Notes

Perhaps Instant Paychecks a Method in the Future?
On a previous employment, several years back, when this glorious day appeared, the secretary in a loud voice announced that the “eagle had landed.” Which our previous month’s work. If one gets compensated once a month, it’s a long time between payment, so those first few days after a week or so of being broke were awesome. I can even recall when I worked in a restaurant and collected my small brown packet of cash which was waiting at the end of each pay period!

These days many of us get compensated electronically, but little else has changed.

Most employees struggle to stretch their money from paycheck to paycheck – a recent study revealed that over half of workers have issues paying their overhead between pay periods, and nearly a third claimed a surprise cost of less than $500 may make them unable to meet other financial responsibilities. Another study found that nearly one in three workers runs out of cash, even those making in excess of $100,000. 12 million Americans have to use payday loans each year, and annually $9 billion is paid in payday loan fees. The average annual percentage interest rate (APR) for a payday loans is 320%.

Based on PayActiv, over $89B are paid in charges from the 90M workers struggling paycheck to paycheck, that is two-thirds of the US population. Real-time payroll would each year put over $25B into peoples accounts, merely from reduction of insanely high APR costs.

The need drives innovation

We are on the edge of a new way of life which has relationship with pandemics or changing workplaces, and a lot to do with how employees desire to receive their pay. Employees, unable to last between paychecks and frustrated from turning to outrageous loans to fill the gap, want to access their earned money as and when needed. More than 60% of U.S. workers who have struggled monetarily between pay periods over the last six months know their financial situation would be enhanced if their employers allowed them immediate access to their earned pay, without of charge.

Perhaps a few people might think this a political issue, the fact is it is regarding financial wellness. Based on SHRM, 40% of workers are not able to pay an unexpected cost of $400. The report also refers to Gartner data that discovered that less than 5% of large US companies with a majority of hourly-paid employees use a flexible earned wage access (FEWA) solution, but it’s expected that this will grow to 20% by 2023.

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

Improving the worker environment
Providing employees access to their money on demand might upset, maybe even, deconstruct, the way we receive payroll and observe our paycheck. Already its possibility is recognized, and, in some instances, companies use it to differentiate their brand and attract new talent. For example, to encourage interest for personnel, Rockaway Home Care, a NY care operation, is promoting its flexible pay options on social media.

Others currently provide on-demand payment – where workers complete a shift, they can receive their money as soon as 3 a.m. the next day. Via an app, employees may move their salary to a bank account or debit card. Walmart is yet another example of a company offering its workers access to their paychecks. Employees can access earnings early, up to eight times each year, for free. The feedback from workers has been incredible, and Walmart is expecting increased adoption. Meanwhile, Lyft and Uber both offer their workers the ability to be paid after they have earned a specific amount.

The metamorphosis of payroll is not confined to the amount of payments. Venmo, Zelle, and other app provide flexibility and transaction services that employees now expect from their paycheck. They want to be able to access their earnings when they need to, not each 2 weeks or on a monthly period. Most of this demand has come from the gig economy and Gen Z generations – who expect to be able to access the earnings they have earned when they want it.

payroll compliance increasing rise of employees without bank relationships
In 2018 it was calculated that in excess of 1.7 billion adults globally do not have access to a banking relationship. In the US, a 2017 review estimated that 25% of households are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey discovered that workers who either don’t have a bank account, or have an account, but still use financial services outside the bank system like payday loans to survive. In the UK, there are in excess of one million people without bank accounts.

There are many consequences of having no banking history. In a few cases, it may result in difficulty receiving financing or buying 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 frequently searching for alternative ways to process payroll, especially for hourly paid employees. Some are utilizing pay cards, which are topped-up electronically each time a worker receives payment. Those pay cards perform the way a debit card does, allowing owners to remove cash or shop online.

It’s clear that instant payroll 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