Employee-centric wages: The rise of the daily pay benefit
With low unemployment and workers willing to take a job across the street for a mere $.25 increase in their hourly wage, employers need innovative ways to increase employee engagement and retention. At the same time, the new workforce, comprised largely of millennials and Gen Z, is looking for greater control, flexibility and transparency in their work lives. They want a say in their benefits, and one of the things they are looking to change is traditional payroll and its associated pay cycles.
This is a demographic that doesn’t understand why they can’t access the money that they’ve already earned. Not having that access is contrary to all of their other instantaneous life experiences.
Enter the rise of employee-centric pay, better known as the daily pay benefit or instant access to earned wages. This is a benefit that appeals to this demographic, along with many others in the current workforce who are living paycheck to paycheck. They are often at the mercy of late fees, overdraft charges and exorbitant payday loan interest when bill are due but are out of sync with payday. These also are the workers who can’t get to work if their car breaks down because many of them have no savings for emergencies.
A daily pay benefit puts employees in the driver’s seat when it comes to receipt of wages they have, in fact, already earned. It also helps them with more fiscally responsible budgeting, especially when they can view an available balance that closely approximates the net earnings they will receive in their next paycheck. Never before have shift workers had this level of transparency — a clear view of their earned wages to help them make decisions and answer questions like, “Will I have enough money to pay my bills next week if I go out to dinner with friends tonight?” “Can I take my kids to the movies?” “If I work another shift, will I make enough to buy those shoes I want?”
Daily pay benefits employers as well. Many report that it’s easier to attract applicants for new positions that offer a daily pay benefit. Others have noticed a marked decrease in turnover and the costs associated with replacing employees who leave their company. And there are those too who have seen an increase in timeclock compliance along with an uptick in requests for additional shifts among employees who have access to the daily pay benefit.
Payroll providers are also offering new solutions to stay competitive. In a recent Paychex survey, business owners reported that one of their top five payroll priorities in 2019 is “extending daily pay options.”
A daily pay benefit shows impressive ROI for both employers and employees. By offering one, employers show concern about the financial well-being of their employees — enough to actually provide them with a life-changing benefit that increases employee engagement and motivates them to stay. And it helps employees with budgeting and makes it easier for them to pay bills on time and meet unanticipated emergency expenses, without having to pay late and overdraft fees or rely on predatory payday loans. A win for the entire team.