Notes

Perhaps On Demand Payroll a Method of the Future?
During a former job, many years back, when this glorious day arrived, the secretary in a loud voice stated that the “eagle had landed.” rewards of our previous month’s labor. When one gets paid once per month, it is a long time between paychecks, so those first few days passed a week or so of being flat-broke were great. I can even remember when I waited tables and collected my own brown packet of cash that was waiting at the end of each pay period!

These days most of us are compensated electronically, but little else has changed.

Most workers battle to stretch their pay from paycheck to paycheck – a recent poll discovered that over half of employees live with issues paying their overhead between pay periods, while nearly one third said an unexpected expense of around $500 could make them unable to pay other financial responsibilities. Another study found that nearly one in three workers runs out of money, even those making over $100,000. 12 million Americans must use payday loans all year, and annually $9 billion is paid in payday loan fees. The average annual percentage interest rate (APR) for a payday loans is 310%.

According to PayActiv, over $89B are paid in charges by the 90M workers living paycheck to paycheck, which is two-thirds of the US population. https://www.immedis.com would annually add over $25B into employees accounts, merely from reduction of insanely high APR fees.

When need forces innovation

We are on the cusp of a new way of life that has relationship with pandemics or shifting work environments, and much to do with how workers want to receive their payroll. Workers, unable to survive between paychecks and tired of turning to high-interest loans to bridge the gap, want to access their hard-earned money as and when wanted. Over 60% of U.S. employees that have struggled monetarily between pay periods in the past six months firmly believe their financial situation would be enhanced if their employers allowed them instant availability to their earned pay, free of charge.

Of course a few people might think this a political point, the fact is it is about financial health. According to SHRM, 4 out of 10 workers are unable to pay an unexpected cost of $400. Their report additionally refers to Gartner data that discovered that less than 5% of large US companies with a majority of hourly-paid workers use a flexible earned wage access (FEWA) solution, but it is expected that this will increase to 20% by 2023.

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

Enhancing the worker experience
Providing employees access to their money instantly might upset, maybe even, deconstruct, the manner in which we receive pay and observe our paycheck. Currently the potential is recognized, and, in many instances, companies are using it to differentiate their company and bring in fresh talent. For example, to stimulate applications for recruitment, Rockaway Home Care, a NY care operation, is promoting its flexible earning options on the internet.

Others currently provide on-demand payroll – where workers complete a shift, they can receive their money as soon as 3 a.m. the following day. Via an app, employees may transfer their pay to a bank account or debit card. Walmart is another example of a company that offers its employees access to their paychecks. Workers can access earnings early, up to eight times per year, for free. The feedback from workers is amazing, and Walmart is anticipating more and more usage. Meanwhile, Lyft and Uber both offer their workers the ability to receive pay after they have earned a specific amount.

The change of payroll is not limited 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 access their pay when they want to, not every 2 weeks or a monthly period. Much of this expectation has come from the emerging economy and Gen Z generations – they expect to be able to receive the earnings they have earned when they need it.

The growing rise of employees without bank accounts
In 2018 it was calculated that in excess of 1.7 billion adults globally don’t have access to a bank account. In America, a 2017 survey estimated that 25% of households are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey found that people who either do not have a bank account, or have an account, but still use financial services outside the banking 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 activity. In a few cases, it can result in difficulty receiving loans or buying a home; 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 looking for alternative ways to process payroll, especially for hourly paid employees. Some are leveraging pay cards, that are topped-up virtually every time an employee receives payment. Those pay cards function the way a debit card does, allowing owners to withdraw cash or shop online.

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

Homepage: https://www.immedis.com