Notes

Is On Demand Paychecks the Method in the Future?
In a previous employment, a few years ago, when this amazing moment appeared, the secretary in a clear voice announced that the “eagle had landed.” Then as quickly as possible, we each worked our way to her location to receive the Payment for our previous month’s working. When you get compensated once a month, it is a long time between paychecks, so those first few days passed a week or so of being without money were fantastic. I even recall when I waited tables and collected my own brown envelope of cash which was waiting at the end of each week!

These days most of us are compensated electronically, but little else has changed.

Many employees suffer to save their money from paycheck to paycheck – a recent study found that over half of employees live with trouble paying their expenses between pay periods, while almost a third said an unexpected expense of less than $500 can make them unable to meet other financial responsibilities. Yet another study discovered that almost one in three workers runs out of money, even those earning in excess of $100,000. 12 million Americans have to use payday loans during the year, and each year $9 billion is paid in payday loan fees. The average annual percentage interest rate (APR) for a payday loans is 300%.

Based on PayActiv, over $89B are paid in fees by the 90M workers struggling paycheck to paycheck, that is the majority of the US population. Real-time payroll can annually add over $25B into workers accounts, merely through reduction of abusively high APR fees.

When need forces innovation

We are on the verge of a new paradigm that has relationship with pandemics or shifting work environments, and lots to do with how people want to receive their payroll. Employees, unable to last between paychecks and frustrated from turning to high-interest loans to fill the gap, need to access their earned pay as and when wanted. More than 60% of U.S. workers that have struggled monetarily between payment periods in the past six months firmly believe their financial circumstances would improve if their employers permitted them immediate access to their earned pay, free of charge.

While various people might think this a political point, the fact is it is regarding financial health. Based on SHRM, 4 out of 10 employees are unable to cover an unexpected cost of $400. Their report also references Gartner information that discovered that less than 5% of large US companies with a majority of hourly-paid employees use a flexible earned wage access (FEWA) platform, yet it’s thought that this will increase to 20% by 2023.

Why should an employee need to wait for days or weeks to receive pay for their time and skills?

Improving the worker relationship
Providing workers access to their pay on demand may disrupt, perhaps even, deconstruct, the manner in which we collect pay and observe our paycheck. Already its possibility is observed, also, in some instances, companies are using it to differentiate their brand and bring in fresh talent. For example, to encourage applications for recruitment, Rockaway Home Care, a NY care operation, is promoting its flexible earning options on the internet.

Others are providing on-demand payment – when workers finish a shift, they can access their money as soon as 3 a.m. the following day. Using an app, employees may move their salary to a bank account or debit card. Walmart is yet another case of a business that offers its employees access to their pay. Workers can access earnings early, up to eight times each year, for free. The feedback from workers has been amazing, and Walmart is anticipating increased usage. Meanwhile, Lyft and Uber each offer their workers the ability to receive pay after they have earned a specific amount.

The metamorphosis of payroll is not confined to the amount of payments. Venmo, Zelle, and other app offer flexibility and transaction services that workers now expect from their payroll. They want to be able to access their earnings whenever they want to, not every 2 weeks or a monthly period. Most of this expectation has come from the emerging economy and Millennial generations – who expect to be able to access the money they have earned when they need it.

global payroll growing rise of workers without bank accounts
In 2018 it was calculated that more than 1.7 billion adults worldwide don’t have access to a banking relationship. In the US, a 2017 review estimated that 25% of people are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey found that people who either do not have a bank account, or have an account, but keep using financial services outside the banking system like payday loans to survive. In the United Kingdom, there are in excess of one million people without bank accounts.

There are numerous results of having no banking activity. In some cases, it can result in difficulty receiving loans or acquiring a house; it also presents employers with specific issues. How do you process payroll if there is no bank account to transfer the money into? As a result, employers are increasingly looking for other ways to process payroll, specifically for hourly paid workers. Some are leveraging pay cards, that are loaded virtually every time a worker gets paid. Those pay cards perform the way a debit card does, allowing holders to remove cash or shop online.

It is clear that instant payroll is something that is going to be a part of the financial health conversation for some time ahead.

My Website: https://immedis.com/blog/make-payroll-a-strategic-asset-for-your-global-company/