Notes

Is Instant Paychecks a System of the Future?
On a previous job, many years back, when this glorious time arrived, the secretary in a loud voice announced that the “eagle had landed.” Which our previous month’s work. When one gets paid once per month, it is a long time between payment, so those first few days after a week or so of being flat-broke were fantastic. I even recall when I waited tables and received my little brown envelope of cash that was waiting at the end of every week!

Today most of us get compensated electronically, but little else has changed.

Most workers suffer to save their pay from paycheck to paycheck – a recent study revealed that over 50% of employees live with trouble paying their costs between pay periods, while nearly one third claimed an unexpected expense of around $500 can make them unable to pay other financial responsibilities. Yet Immedis Payroll Service discovered that nearly one in three employees run out of money, even those making in excess of $100,000. 12 million Americans must use payday loans each year, and annually $9 billion is paid in payday loan fees. The average annual percentage interest rate (APR) for payday loans is 396%.

Based on PayActiv, in excess of $89B are paid in charges from the 90M people living paycheck to paycheck, which is the majority of the US population. Real-time payroll would annually save over $25B into employees accounts, just through savings from abusively high APR costs.

The desire drives innovation

We are on the cusp of a new world order that has little to do with pandemics or shifting workplaces, and lots to do with why employees desire to receive their remuneration. Employees, not able to survive between paychecks and frustrated from turning to abusive loans to bridge the gap, desire to receive their hard-earned pay as and when needed. Over 60% of U.S. workers that have struggled monetarily between pay periods over the past six months firmly believe their financial situation would be enhanced if their employers allowed them immediate availability to their earned wages, free of charge.

While various people might think this a political point, the truth is it is regarding financial health. Based on SHRM, 40% of workers are not able to cover an unforeseen expense of $400. The report additionally references Gartner data that found that less than 5% of major US organizations with a majority of hourly-paid employees use a flexible earned wage access (FEWA) platform, yet it’s expected that this will increase to 20% by 2023.

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

Enhancing the employee experience
Giving workers access to their money on demand may upset, perhaps even, deconstruct, the way we receive pay and review our paycheck. Already its potential is recognized, and, in some cases, companies use it to differentiate their company and attract new talent. As an example, to encourage interest for recruitment, Rockaway Home Care, a New York care facility, is promoting its flexible pay options on the internet.

Others currently provide on-demand pay – when workers finish a shift, they can receive their money as early as 3 a.m. the next day. Via an app, employees can transfer their salary to a bank account or debit card. Walmart is another example of a business offering its employees access to their payroll. Workers may access pay early, up to eight times per year, without cost. The feedback from workers has been incredible, and Walmart is expecting more and more usage. Meanwhile, Lyft and Uber each offer their drivers the ability to be paid after they have earned a certain amount.

The alteration of payroll isn’t confined to the frequency 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 receive their pay whenever they want to, not each 2 weeks or on a monthly period. Most of this expectation has come from the emerging economy and Millennial generations – who expect to be able to receive the earnings they have earned when they need it.

The increasing rise of employees without bank accounts
In 2018 it was estimated that more than 1.7 billion adults worldwide do not have access to a bank account. In America, a 2017 review estimated that 25% of households 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 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 relationships.

There are numerous results of having no banking activity. In some cases, it may result in problems receiving loans or buying a house; it also presents companies with specific challenges. How do you process pay if there is no bank account to move the money into? As a result, employers are increasingly looking for other ways to process payroll, specifically for hourly paid employees. Some are leveraging pay cards, which are topped-up electronically each time an employee receives payment. These pay cards function the way a debit card does, allowing owners to remove cash or shop online.

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

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