Most organizations think about payroll as a rigid process where payment dates are set in stone, but on-demand pay is becoming increasingly popular. These payroll solutions allow workers to access some or all of their earned wages as soon as they have clocked out of a shift through a mobile app. The concept makes perfect sense: You pay your babysitter or the professional who mows your lawn on the same day that they provided the service —so why not your employees?
The modern workplace has changed significantly in recent years, with corporate or office-based employees enjoying more location flexibility. However, frontline workers in sectors such as quick-service restaurants, retail, and the gig economy are also demanding more flexibility. Offering on-demand pay is an effective way to provide this.
Life happens every day, not according to weekly or bi-weekly payroll dates. Household bills, for example, can be due throughout the month. Medical bills and other emergencies might also require immediate funds. On-demand pay allows workers to access their earnings as needed to be prepared for any unforeseen expense, without having to wait until payday. This significantly reduces financial stress.
When employees have real-time access to their earnings, it sets the stage for better budgeting and saving opportunities. For example, they could elect to transfer all their earnings for one day each week into an emergency savings account, boosting their financial resilience.
Many workers fall into the habit of relying on high-interest credit or payday loans to make ends meet, incurring additional charges. On-demand pay solutions like Payactiv’s Earned Wage Access helps employees break the cycle, ensuring that they can pay for important expenses without becoming dependent on these forms of credit.
Some companies allow workers to apply for salary advances every so often to deal with personal emergencies. In most cases, however, this is a protracted, admin-intensive process that creates additional workload for the employer and cannot always meet the employee’s needs in time. An on-demand pay solution addresses these challenges. The entire process is automated, so there is no extra work for the employer and the employee can access their funds in seconds.
When your employees know that their efforts translate to immediately available compensation, they become more motivated, which boosts productivity. To illustrate the positive effects of on-demand pay on recruitment and retention, consider these statistics:
While there are numerous advantages to allowing employees to access their wages after every shift, it’s vital to consider the practicalities of embracing on-demand pay. Here are some factors to consider:
You might be wondering, “Will integrating on-demand pay with my existing systems introduce additional workload for my payroll team?” Fortunately, leading on-demand pay services easily integrate with most payroll providers so you don’t need to make any adjustments to your existing payroll process.
Like any employee benefit, if your workers are unaware of your on-demand pay program, they won’t take advantage of it. Be sure to communicate this benefit and how it works through your internal communications channels.
In addition to on-demand wage payments, the best platforms include comprehensive budget management and saving tools and tips for your employees, helping them improve their financial well-being at no extra cost.
On-demand pay is redefining the payroll landscape, and this payroll model is becoming increasingly popular with both employers and employees. As more employers offer these solutions, more American employees who are struggling to make ends meet will experience relief from financial uncertainty and start the important journey towards long-term financial stability.
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