Not surprisingly, the past year has drawn long-awaited attention to the crucial role employers play in addressing financial well-being of their employees. This need, coupled with the increased challenge companies face in attracting and retaining the best talent, has led forward-thinking organizations to adopt smart technologies that address these two priorities.
With technology advancing at a breathtaking pace and the rapid changes taking place in the world of work, companies are in a unique position to rethink workplace policies and benefits and actively define what the future looks like. work. A notable recent development is the shift to the transformation of when employees are paid – from a fixed pay period to pay on demand.
Just as Netflix’s streaming content and Amazon same-day delivery have shifted from intriguing ideas to basic expectation, pay-on-demand access is quickly becoming a much sought-after perk by employees. Also known as access to earned wages, on-demand pay simply means that workers can tap into their earned wages ahead of the traditional payday.
Financial wellness programs focused on employee expectations
Workplace policies have evolved rapidly over the past year and put employees at the center of the work experience. Central to this change is to offer employees the opportunity to be paid at the pace of real life.
This is driven by the needs of the employees. For example, in a recent PwC financial survey on employee well-being 63% of workers say their financial stress has increased since the start of the pandemic.
Additionally, nearly three-quarters of workers facing increased financial stress from the pandemic would be drawn to employers who care more about their financial well-being than their current employers, PwC found.
While a financial well-being offering should have many benefits, pay-on-demand is quickly becoming a table issue.
Workers want flexible pay
Equally high is the desire of workers to access pay on demand. Globally, EY Research Finds 70% of workers are now paid monthly or every two weeks, yet four out of five employees are keen to use solutions giving them access to salaries already received before the traditional payday.
Bills and expenses don’t wait for payday.
Many people live paycheck to paycheck, with 42% of full-time workers in the United States struggling to meet household expenses on time each month, according to a recent survey. High incomes are not immune to this, with nearly a third of people earning more than $ 100,000 a year also having difficulty meeting their payments, according to an EY study.
However, options have been largely limited for low earners when they find themselves in financial difficulty. Payday loans – which are often the only recourse for underserved and underbanked communities – can incur fees that run up to an annual percentage of 300%, the Center for Responsible Lending said. Credit facilities can charge up to 20% interest and fees. Many low-income workers face billion overdraft fees.
Reducing financial stress is also a victory for employers
Pay-on-demand provides workers with funds to deal with emergencies without having to resort to high-interest payday loans or carry balances on credit cards. With pay-on-demand, workers also benefit from better liquidity and better control of their finances.
While increasing wages and benefits is often unrealistic, companies that offer pay-on-demand can help reduce financial stress for their employees without affecting business results. With 80% of employers Noting that financial stress reduces the performance level of their employees, there is no shortage of evidence on the role employers need to play in preparing people for financial success.
Advances in technology mean employers now have a choice when choosing a pay-on-demand solution.
Find the right payment on demand solution
1. What is the cost, especially for employees? Only a few pay-on-demand service providers offer the service free of charge to workers, and even fewer do so at no cost to employees and employers. Be sure to research the fees and the frequency of fees, so workers know how much each transaction will cost them. Even a small fee, say $ 5, adds up if workers only access small dollar amounts, but do so frequently.
2. Is this a real payroll? Accurate, on-demand payment is much different from approximating income. Select a vendor who can process on-demand payroll requests as regular payroll with the appropriate tax withholding. This ensures accurate payment and income statement for each on-demand payment, to comply with federal, state, and local remittance requirements.
3. Will there be any changes to payroll processes? Pay-on-demand done correctly should not require any changes to the company’s payroll processes. Payroll administrators should continue to close payroll on a weekly, biweekly, biweekly, or monthly cycle without increasing their workload. This means administrators won’t have to spend time reconciling at the end of the pay period.
4. How are the calculations made on what workers can access? Many pay-on-demand service providers estimate wages earned and reconcile after the fact. This can be tedious and cause workers to receive too much money up front and have less than expected later – not to mention the additional back office load on payroll staff. Real-time calculation of wages earned means employees only have access to what they have, nothing more. And ensures that payroll is reconciled at the end of each pay period, transparently and without intervention from the payroll team.
5. Will it offer additional financial wellness tools? OPay-on-demand is a promising tool to improve the financial well-being of employees. Over time, pay-on-demand solutions can also include valuable tools, such as financial planning and rewards programs.
Pay streaming in the future
While the payroll has been slow to change for decades, technology now enables huge advancements. The following ? Pay these “flows” to workers as they earn it, whether they are full-time, part-time or on contract in the booming gig economy.
With continuous pay, workers will have immediate and full access to their earned wages, minus deductions. When continuous pay occurs, workers will be even more empowered to control their own finances.
The result of all of these advancements is that flexible compensation is now, more than ever, a benefit that companies can leverage to best meet the needs of their employees.
Seth ross is Managing Director, Dayforce Wallet + Consumer Services at Ceridian.