Payroll management is a challenge for businesses in Africa, particularly given the diverse legislation, remote workforce, and hybrid work environments prevalent in the region. Because they cannot afford or maintain sophisticated payroll systems, almost 80% of small and medium-sized enterprises continue to operate using Google Sheets and Excel.
This is the reason why: Third-party solutions installed on-site have limited functionality, and software intended for large businesses can be costly and challenging to use. Payroll has been made simpler for firms operating abroad by multinational corporations like Gusto and Rippling, yet they have trouble operating in Africa.
This is the environment in which locally based solutions, like Workpay, supported by YC, flourish.
Workpay serves two primary customer types by offering cloud-based HR, payroll, and benefits solutions to companies with employees throughout Africa. Firstly, Workpay offers HR and payroll solutions to manage the workforce for small enterprises with 20–100 people operating in a single jurisdiction, such as a grocery store in Kenya or a manufacturing company in Nigeria. Moreover, Workpay assists in ensuring cross-border employee compliance for companies with 100–1,000 cross-border workers, such a Ugandan company employing in South Africa.
For ease of use and financial reasons, small-to-medium-sized enterprises favor more complete, full-stack solutions over juggling several systems, according to co-founder and CEO Paul Kimani: Because each piece of software must be purchased separately, using several solutions for the same department results in higher costs.
Over time, workpay has changed to reflect these changes. The five-year-old firm first concentrated on payroll, but as it grew, it added more services and responded to client input.
Businesses in the manufacturing industry, where it is crucial to monitor staff hours, are the primary users of features like time and attendance tracking. On the other hand, companies that employ remote workers are more concerned in measuring worker performance, which is something that Workpay’s performance management tool takes care of.
“The shift in customer needs has pushed us to expand our product from being a solid payroll solution to offering a more full-stack HR service. We’ve also noticed an opportunity to layer financial services on top of our HR offerings,” Kimani added, who founded Workpay with COO Jackson Kungu. “Since companies already use us to pay their employees, we can now provide added services like medical and vehicle insurance and even partner with providers for lending, savings, and investment options. This way, we offer a more comprehensive solution that meets the broader needs of our customers and their employees.”
As of right now, the startup has raised $5 million in Series A funding headed by the pan-African venture capital group Norrsken22. Current investors Y Combinator, Saviu Ventures, Axian, Plug n Play, Verod-Kepple Africa Ventures, and Acadian Ventures have also contributed, along with new money from Visa.
Visa is a major player in this investment round. The multinational payments giant debuted its fintech accelerator in November of last year, choosing 23 entrepreneurs for its first cohort and offering investment, training, and mentorship via its partners.
As of now, only Workpay has disclosed that it has obtained funding from Visa after finishing the program. Co-founder and CEO Paul Kimani said, “I think they invested depending on how they see a startup from a strategic and growth perspective,” following the program.
PaySpace in Africa is acquired by Deel, which reports that its ARR has surpassed $500M.
Payroll and HR solutions are in high demand throughout Africa as international businesses expand into previously untapped markets. This month, Skuad, a global HR and payroll business with headquarters in Singapore, was acquired by New York-based fintech Payoneer for $61 million. For well over $100 million in March of this year, Deel purchased PaySpace, a company based in South Africa.
With these new competitors, Workpay and other regional systems like SeamlessHR, PaidHR, and Bento will have to contend with more competition. On the other hand, Kimani sees increased international rivalry as validation of the market’s potential.
“We’re not overly concerned about competition from global players. There is still significant work to be done across Africa, both by external companies and ourselves. Building a comprehensive payroll solution for the entire continent is challenging—each country has its regulations and requirements,” the CEO added. “Payroll in Ivory Coast differs from South Africa. It will take time for global companies to adapt their products to the diverse African market. Therefore, in the short to medium term, we believe that competition from these global players won’t be a major concern for us or others in our space.”
Workpay is currently growing as quickly as it can, claiming to have added about 500 enterprises to its platform in the previous 16 months and to be serving over 1,000 clients in 20 African nations. This expansion would have increased the company’s reach from 20 to 40 nations, but it was postponing its move into Francophone Africa at the same time as this growth. In a similar vein, the business asserts that during the first half of 2024, revenue increased 1.5 times and is expected to quadruple by the end of the year.
According to Kimani, Workpay plans to use the additional funds to grow its workforce, improve its performance management tools with AI to help companies manage their teams, and broaden its financial services offering (including investigating new products to improve how employers and employees interact with salaries).
The Norrsken Foundation participated in the $2.7 million pre-Series A round last year, and the $2.1 million seed round in 2020 came before the Norrsken-led round. Existing investors Y Combinator, Saviu Ventures, Axian, Plug n Play, Verod-Kepple Africa Ventures, and Acadian Ventures are also involved in this round. Workpay was founded in 2019 and has already raised about $10 million in funding.