts in Israeli tech companies, and not everyone has returned to previous levels. I definitely think there will be some rethinking and a large adaptation to benefits that accompany salaries in Israel, such as the 10bis card (which allows hi-tech workers to order food subsidized by their employers), vacation days and other benefits such as subsidies for gyms - these are quite expensive. At the end of the year, when budgets are made for the year to come, things will look different.”
“Furthermore, I think that the reality will force Israeli companies to be more flexible in relation to their employees, who may not want to spend the entire year in Israel due to the worsening health situation and the ongoing lockdown.We already see people taking long trips to Greece. Many Israelis have foreign passports and the ability to move elsewhere.” says Guez.