Top 5 Reasons to Offer Payroll on Demand for Employees
Have you considered adding earned wage access to your employee offerings? If you've thought about payroll on demand for employees, you're not alone.
According to recent data, 63% of Americans are living paycheck to paycheck. That's not just due to the current economy, either. A large percentage of those polled indicated that they were living beyond their means before the pandemic. According to some statistics, that number might be as high as 80% of American workers. For employers, personal financial stress is something to consider as it can impact productivity dramatically, according to 80% of employers. Plus, financially stressed employees are more likely to look for a new job.
What can your company do to help employees? On-demand pay is one strategy that many companies find helpful in supporting their staff.
What is payroll on demand?
On-demand pay allows your employees to access earned wages when they need them. Your pay cycle stays the same, but employees can access funds they've already earned at any point. Instead of waiting for their next paycheck, or putting necessities on high-interest credit lines, the employee can access the amount of money they've already earned when they need it.
This can greatly benefit the many employees who are stretched thin, living paycheck to paycheck. It gives them more control over their finances, without going into debt to stay on track. For employees, it means there's a safety net they can tap into when they need, which alleviates some of the financial stress they might ordinarily have. As the employer, you won’t have to lift a finger – it’s all done automatically, same day, without extra paperwork and you don’t have to worry about re-calculating their payroll.
Companies that offer easy-to-use payroll on-demand features give their employees more control over their earnings or at least the schedule on which they can access their funds. There are fees for workers who use this feature, but it can be an advantage when they're hit with unexpected expenses. Productivity increases because employees are less concerned about financial stresses. It also shows employees that the company supports their personal needs, as well as their professional growth.
Top 5 reasons to offer on-demand pay
Your employees’ financial wellness should be a big concern. Employees who have financial stress are less productive and tend to look for other employment opportunities. Here are some of the ways that offering earned wage access can improve the situation for your employees:
It's an excellent idea to offer solid information about financial literacy for employees to manage this feature for their best benefit.
- Eliminate Late Fees and Improve Credit: Paying bills on time is an important aspect of financial security. Did you know 47 million Americans expected to miss a credit card payment in 2021? For many Americans who live paycheck to paycheck, one extra expense can mean missing bills and due dates. Ironically, those missed bills mean late fees. So the people who can least afford extra expenses wind up paying more in bills simply because they can't pay them on time. Late payments also damage credit ratings. For those workers, that can mean higher charges on future payment plans and the inability to take out loans for large purchases, such as cars and homes. On-demand pay lets employees withdraw what they need when something extra pushes them behind.
- Ability to Afford Unexpected Costs: Things go wrong. Cars break down, houses need repairs, and there are unexpected medical bills. There are all sorts of extra expenses that your employees may not have budgeted for. Being able to withdraw the needed funds in an emergency means that your employee can relax. They don't have to stress over where to find money or how to do without things they may need.
- Employees Won't Need to Take Bad Loans: The world is full of predatory lending. Many workers who live paycheck to paycheck feel pressured to take out loans with high-interest rates to make ends meet. Being able to access current earnings can help them budget and avoid high-interest loans.
- Helps Employees Feel Supported: For employees, the ability to access their earnings is a positive aspect of employment. They don't need to use the feature if they don't want to, but it's available if they ever have the need. This level of support diminishes their financial stress. For the employer, it means that employees are more content and productive. It can also decrease employee turnover.
- Diminished Stress Improves Overall Health: Stress is a known health risk. For employees, the extra support to stay on top of their personal finances can diminish stress levels and help promote better health overall. For employees, better health means a more satisfying quality of life. For employers, it also means fewer sick days and higher productivity among their staff.
How does payroll on-demand work?
Your employees can request earned wages at any point during the pay period. The fees for the feature are paid by the employee. There is typically a low fee charged to the employee every time they make an early withdrawal. For employees, this means being extra vigilant about how and when they use this feature. If they use it too often, the extra fees can add up quickly. However, for emergency situations, most employees appreciate the option to help them balance their finances without taking out loans or running late on their bills.
Offering on-demand pay is another benefit that attracts top talent. Offering payroll on-demand is an extra option that employees do appreciate. This puts the employee in control of when they draw their earned wages. It's an open option, so employees who don't want to use it don't need to. At Paylocity, on-demand payroll is handled through the platform, so taxes and legal requirements are all handled without any extra work for the company or HR department. There's no worry over payroll errors or discrepancies due to the feature.
Who can benefit from on-demand pay?
Employees and employers both benefit from on-demand pay options. For employers, offering this service is a way to help employees manage their personal finances. It shows that the company is invested in the well-being of the employee and improves company culture. It also diminishes the financial strain many workers feel, which improves performance and job satisfaction.
For employees, on-demand pay gives them a financial safety net to help them navigate life's challenges. Contact us to learn more about our on-demand pay solutions!