Are On Demand Paychecks a System of the Future?Posted by Hammond Marks on January 25th, 2021 In a former employment, many years ago, when this amazing moment appeared, the secretary in a clear voice stated that the “eagle had landed.” rewards of our previous month’s work. When one gets paid once a month, it’s a long period between paychecks, so these first few days after a week or so of being without money were awesome. I can even remember when I waited tables and received my own brown packet of cash which was waiting at the end of each pay period! Today most workers get paid electronically, but little else has changed. Many employees battle to save their pay from paycheck to paycheck – a recent study found that over half of employees experience trouble covering their expenses between pay periods, while almost one third said an unexpected cost of less than 0 can make them unable to meet other financial responsibilities. Another study discovered that almost one in three workers runs out of money, even those making over 0,000. 12 million Americans must use payday loans each year, and each year billion is collected in payday loan fees. The average annual percentage interest rate (APR) for payday loans is 310%. According to PayActiv, over B are paid in costs from the 90M people living paycheck to paycheck, which is the majority of the US population. Instant payroll could annually put over B into peoples wallets, just from savings from insanely high APR costs. The desire pushes innovation We are on the edge of a new world order that has little to do with pandemics or shifting work environments, and much to do with why people desire to receive their pay. Workers, not able to survive between paychecks and tired of turning to abusive loans to bridge the gap, want to receive their hard-earned pay as and when needed. More than 60% of U.S. workers that have struggled monetarily between pay periods over the past six months firmly believe their financial circumstances would improve if their employers allowed them immediate access to their earned pay, without of charge. Of course a few people might think this a political point, the fact is it is regarding financial wellness. Based on SHRM, 4 out of 10 employees are not able to cover an unforeseen expense of 0. The report also references Gartner data that discovered that less than 5% of large US organizations with a majority of hourly-paid employees use a flexible earned wage access (FEWA) platform, yet it is expected that this will increase to 20% by 2023. Why would a worker need to wait for days or weeks to receive pay for their time and ability? Enhancing the employee environment Giving employees access to their pay instantly will disrupt, perhaps even, change, the manner in which we receive payroll and view our paycheck. Already its potential is recognized, also, in some cases, companies use it to differentiate their company and bring in new talent. As an example, to encourage applications for workers, Rockaway Home Care, a NY care facility, is promoting its flexible earning options on the internet. Others are providing on-demand payment – when employees finish a shift, they can receive their money as early as 3 a.m. the following day. Via an app, employees may transfer their salary to a bank account or debit card. Walmart is another case of a company that offers its workers access to their payroll. Employees can access wages early, up to eight times each year, for free. The feedback from workers has been amazing, and Walmart is anticipating increased adoption. Meanwhile, Lyft and Uber both offer their workers the ability to receive pay once they have earned a certain amount. The alteration of payroll is not confined 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 receive their pay whenever they need to, not each 2 weeks or a monthly period. 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 growing rise of employees without bank accounts In 2018 it was calculated that more than 1.7 billion adults globally 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 survey discovered that workers who either do not have a bank account, or have an account, but still use financial services outside the bank system like payday loans to survive. In the United Kingdom, there are over one million people without bank relationships. There are several results of having no banking activity. In a few cases, it can result in problems receiving financing or buying a home; it also presents employers with specific issues. How do you process pay if there is no bank account to move the money into? As a result, employers are increasingly searching for alternative ways to process payroll , specifically for hourly paid workers. Some are leveraging pay cards, which are topped-up electronically every time a worker receives payment. Those pay cards function the way a debit card does, letting holders to withdraw cash or shop online. It is obvious that instant payroll is something that is going to be a part of the banking wellness discussion for a while to come.Like it? Share it! More by this author |