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What If Every Day Was Payday?
Just imagine, gone are the days of counting down until sweet financial relief comes with that cellphone notification letting you know that you just received your direct deposit. No sir, now you can expect compensation today for today’s work. This is the reality for a growing number of individuals working for companies like McDonald’s, WalMart, and Outback Steakhouse that are turning traditional payroll schedules upside down by offering employees daily pay.
More Control Over Your Finances
An employee receiving a daily wage will be afforded greater control over their finances, which will be especially advantageous for individuals previously living meagerly between paychecks. No longer would their last few days before payday be a stretch. Now they could get a daily rejuvenating opportunity to get the groceries and pay the bills. Certain populations will be most benefited by this, particularly single moms and low-pay, hourly employee. This shift would give them a chance to save money by relying less on credit cards and cash advance institutions which often were their only recourse but come with high interest rates.
Obstacles In The Way
Some hurdles that still need addressing include overtime pay and state hours and wage laws. Overtime pay is calculated based off of weekly hours worked, so companies adopting a daily pay structure would still need to account for those weekly total hours worked. Also, most states require employees to receive a pay stub for the pay period, so employers would need to continue to record for more traditional payroll cycles while still offering daily pay options. The increased number of financial transactions associated with this shift could also result in higher administrative costs, but such hurdles are already being addressed by those involved in developing these apps and by payroll processors.
Let’s Meet The Contestants!
Instant Financial and Daily Pay are two companies with mobile apps providing companies the means to provide “instant pay.” Claiming to help attract and retain the best workforce, Daily Pay says their app helps companies retain talent because if another job will offer 50-cents more but doesn’t offer daily pay then an employee may be more inclined to stay where they are. Instant Financial allows employees to withdraw some of their daily earnings, giving them the option to save other portions for a larger payday. How much does this service cost? This is where the two companies differ. For an organization to use Instant Financial they pay $1 per employee per month, while Daily Pay charges the employees instead of the employer, at $1.25 per transaction. Daily Pay’s structure encourages employees to be more selective with their requests, while still saving them from engaging with the cash advance institutions which charge higher interest rates. While some may be concerned that such availability to one’s wages will make saving more difficult, Instant Financial reported that the average employee withdrawal is $27, suggesting that the primary purpose of the app is to help the paycheck to paycheck populations make ends meet until their regularly scheduled payday arrives.
Food and Service Industries Expected to Use This the Most
The Maid and DoorDash are two companies already using Daily Pay, and the hospitality and food-service industries are expected to be the most attracted to these change to payroll. Walmart announced they will use a similar app called Even for employees to receive pay advances. Major payroll companies are expected to provide similar solutions in the coming years.
Is Your Company Ready?
Creating that modern-day workplace culture that’s rooted in trust, autonomy, and cutting-edge technology could be a bit more attainable for smaller companies who provide employees a daily pay option. And, if this becomes the new fad (dare we say the expectation!) of the workforce’s upcoming generation, will your company be prepared to provide this payroll option? There are some affordable options for time tracking software you could use to help populate your daily payroll, and we happen to have one that works well if you want to try it out.