Notes

Perhaps On Demand Paychecks the Way of the Future?
In a former employment, several years back, when this glorious day appeared, the secretary in a clear voice announced that the “eagle had landed.” Then as soon as possible, we each worked our way to her office to get the Payment for our previous month’s work. If you get paid once per month, it is a long period between paychecks, so those initial few days after a week or so of being without money were awesome. I can even remember when I waited tables and received my small brown envelope of cash which was waiting at the end of each pay period!

Today many of us are paid electronically, but little else has changed.

Many workers battle to save their pay from paycheck to paycheck – a recent poll found that over 50% of workers experience issues paying their expenses between pay periods, and nearly one third said an unexpected cost of less than $500 may make them unable to pay other financial obligations. Another study found that nearly one in three employees run out of money, even those making in excess of $100,000. 12 million Americans use payday loans during the year, and annually $9 billion is collected in payday loan fees. The average annual percentage interest rate (APR) for payday loans is 320%.

Based on PayActiv, in excess of $89B are paid in costs from the 90M people struggling paycheck to paycheck, that is two-thirds of the US population. Real-time payroll would annually place over $25B into peoples wallets, merely through savings from insanely high APR costs.

When need forces innovation

We are on the edge of a new paradigm which has connection with pandemics or shifting work environments, and lots to do with why people want to receive their remuneration. Employees, unable to last between paychecks and frustrated from turning to high-interest loans to bridge the gap, want to access their hard-earned pay as and when needed. Over 60% of U.S. workers that have struggled monetarily between pay periods in the past six months firmly believe their financial situation would improve if their employers permitted them immediate availability to their earned pay, free of charge.

Perhaps various people may consider this a political issue, the truth is it is regarding financial wellness. According to SHRM, 40% of employees are not able to pay an unforeseen cost of $400. Their report also refers to Gartner data that found that less than 5% of major US companies with a majority of hourly-paid employees use a flexible earned wage access (FEWA) solution, but it is thought that this will increase to 20% by 2023.

Why should an employee need to wait for days or weeks to get paid for their time and ability?

Improving the employee experience
Giving employees access to their pay on demand may disrupt, maybe even, deconstruct, the way we collect pay and observe our paycheck. Currently the possibility is noticed, also, in many cases, companies use it to differentiate their brand and bring in new talent. For example, to stimulate interest for personnel, Rockaway Home Care, a NY care operation, is promoting its flexible pay options on social media.

Others are providing on-demand payroll – where employees finish a shift, they can receive their money as soon as 3 a.m. the following day. Using global payroll , employees can move their pay to a bank account or debit card. Walmart is another example of a business that offers its employees access to their paychecks. Workers may access earnings early, up to eight times per year, for free. The feedback from workers has been amazing, and Walmart is expecting more and more usage. Meanwhile, Lyft and Uber both offer their drivers the ability to receive pay once they have earned a certain amount.

The alteration of payroll is not limited to the amount of payments. Venmo, Zelle, and other app provide flexibility and transaction services that employees now expect from their payroll. They want to be able to access their pay when they need to, not every 2 weeks or on a monthly cycle. Much of this demand has come from the gig economy and Millennial generations – who expect to be able to access the earnings they have earned when they want it.

The growing rise of workers without bank relationships
In 2018 it was estimated that in excess of 1.7 billion adults globally do not have access to a bank account. In America, a 2017 survey estimated that 25% of people are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey discovered that people who either do not have a bank account, or have an account, but keep using financial services outside the bank system like payday loans to survive. In the United Kingdom, there are over one million people without bank relationships.

There are many consequences of having no banking activity. In some cases, it may result in difficulty receiving financing or acquiring a house; it also presents employers with specific issues. How do you process pay if there is no bank account to transfer the money into? As a result, employers are frequently looking for other ways to process payroll, especially for hourly paid workers. Some are leveraging pay cards, which are topped-up virtually every time an employee receives payment. These pay cards function the way a debit card does, allowing owners to withdraw cash or shop online.

It’s obvious that on-demand payroll is something that’s going to be part of the payroll health discussion for a while ahead.

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