It’s time for companies to pay their employees on demand
By David Ossip, Chairman and CEO of Ceridian
Many Americans – regardless of income level, job type, race, gender, age, or geography – live paycheck to paycheck.
Currently, the overwhelming majority of employers pay their employees in arrears. This means that employers keep wages earned by employees for up to two weeks, and during that time, employees effectively fund their employers. Employees oscillate between being cash rich on payday and cash poor while waiting for the next paycheck. According to researchers at Carnegie Mellon University, “there is a sharp increase in payday spending, which peaks either on the payday itself or in the following two days, then slowly declines in both. following days “.
This may leave little to cover the expenses for the remaining days. In fact, nearly one in three workers have run out of money before, even among those earning more than $ 100,000.
So far, the options for these workers have been very expensive. Credit card and line of credit facilities charge up to 20% interest and fees. Payday loans, according to the Consumer Financial Protection Bureau and according to the state, have fees that can amount to an annual percentage rate of almost 400% for a period of two weeks.
Looking at the market, we found that over 60% of American workers who have experienced financial difficulty between pay periods in the past six months believe their financial situation would improve if their employers allowed them immediate access. and free of charge at their salary.
Most payroll providers don’t calculate wages earned continuously – in real time – making it very difficult for payroll administrators to implement an accurate on-demand payroll solution. However, advancements in cloud and HCM technologies have led to real-time payroll systems that can calculate how much an employee is actually owed on a daily basis, net of taxes and deductions. This allows employees to be paid daily.
For employers, allowing employees to be paid when they want helps organizations differentiate themselves as future-oriented employers of choice. Data shows that better financial well-being and better expense management lead to a more engaged workforce and lower turnover. Pay on demand makes employers more attractive when recruiting and onboarding new talent.
For employees, pay on demand means they can pay their bills sooner and use the money they’ve already earned, instead of borrowing at potentially high interest rates. This gives them greater control over their finances, including the immediate delivery of funds in an emergency.
Covid-19 has led to an acceleration of change in virtually every sector of the economy and in virtually every aspect of our lives. We believe that over the next five years organizations will no longer pay their employees late. The technology to pay on demand is here today. Ceridian’s new Dayforce wallet allows employees to be paid on demand with no direct, even daily fees, while allowing employers to fund their payroll on a weekly or bi-weekly basis.
To learn more about Dayforce Wallet, Ceridian’s premier on-demand payment solution, click here.