It’s old news that the economy has been hard on organizations, but you might be surprised how much it has affected your employees. Seventy-eight percent of Americans are living paycheck to paycheck and are financially unprepared for unexpected expenses. That means nearly eight out of ten of your employees go to bed every night worrying about how they’ll pay for their housing and groceries.
Another survey found that:
- Nearly half of Americans have depleted their savings.
- If faced with a $500 emergency, 80 percent of people wouldn’t be able to pay for it.
- Since the pandemic started, over 40 percent have taken on more debt than they normally would.
- More than 25 percent of people have accumulated $10,000+ in new debt during 2020.
To help employees make it from paycheck to paycheck, an increasing number of companies are looking at alternative payroll formats. Instead of monthly or even weekly pay, these employers are now offering workers an on-demand pay option.
Related reading: How to Grow Your Business During Challenging Times
On-demand pay can be configured in various ways, but the basic idea is that your employees can get paid when they want — even at the end of a shift. Typically, the money is electronically deposited into their bank account, or onto a paycard.
Growing Payroll Trend
An on-demand pay option may be a foreign idea in your organization, but the pay model is starting to catch on. Several industries are adopting it more widely, and the trend could become a mainstream option before long.
In fact, Millennials and Gen Z are asking for on-demand pay, and they’re willing to limit their job searches to employers that offer the option. Feeling crushed by student loan debt, these employees have the deck stacked against them when it comes to building financial security. On-demand pay can help provide a much-needed safety net.
Benefits of On-demand Pay
On-demand pay can provide enticing benefits to you and your employees. The pay model:
- Incentivizes employees to accurately report their time each shift
- Creates a recruiting advantage — especially among Millennials
- Helps retain top talent
- Helps your best workers to control cash flow
- Boosts employee morale
By providing your employees with access to funds they’ve earned before their regular pay day, you offer them a better way to fill the gaps between paychecks. You won’t have to deal with requests for a pay advance, and your people won’t need to resort to a payday loan with astronomical interest fees.
The pay model also gives you the opportunity to show your employees that you care about their well being outside of work.
Don’t miss this article: Will Your Payroll Plan Work in the New Normal?
What to Consider Before You Decide
It’s important to understand several considerations before you decide whether on-demand pay makes sense for your organization. Here are some top questions to ask before you decide:
How will this impact your payroll staff?
Find out if you’ll still be able to process payroll on the same schedule you’re currently following, and ask about how disruptive the changes will be to your current payroll process.
How long will implementation take?
Get a good sense of the project scope and the disruption you’ll be experiencing while implementing the new system.
What kind of support will you get after implementation?
There are bound to be questions from employees and from the payroll department. Will the vendor provide an orientation to the new system? If there’s a glitch at launch, how will it be handled, and how quickly?
What are all the costs involved, and will they outweigh the benefit of retaining employees?
Find out how you will be charged before, during, and after implementation. Will there be hosting fees or transaction fees? Will your employees be charged for using on-demand pay?
What are the disbursement options?
Some models use a paycard system, and others use electronic banking. Some give you the flexibility of either. Your payroll department (and your employees) may have preferences or requirements for one option versus another.
Is On-demand Pay Right for Your Employees?
When you consider the current financial strains of your employees, and the expectations of the emerging workforce, an on-demand pay model can be a great benefit to your organization and to the people you’re responsible for.
In tough economic times, the companies that take the best care of their employees are the ones that emerge stronger. While on-demand pay is a newer concept, it’s one that’s worth serious consideration — especially because it shows all signs of staying around for the long haul.