The HR Tech Compass Blog
Helping You Navigate The World of HR Technology
By Chris Harvey
Imagine a world where your employees no longer have to count down the days until their next payday, a world where their hard-earned money is at their fingertips when they need it. Well, that day has arrived with On-Demand Pay, also known as Earned Wage Access. On-Demand Pay can be a game-changer for your employees’ financial wellness and your ability to attract and retain them.
What is On-Demand Pay?
On-Demand Pay (also known as Earned Wage Access) provides employees the ability to access their earned wages prior to their normally scheduled payday. This benefit has become increasingly popular with organizations and their employees.
The Rise of On-Demand Pay
Ceridian was a trailblazer in the HR industry when it introduced Dayforce Wallet to provide On-Demand Pay in 2020, a move that resonated strongly with its customers during the economic uncertainty of the Covid-19 pandemic. Fast forward to June 2023, and Ceridian Dayforce proudly announced that over $2 billion had been paid early to employees across 1,640 Dayforce Wallet customers. Moreover, a staggering 50% of eligible employees embraced this newfound financial flexibility by signing up for On-Demand Pay.
But Ceridian isn't the only player in the game. On-Demand Pay is now offered by leading HR vendors like ADP, UKG, isolved, and Paylocity. The HR Technology Product Comparison includes which vendors offer On-Demand Pay. If you haven't explored this option with your current HR vendor, it's time to ask them about providing this valuable feature to your employees.
Financial Stress and Economic Circumstances
A Sept 2023 "CNBC Your Money Survey" revealed that 74% of working Americans are stressed about their personal finances and 61% consider themselves "living paycheck to paycheck".
For years, payday loan providers have taken advantage of financially strapped consumers, charging exorbitant interest rates. These predatory practices are a result of many employees not having enough money to cover expenses between paychecks. In fact, approximately 12 million Americans turn to payday loans at least once a year, and some rely on them almost every week. With inflation at recent highs and wages struggling to keep up, the need for early access to earnings has never been more critical.
Why Offer On-Demand Pay to Your Employees?
On-Demand Pay isn't just a leap forward for employees; it's a powerful employee benefit that enhances financial well-being and boosts engagement and retention. Recent research reveals that 63% of On-Demand Pay users reported it positively impacted their perception of their employers. Organizations that offered On-Demand Pay demonstrated that they care about their employees' financial flexibility and well-being.
What's even more astounding is the impact on younger employees aged 18-29. A remarkable 45% of them said that access to On-Demand Pay influenced their decision to stay with their current employer. It's a retention game-changer that few other benefits can match. Moreover, On-Demand Pay isn't exclusive to frontline and hourly staff. HR Leaders report they were surprised to find how popular On-Demand Pay has been with their professional employees. It isn't shocking to find unexpected bills, like car repairs or medical expenses, can affect anyone. Additionally, some employees simply appreciate the convenience of early access to their earnings, even without an immediate financial need.
The Opportunity to Be an Early Adopter
Surprisingly, On-Demand Pay as an employee benefit hasn't been widely adopted, yet, by many organization. In a recent LinkedIn poll, only 16% of respondents offered this benefit or planned to do so. As an employer, you have a unique opportunity to be an early adopter, setting your organization apart in the competitive talent market, and attracting and retaining talent at all levels.
HR Technology Product Comparison
Compare the top mid-market HCM solutions on 20 different aspects of feature/functionality including On-Demand Pay.
The Future of Payroll
Imagine a scenario where a company not only embraces On-Demand Pay but takes it a step further, committing to paying their employees for ALL their earned wages within a mere 48 hours of being earned. Such a bold move would dramatically shift employee satisfaction and the company's ability to attract and retain top talent. The immediate access to earned wages would significantly enhance employee financial wellness and flexibility, fostering a sense of security and trust. This company would stand out as a trailblazer in the realm of employee benefits, not just meeting but exceeding employee expectations. The positive ripple effect would extend beyond the workplace, garnering substantial press coverage and recognition as a role model for employee-focused businesses. In a competitive talent market, this dramatic approach would make a company an irresistible choice, fostering unmatched loyalty and elevating your organization as a leader in the eyes of both employees and the public.
A Shift to the 21st Century
For centuries, employees have endured the wait for payday, but times are changing. We're on the cusp of a revolution, where daily automatic pay deposits or pay card loads will become the norm. Working today and getting paid later will be viewed as an outdated concept. It's not that employees didn't deserve access to their earnings when they earned them; it's just that our systems couldn't keep pace with the demand for faster access.
Conclusion
If On-Demand Payroll hasn't been on your radar, I hope this has provided you with a fresh perspective and compelling reasons to consider it as a powerful benefit for your employees in 2024 and beyond.
Want to Learn More?
To learn more about On-Demand Payroll, check out the recent HR on the Offensive Podcast: "Is Earned Wage Access the Future of Payroll and Financial Well-Being?"
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