Notes

Perhaps Instant Paychecks a Method of the Future?
In a former job, many years ago, when this amazing moment appeared, the secretary in a clear voice declared that the “eagle had landed.” Which our previous month’s work. If international payroll gets compensated once every month, it’s a long time between payment, so these initial few days passed a week or so of being broke were awesome. I even remember when I waitressed and collected my own brown packet of cash which was waiting at the end of every pay period!

These days most workers get compensated electronically, but little else has changed.

Many people suffer to stretch their money from paycheck to paycheck – a recent poll discovered that over half of employees experience issues paying their expenses between pay periods, and almost one third said a surprise cost of around $500 may make them unable to meet other financial responsibilities. Yet another study found that nearly one in three employees run out of cash, even those earning in excess of $100,000. 12 million Americans must use payday loans during the year, and annually $9 billion is paid in payday loan fees. The average annual percentage interest rate (APR) for payday loans is 310%.

According to PayActiv, over $89B are paid in charges from the 90M people living paycheck to paycheck, that is two-thirds of the US population. Real-time payroll could each year save over $25B into employees accounts, merely from savings from abusively high APR costs.

When need forces innovation

We are on the cusp of a new way of life which has little to do with pandemics or shifting workplaces, and lots to do with how workers want to receive their remuneration. Workers, unable to survive between paychecks and frustrated from turning to outrageous loans to bridge the gap, desire to receive their earned money as and when wanted. More than 60% of U.S. workers who have struggled monetarily between pay periods over the past six months firmly believe their financial situation would be enhanced if their employers permitted them immediate availability to their earned pay, free of charge.

While some people might think this a political issue, the fact is it is about financial health. According to SHRM, 40% of employees are unable to cover an unexpected cost of $400. Their report also refers to Gartner information that discovered that less than 5% of major US companies with a majority of hourly-paid employees use a flexible earned wage access (FEWA) platform, but it’s thought that this will increase to 20% by 2023.

Why would a worker have to wait for days or weeks to receive pay for their time and ability?

Improving the employee experience
Providing employees access to their pay instantly could disrupt, maybe even, change, the way we receive payroll and view our paycheck. Currently the possibility is observed, also, in some cases, companies use it to differentiate their company and bring in fresh talent. As an example, to encourage interest for workers, Rockaway Home Care, a NY care operation, is promoting its flexible pay options on social media.

Others are providing on-demand pay – when workers complete a shift, they can receive their money as soon as 3 a.m. the next day. Using an app, workers can transfer their salary to a bank account or debit card. Walmart is another case of a company offering its workers access to their paychecks. Workers can access earnings early, up to eight times per year, without cost. The reaction from workers is incredible, and Walmart is expecting increased adoption. Meanwhile, Lyft and Uber both provide their drivers the ability to be paid once they have earned a certain amount.

The change of payroll isn’t limited to the frequency of payments. Venmo, Zelle, and other app provide flexibility and transaction services that workers now expect from their paycheck. They want to be able to access their pay whenever they want to, not every 2 weeks or on a monthly period. Most of this expectation has come from the emerging economy and Gen Z generations – they expect to be able to receive the money they have earned when they need it.

The increasing rise of employees without bank accounts
In 2018 it was calculated that more than 1.7 billion adults globally 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 workers who either do not have a bank account, or have an account, but still use financial services outside the bank system like payday loans to make ends meet. In the United Kingdom, there are in excess of one million people without bank relationships.

There are numerous results of having no banking relationship. In some cases, it can result in problems getting loans or buying a house; it also presents companies with specific issues. How do you process payroll if there is no bank account to move the money into? As a result, employers are increasingly searching for other ways to process payroll, especially for hourly paid workers. Some are utilizing pay cards, which are topped-up electronically every time an employee receives payment. These pay cards function the way a debit card does, allowing holders to withdraw cash or shop online.

It’s obvious that instant pay is something that is going to be part of the financial health conversation for a while to come.

Here's my website: https://www.immedis.com