Notes

Are On Demand Paychecks the System of the Future?
During a previous job, many years ago, when this glorious day arrived, the secretary in a loud voice stated that the “eagle had landed.” Then as rapidly as possible, we each made our way to her location to receive the Payment for our previous month’s working. If one gets paid once a month, it’s 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 worked in a restaurant and collected my small brown envelope of cash that was waiting at the end of every pay period!

Today many workers are paid electronically, but little else has changed.

international payroll struggle to stretch their pay from paycheck to paycheck – a recent poll discovered that over 50% of employees have issues covering their expenses between pay periods, while almost a third said an unexpected expense of less than $500 may make them unable to meet other financial obligations. 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 must use payday loans each year, and annually $9 billion is collected in payday loan fees. The average annual percentage interest rate (APR) for a payday loans is 310%.

Based on PayActiv, over $89B are paid in fees by the 90M people struggling paycheck to paycheck, which is two-thirds of the US population. Real-time payroll could annually put over $25B into employees accounts, just from savings from abusively high APR costs.

When desire drives creation

We are on the edge of a new paradigm which has relationship with pandemics or shifting workplaces, and a lot to do with why people want to receive their payroll. Employees, not able to last between paychecks and frustrated from turning to outrageous loans to fill the gap, need to access their hard-earned pay as and when needed. Over 60% of U.S. employees that have struggled financially between payment periods over 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 a few people could consider this a political point, the truth is it is regarding financial health. Based on SHRM, 4 out of 10 workers are unable to cover an unexpected cost of $400. Their report also refers to Gartner data that found that less than 5% of big US organizations with a majority of hourly-paid workers use a flexible earned wage access (FEWA) solution, but it is thought that this will grow to 20% by 2023.

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

Improving the employee experience
Providing workers access to their money on demand may disrupt, maybe even, deconstruct, the manner in which we receive payroll and observe our paycheck. Already its possibility is observed, and, in some instances, companies use it to differentiate their company and bring in new talent. For payroll compliance , to stimulate applications for workers, Rockaway Home Care, a New York care operation, is promoting its flexible pay options on social media.

Others currently provide on-demand payroll – when employees complete a shift, they can access their money as soon as 3 a.m. the next day. Via an app, workers can transfer their pay to a bank account or debit card. Walmart is another example of a company offering its workers access to their paychecks. Workers can access pay early, up to eight times each year, without cost. The reaction from employees is incredible, and Walmart is expecting increased usage. Meanwhile, Lyft and Uber each provide their workers the ability to receive pay once they have earned a certain amount.

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

The growing rise of workers without bank accounts
In 2018 it was calculated that in excess of 1.7 billion adults globally don’t have access to a banking relationship. In the US, a 2017 survey estimated that 25% of households are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey discovered that people who either don’t have a bank account, or have an account, but still use financial services outside the banking 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 many results of having no banking account. In some cases, it can result in problems getting financing or acquiring a house; it also presents companies with specific issues. How do you process pay if there is no bank relationship to move the money into? As a result, employers are frequently searching for alternative ways to process payroll, specifically for hourly paid workers. Some are leveraging pay cards, which are topped-up electronically every time an employee gets paid. These pay cards perform the way a debit card does, allowing holders to remove cash or shop online.

It is obvious that on-demand payroll is something that’s going to be a part of the banking wellness conversation for some time ahead.

Here's my website: https://immedis.com/blog/make-payroll-a-strategic-asset-for-your-global-company/