We live in a 24/7 world where all aspects of our lives, from shopping and banking to watching movies, listening to music, learning and communicating, are on demand. We must now ask ourselves: why are employees paid every two weeks?
It’s time for business leaders and HR managers to redefine flexibility beyond where or when they work, to offer flexible compensation and benefits. Access to earned wages between pay periods (known as pay-as-you-go and earned wage access) via a mobile app at a time other than a weekly or bi-weekly pay period is a flexible benefit that is catching the attention of employers and employees.
The Federal Reserve research finds that 40% of adults can’t cover an emergency expense costing $400, leaving many living paycheck to paycheck and all too often dipping into payday loans, bank overdrafts, credit card late fees and borrowing from friends and family to fund emergency cash needs.
New employee expectation: payment on demand
The American Payroll Association (APA) reports that, among other things, more than 60% of American workers believe that all employers should offer their employees immediate access to their daily pay.
While pay-on-demand was originally designed for frontline workers to meet urgent cash needs between pay periods, the future may look very different. Employees use these mobile apps to accrue wages before the end of their normal payroll cycle by transferring earned wages to a bank account, prepaid debit card, or payroll card. This process differs from a payday loan because the worker has already done the work for which they are being paid.
According to Eric Wade, Product Strategy Manager at Payment“Pay-as-you-go has been introduced Payment customers in December 2019 as a way to address the financial insecurity of workers by allowing them instant access to their earned wages, when they need it, and at no cost to them. (Payment use it payactiv card for direct deposit, so payactiv is the provider that manages this program for Payment.) As Payment‘s Wade shares, “Looking at our customers who use pay-as-you-go, we find both industries with large populations of frontline workers such as restaurants, home healthcare and hospitality, as well as investment companies, consulting firms and law firms.
A recent Payment A survey shows that 45% of their customers said they would be interested in using Pay-on-Demand, which is a 14% increase from a similar survey conducted in 2018. Since the launch of Pay-on- Demand, twice as many employees signed up for Pay-on-Demand. -on-demand over the past two years, with the average number of employees signing up per customer doubling over the past two years. These workers use Pay-on-Demand to access their earned wages four times a month, on average.
In addition to meeting the need for immediate access to earned wages to pay for an unforeseen emergency, other benefits of pay-as-you-go include helping workers build financial literacy and access a range of financial resources to build savings strategies.
Unifi: Bringing Pay-As-You-Go to Its Aviation Services Workforce
Unified is a leader in aviation services, with a frontline workforce of 23,000 employees in 200 airports across North America. As Dr Archana Arcot, Chief People Officer of Unified, shares, “Our main reason for offering pay-as-you-go to our employees is to relieve their financial stress and make it easier to access financial well-being. Many of our workers rely on expensive solutions like payday loans which have a Average APR of 400%. While doing our research, we discovered that pay-as-you-go is used to access cash in an emergency. One of our employees used our mobile app solution to access money to get his car out of a tow lot and was able to avoid missing work. Our Pay-on-Demand application was able to allow him to continue his working day and saved our company from unexpected absenteeism. »
Importantly, Wade and Arcot point out that pay-as-you-go is really a way to boost the financial well-being of their workforce. Employers are increasingly sensitive to the stress caused by financial anxieties. Recent research of 19,000 working adults by the Global Center for Financial Research at George Washington University found that 60% of respondents indicated that they felt anxious when thinking about their personal finances, while 50% of respondents felt stressed when discussing their finances.
Advantages of the pay-as-you-go offer
The benefits of flexible payroll are numerous, and a few include:
Increase overall employee retention. American workers say they would stay in a job longer if they could get immediate access to their earned wages after each day of work at no cost. A recent Payment A survey of its customers found that 42% of employees said they would be less likely to leave their current employer if they offered a pay-as-you-go option.
Attraction tool for young workers. The APA survey found that 79% of all American workers would be more interested in applying for a job that pays them the same day they work, which is 30% higher than the 2018 study. Indeed, workers Millennials (84%) and Gen Z (87%) showed more interest in applying for a job that pays them the same day they work.
A stronger employer value proposition. Companies are measure the likelihood that their employees will recommend their employer to a friend or colleague. The APA investigation revealed 70% of respondents said they would recommend the employer to friends, family or others looking for a job, with 67% saying they would see a longer career at a company offering a flexible pay option, and 69% of workers would choose to work an extra shift or work more optional days to access earned wages sooner.
Looking Ahead: The Future of Flexible Payroll. As pay-as-you-go gains traction, employers need to work with their payroll processors to accommodate deductions and deposits more frequently than the typical bi-weekly or monthly payroll cycle and to ensure that their business complies with the US Treasury’s payment-on-demand processing. Finally, employers must develop a communication plan to clearly define what Pay-on-Demand is in the company and how it is not a loan but access to earned wages.
With inflation at its highest level in 41 years, employers are looking for ways to increase talent attraction and retention, and employees are demanding flexibility in all aspects of their working life, location and time. when they are working on flexible compensation and benefits. “In the new World CHRO for future research Executive Networks, eight out of 10 global organizations face a significant talent retention issue. While it was important to pay attention to the employee experience before the pandemic, employee experience now focuses on how to ensure fairness and equity in all aspects of the human experience of the work.
Offering pay-as-you-go is just one strategy employers can leverage to create an engaging employee experience for all workers: knowledge workers and frontline workers. Building an improved employee experience that is fair and equitable for all workers starts with designing flexible work practices and reviewing flexible compensation practices to create a more human experience for all employees.