Under Criticism, Xero Increases Standard Plan To Five Employees

Sholto MacPhearson for BoxFreeIt writes: 

• Standard plan swings from 20 to one to five employees
• MD explains how Xero calculates employees
• Users could scale plans up or down to allow for seasonal, casual labour

Cloud accounting program Xero has increased the number of users on its Standard plan from one to five payroll employees after facing heavy criticism three days after releasing its new pricing scheme.

Xero users and partners left more than 170 comments on the Xero blog post announcing the change, most of them critical of the price rise, which will come into effect on December 9. One of the biggest targets for criticism was the new Standard plan which cost one dollar more but dropped from 20 employees to one payroll employee.

Businesses with more than one employee had to use the $60 Premium 10 plan, which covered up to 10 employees, or the $70 Premium 20 plan for up to 20 employees.

In a post yesterday Chris Ridd, Xero’s managing director for Australia, said many Australian partners and customers had asked about the single employee on the Standard plan. “We know we’ve slipped up and I won’t bore you with the convoluted history of discussion that led to us putting that out there. So we’re confirming that for the new Standard plan, we’ll make the number of payroll employees on that plan five not  one,” Ridd said in the blog post.

“Thursday was a pretty brutal day, to be honest. We hadn’t anticipated the feedback. It was good that we could turn it around very quickly,” Ridd told BoxFreeIT.

Xero had “an enormous number” of customers who had no payroll or one employee and would have fit a Standard plan limited to one employee.

“But what was clear from the feedback was that (the one-employee restriction) was creating a lot of pain for all the mums and dads businesses. We looked at various iterations and we spoke to a number of partners and we realised we got it wrong,” Ridd said.

Xero had initially wanted to encourage businesses with staff to move to its Premium plans which included automated superannuation payments. Competing products sold super payments as a separate feature, but bundling it with the accounting program was much more efficient, Ridd claimed.

“No-one is doing that (bundled super payments) and once you price Xero at that end of the market we are highly competitive and we generally sit at the lower range (in price),” Ridd said.

Xero was also concerned about missing out on the 1.3 million sole traders and 520,000 micro-businesses in Australia. “We didn’t want to price ourselves out of the market,” Ridd said.

How Xero Calculates Employees

Several commenters on Xero’s blog asked how businesses using casual employees selected their pricing plans which were segmented by number of employees. Xero calculated the number of unique employees in the previous month’s pay run, Ridd said.

“That’s how it works now. If you are on the medium plan and you get to your 21st employee then the system will tell you to move to the next subscription,” Ridd said.

Businesses had the option of moving to cheaper plans in months when they had fewer employees. However, Xero didn’t automatically move users to a cheaper plan automatically; the business had to select the plan manually.

There were no fees for moving up or down plans and Xero users could scale their Xero subscription as required. “We monitor movement between plans, and it’s quite a bit. There’s a lot of movement between small and medium.”

Thousands of customers operating seasonal businesses scaled back their subscription to the smallest plan in the quiet times, Ridd said.

Xero had introduced a plan for businesses with 100 employees “to say to the market what we’re in and what we’re not into”, Ridd said. Although Xero had several customers with hundreds of employees, those businesses were better suited to enterprise accounting software such as NetSuite, Ridd said.