What is On Demand Pay? The Benefits of Flexible Pay SchedulesAugust 22, 2022
Don’t make employees wait two weeks for their paycheck. Learn how on demand payroll services benefit employees and employers.
Have you considered adding earned wage access, also known as on demand pay, to your employee offerings? On demand pay allows workers to request part of their paycheck before the next pay period – an appealing benefit, especially for employees who may be dealing with an unexpected expense. And with two-thirds of Americans living paycheck to paycheck, an expediated pay day can help relieve some financial stress.
A large percentage of Americans surveyed indicated that they were living beyond their means even before the pandemic started. According to a CareerBuilder study, that number might be as high as 80%. For employers, personal financial stress is a serious consideration as it can impact productivity dramatically, according to 80% of organizations that responded.
What can your company do to help employees manage personal financial strain? On demand pay is one strategy that many companies find helpful in supporting their staff.
What is On Demand Pay?
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 as on demand wages.
On demand wages can greatly benefit employees who are in need of their wages before payday. This benefit gives them more control over their finances. On demand payroll services can act as a safety net employees can tap into when they need. Once the requested wages are approved by the employer, it’s executed automatically, often same day, without extra paperwork, and you don’t have to worry about re-calculating their payroll.
How Does On Demand Pay Work?
With on demand pay, your staff can request earned wages through an employee self-service portal at any point (and anywhere through an HR mobile app), during the pay period. In Paylocity, on demand payment is managed through the payroll system, so taxes and legal requirements are all handled without any extra work for the company or HR department. As the employer, you won’t need to worry about cash flow issues, managing deductions, or payroll errors with this feature.
There is typically a low fee charged to the employee every time they make an early withdrawal of wages. However, Paylocity’s on demand payroll service provides the option for the employer to pay the fee if they chose.
The Benefits of On Demand Payroll for Employees
Your staff’s financial wellness should be considered when determining your benefits package, as employees who have financial stress are less productive and tend to look for other jobs. Here are some of the ways that offering payment on demand can benefit employees:
1. Reduced Likelihood for Late Fees
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. On demand pay lets employees withdraw what they need when something extra pushes them behind, which can help them avoid costly late fees.
2. Assistance with 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 can help your employee tap into resources when needed. With on demand payment, employees may have less stress over where to find money or how to do without things they may need.
3. Reduced Need for Bad Loans
Workers who live paycheck to paycheck could feel more pressure to take out loans with high-interest rates to support their expenses. Being able to access current earnings with on demand pay can help them budget and avoid high-interest loans.
4. Helps Employees Feel Supported
For employees, the ability to access their wages on demand is a significant benefit 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 gives a sense of security.
For additional support, offer easily accessible information about financial literacy for employees to manage this feature for their best benefit.
The Benefits of On Demand Payroll for Employers
Offering on demand payroll services is a way to help employees manage their personal finances and alleviate some amount of stress. Let’s explore how offering this type of benefit can help employers as well:
1. Showcases the Employers’ Investment in Employees
On demand payroll is a means of offering financial support and flexibility, which directly impacts an employee’s wellbeing. Offering these types of benefits showcases that an organization is invested in the employee, which in turn can improve employee morale and company culture.
2. Serves as a Competitive Benefit for Attracting Talent
It’s no surprise that benefits can sway potential new hires one way or another. A recent Gallup poll found that 64% of workers say an increase in pay or benefits is very important to them when accepting a new job. Offering on demand wages can be one effective benefit that attracts top talent and also serves as a key differentiator in a competitive labor market.
It’s important to highlight on demand payment options during the recruitment and hiring process so that prospective employees can get a clear view of benefits employers offer. It’s equally important that current employees understand what’s available to them to keep them engaged with the company.
3. Happier and More Productive Employees
Employers can also benefit from employees that feel supported by the flexibility of on demand pay offerings. When employees have support systems in place to help deal with unexpected expenses, they may be better positioned to cope with financial stress. This in turn can contribute into a happier and more productive workforce.
4. Better Retention and Reduced Turnover
According to a PwC 2022 employee wellness survey, financially stressed employees are twice as likely to look for a new job. Financial options like on demand pay can provide more support to workers dealing with cash or debt problems, which may deter them from seeking a new position. For the employer, this means better retention and reduced employee turnover.
Staying Compliant with On Demand Payroll
On demand payroll is subject to state and federal regulations, and the legal landscape evolves as individual states trial new legislation. Ultimately, employers need to operate within the confines of legislative requirements to ensure on demand payroll compliance. To help support employers, Paylocity handles on demand payroll within the platform, which means legal stipulations are embedded into the system and require no additional labor from employers or HR professionals.
Is On Demand Payroll Right for You?
Payroll on demand can benefit all types of employees and small businesses in particular benefit from on demand payroll services. When budgets are tight and there’s a lot on HR’s shoulders, a flexible payment option can assist in retention and benefit efforts when raising wages isn’t financially feasible.
Additionally, in industries where attracting and retaining talent is of particular concern, on demand payment can be a way to stand out from competition in the battle for talent. And with many employees not just leaving jobs, but switching from one industry to another, the stakes are higher. In fact, the consumer and retail industry sees the highest numbers of employees who have left positions and the industry for new roles. Offering on demand wages can be a meaningful differentiator within your benefits package that attracts quality candidates and help keep your existing employees on board.
Employees and employers across industries have learned the value of services like on demand pay. It can serve as a standout feature when labor market fluctuations persist, and your employees will thank you for it.
Request a payroll demo from Paylocity today to learn more about our on demand pay services!
Any Day Can Be Pay Day
Unexpected expenses happen. And they don’t wait for pay day. When your employees need an immediate cash flow option, our On Demand Payment gives them flexible access to their earned wages without interrupting your payroll process. Your workforce can do this directly from our mobile app. That means there’s no added paperwork for you – and it helps employees satisfied in a competitive market.On Demand Payment
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