Not so long ago, the fintech and payments space was the first place to look for cutting-edge digital innovation. It is a consequence of startup funding from venture capital firms.
It is also a measure of how the dial has shifted that fintech is not the only place to look now. Certainly, RegTech has been a big spinoff, but the other big area for digital innovation has been in the human resources space.
The Unfolding HRTech Boom
In Australia, the startup scene now boasts several promising new companies that are capturing the attention of investors. Their ideas and solutions point the way forward for HR management in the digital future.
“Digital technologies all come together nicely in HR,” said one leading venture capitalist who operates a fund for a major bank.
"We see advantages in terms of cost and scale, plus usability and finally better outcomes for companies and employees, and by that, I mean engagement and retention, which flows through to productivity and profits. The cloud is where employers and staff can transact and collaborate. Importantly, the companies who are getting this right are creating solutions that are at their core consensual, and that is a major concept to promote in HR right now."
He said that a significant driver of success in HR is the consistency of communication and processes, and this is what rules-based digital solutions can deliver.
Practicing Consensual HR
This is an idea re-inforced by the University of NSW academic Karin Sanders, the director of the Centre for Innovation and Entrepreneurship.
“For HRM to be consensual, employees need to receive the same message across an organization about the strategy and day-to-day activities,” says Sanders says.
"The whole idea is that you need to send out clear messages across different HR practices and then we call it consistency, and if the same message is communicated from different people, we call it an agreement, or consensus."
Such an approach lends itself to deliver from a technology platform, and it is no coincidence that some of these are the ones attracting the attention of investors.
One company which has Australia abuzz is people management platform Employment Hero, which just landed AUD 22 million in funding from jobs board Seek and venture capital firms AirTree and OneVentures.
This has been one of Australia's most significant private capital raisings so far this year and values Employment Hero at just over AUD 100 million.
The Employment Hero solution is aimed squarely at small and medium-sized enterprises (SMEs), which are the ones that routinely have the biggest administrative pain points around HR and in particular HR compliance.
These companies often struggle with policies and procedures for employees, with business owners and executives too often bogged down in day-to-day operations to invest time in HR issues. Employment Hero estimates that 97% of Australian employers with less than 200 employees are not as well equipped to handle their HR as large businesses.
Also, the expertise of these people lies in other areas, so they struggle to access and implement best-practice HR. Once again, digital solutions that can aggregate and then distribute best practice policies are in demand from SME's.
Employment Hero provides a digital platform for 4,000 Australian businesses to manage the administration of new employees.
This includes informing them on workplace policy, finalizing contracts, rosters, timesheets, pensions payments, and also their salary. There is also the potential to use the platform as a channel for retailers to offer rewards and discounts and employers to pass on staff benefits.
Chief executive Ben Thompson recently said that SMEs which use the Employment Hero platform reported an 80 percent reduction in time spent on people management, with a saving of up to 60 percent on payroll processing. Onboarding new hires is reduced down to a matter of minutes.
Employment Hero has also developed what it calls an “employee passport” for the management of pensions savings across employers.
The smooth maintenance of pension payments into the right fund is a significant irritant when people change jobs because many employers have a default fund into which they automatically put employees.
The final piece in the Employment Hero offering comes from new investor Seek, which is one of Australia’s biggest online recruitment websites.
Major investor Seek is also looking to act as a distributor of the platform to small businesses that advertise on the site.
HRTech Matures Fast
For a major player like Seek, a startup like Employment Hero represents a significant bolt-on potential acquisition.
Already the company has stated its focus on HR software-as-a-service (SaaS) and is backing several other startups such as employment marketplace Sidekicker and worldwide job aggregator Jora.
Employment Hero is not the only Australian HR startup by any means, but it is probably the ripest for growth and commercialization, both at home and offshore. This is where the bulk of the AUD 22 million in capital raising will be spent – on international expansion.