Notes

Is On Demand Paychecks the System in the Future?
In a former employment, several years ago, when this glorious time arrived, the secretary in a loud voice announced that the “eagle had landed.” Which our previous month’s labor. If one gets paid once every month, it’s a long time between payment, so these initial few days passed a week or so of being broke were awesome. I can even recall when I worked in a restaurant and collected my little brown envelope of cash which was waiting at the end of each pay period!

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

Many employees struggle to stretch their pay from paycheck to paycheck – a recent poll found that over 50% of workers have issues paying their expenses between pay periods, while almost a third claimed an unexpected expense of around $500 may make them unable to meet other financial responsibilities. Yet another study found that nearly one in three employees run out of money, even those earning over $100,000. 12 million Americans have to use payday loans all year, and each year $9 billion is collected in payday loan fees. The average annual percentage interest rate (APR) for payday loans is 310%.

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

When need pushes innovation

We are on the cusp of a new paradigm which has relationship with pandemics or shifting work environments, and much to do with why employees desire to receive their remuneration. Employees, unable to survive between paychecks and tired of turning to high-interest loans to fill the gap, want to access their hard-earned money as and when needed. Over 60% of U.S. employees who have struggled financially between payment periods over the last six months know their financial situation would improve if their employers permitted them immediate access to their earned wages, free of charge.

Of course some people might consider this a political issue, the truth is it is regarding financial health. Based on SHRM, 40% of workers are unable to cover an unforeseen cost of $400. Their report also refers to Gartner information that found that less than 5% of big US companies with a majority of hourly-paid workers use a flexible earned wage access (FEWA) solution, yet it’s expected that this will grow to 20% by 2023.

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

Improving the employee environment
Providing employees access to their money instantly could upset, perhaps even, change, the way we collect pay and view our paycheck. Already its potential is recognized, also, in some cases, companies use it to differentiate their brand and bring in new talent. For example, to stimulate applications for recruitment, Rockaway Home Care, a NY care operation, is promoting its flexible pay options on social media.

Others currently provide on-demand pay – when employees finish a shift, they can receive their money as soon as 3 a.m. the following day. Using Immedis Payroll Service , workers may move their pay to a bank account or debit card. Walmart is another case of a company that offers its employees access to their payroll. Workers can access wages early, up to eight times each year, for free. The reaction from employees is incredible, and Walmart is expecting more and more usage. Meanwhile, Lyft and Uber each offer their workers the ability to be paid after they have earned a specific amount.

The alteration of payroll is not limited to the amount of payments. PayPal, Zelle, and other app offer flexibility and transaction services that employees now expect from their paycheck. payrll service want to be able to receive their pay whenever they want to, not every 2 weeks or on a monthly cycle. 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 need it.

The increasing rise of employees without bank accounts
In 2018 it was calculated that more than 1.7 billion adults worldwide 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 report found that people who either don’t have a bank account, or have an account, but keep using financial services outside the banking system like payday loans to make ends meet. In the United Kingdom, there are over one million people without bank relationships.

There are several results of having no banking history. In some cases, it may result in difficulty receiving financing or acquiring a house; it also presents companies with specific issues. How do you process payroll if there is no bank relationship to move the money into? As a result, employers are increasingly searching for other ways to process payroll, especially for hourly paid employees. Some are utilizing pay cards, that are topped-up virtually every time a worker receives payment. Those pay cards perform the way a debit card does, allowing holders to withdraw cash or shop online.

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

Read More: https://immedis.com/blog/make-payroll-a-strategic-asset-for-your-global-company/