Pay­roll works the same way in almost every full-time job.  Employ­ees earn mon­ey by work­ing, and they all receive their earn­ings on a set date: pay­day.  How­ev­er, in an era of same-day ship­ping, on-demand movies, and unlim­it­ed mobile access, indi­vid­u­als are increas­ing­ly expect­ing prompt access to near­ly any­thing they need. For employ­ees, this also means get­ting quick­er access to their paychecks.

What is On-Demand Pay?

On-demand pay, or earned wage access (EWA), is an employ­ee pay­ment method in which employ­ees can access wages already earned and owed before the tra­di­tion­al bi-week­ly or month­ly paycheck.

As Amer­i­cans face ris­ing costs for every­day essen­tials, health care and oth­er needs, on-demand pay pro­vides employ­ees with more con­trol over their finances.  Did you know that few­er than four in 10 Amer­i­cans could afford an unex­pect­ed $1,000 expense?  And we all know that expens­es don’t occur on a neat two or four-week cycle!

Growing Payroll Trend

Finan­cial well­ness is the new “must-have” employ­ee ben­e­fit .  Accord­ing to recent data, 64% of Amer­i­cans are liv­ing pay­check to pay­check. Finan­cial stress can lead to unpro­duc­tive, dis­en­gaged or absent employ­ees.   On-demand pay can offer employ­ees access to some or all of their earned wages to help pay bills on time and bet­ter man­age their liv­ing expens­es.  Addi­tion­al­ly, Mil­len­ni­als and Gen Zers are ask­ing for on-demand pay and they’re will­ing to lim­it their job search­es to employ­ers that offer that option.

Financial Wellness

Peo­ple show up to work each day because of their desire for long-term finan­cial well­ness.  Often, finan­cial well­ness has been approached with con­tri­bu­tions to a 401(k) plan and oth­er ben­e­fit-relat­ed com­pen­sa­tion.  But what about every­thing between now and retire­ment?  Things go wrong.  Cars break down, hous­es need repairs and there are unex­pect­ed med­ical bills. For many work­ers, wait­ing 2 weeks or more to get their pay­checks leaves them in a bind.  In the past, employ­ees have turned to cred­it cards and pay­day loans to make ends meet when need­ed.  How­ev­er, these options are noto­ri­ous for hav­ing high inter­est rates and hefty fees.

In today’s fast-paced cul­ture — where Amer­i­cans can get any­thing with the click of a but­ton — it’s not sur­pris­ing that on-demand pay appeals to many work­ers who don’t have sav­ings to han­dle unex­pect­ed expens­es.  On-demand pay is pro­ject­ed to grow quick­ly.  Three years ago, very few com­pa­nies had even heard of it.  Today, it’s not a ques­tion of whether a com­pa­ny will adopt the ben­e­fit but when.

On-Demand Pay Execution

Of course, this means that com­pa­nies might need to update their pay­roll infra­struc­ture because on-demand pay would require some changes with the pay­roll depart­ment.  How­ev­er, there are var­i­ous auto­mat­ed solu­tions that offer sys­tems that can eas­i­ly inte­grate with most pay­roll soft­ware.  These solu­tions enable employ­ees to check how much they have earned and with­draw a per­cent­age of their earn­ings with­out putting stress on the pay­roll team.  When employ­ees access their net pay before their reg­u­lar pay date, the wages they access are deduct­ed from the total earn­ings they’d receive on pay day.

Methods to Provide On-Demand Pay:
  • Direct Deposits — Employ­ers pro­vide imme­di­ate wages to an employee’s bank account.
  • Pre­paid Deb­it Cards — Employ­ers pro­vide a pre­paid or pay­roll card for employ­ees who wish to avoid banks.

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 is worth seri­ous con­sid­er­a­tion – espe­cial­ly because it shows all signs of stay­ing around for the long haul.