Notes

Are On Demand Payroll a Way in the Future?
In a former job, many years ago, when this amazing time arrived, the secretary in a clear voice announced that the “eagle had landed.” Then as rapidly as possible, we each worked our way to her desk to receive the Payment for our previous month’s work. If you get compensated once a month, it is a long period between payment, so those first few days passed a week or so of being without money were great. I even recall when I waitressed and received my little brown packet of cash that was waiting at the end of each pay period!

Today most workers are compensated electronically, but little else has changed.

Most workers battle to save their money from paycheck to paycheck – a recent poll revealed that over 50% of employees experience issues covering their overhead between pay periods, while almost a third claimed a surprise cost of around $500 would make them unable to meet other financial obligations. Another study found that almost one in three employees run out of cash, even those making over $100,000. 12 million Americans use payday loans each year, and each year $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 fees from the 90M people living paycheck to paycheck, that is the majority of the US population. Instant payroll can each year add over $25B into workers accounts, merely from reduction of insanely high APR fees.

The need drives creation

We are on the cusp of a new paradigm that has connection with pandemics or shifting work environments, and a lot to do with why employees desire to receive their payroll. Workers, not able to last between paychecks and tired of turning to outrageous loans to bridge the gap, need to access their hard-earned money as and when wanted. Over 60% of U.S. employees who have struggled monetarily between pay periods over the past six months believe their financial situation would improve if their employers allowed them instant access to their earned wages, free of charge.

Of course various people could think this a political issue, the truth is it is regarding financial health. According to SHRM, 4 out of 10 employees are not able to pay an unforeseen expense of $400. Their report additionally refers to Gartner information that discovered that less than 5% of big US companies with a majority of hourly-paid workers use a flexible earned wage access (FEWA) solution, but it’s expected that this will grow to 20% by 2023.

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

Enhancing the worker relationship
Providing employees access to their pay on demand could disrupt, perhaps even, change, the way we collect pay and review our paycheck. Already global payroll is recognized, also, in many instances, companies are using it to differentiate their brand and bring in fresh talent. As an example, to stimulate interest for personnel, Rockaway Home Care, a NY care facility, is promoting its flexible pay options on social media.

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

The change of payroll is not limited to the frequency of payments. PayPal, Zelle, and other app provide flexibility and transaction services that employees now expect from their paycheck. They want to be able to receive their pay when they need to, not every 2 weeks or a monthly period. Most of this expectation has come from the gig economy and Millennial generations – who 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 estimated that in excess of 1.7 billion adults worldwide do not have access to a bank account. 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 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 results of having no banking account. In a few cases, it can 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 move the money into? As a result, employers are quickly looking for alternative ways to process payroll, especially for hourly paid workers. Some are leveraging pay cards, that are topped-up electronically every time an employee gets paid. Those pay cards perform the way a debit card does, letting owners to withdraw cash or shop online.

It’s obvious that on-demand pay is something that’s going to be part of the payroll wellness discussion for some time to come.

Read More: https://www.immedis.com