Pay-on-demand meets employee expectations
Financial insecurity is a long-standing problem for American consumers, exacerbated by the current economic recession. Studies have shown that 71% of households are considered financially unhealthy, with AARP finding that more than half of Americans do not have emergency savings to deal with financial crises. Another Bankrate study found that only 39% of Americans can afford an unexpected $ 1,000 expense.
Many of these financial problems are caused by payroll systems that are delayed by the use of paychecks or, more commonly, pay periods that do not match when workers need money the most. It’s a dilemma that DailyPay, an on-demand payment platform, sought to resolve when it was created in 2015.
“Workers, especially those at the bottom of the pay scale, don’t have enough control over their pay,” said Ron Munkittrick, senior vice president of external operations at DailyPay. “They suffer as a result of hardship, whether it’s bank charges, late fees or having to go to payday lenders.”
In a recent interview with PYMNTS, Munkittrick discussed the challenges workers face in their payroll schedules, how DailyPay is working to address these challenges by providing on-demand payments, and how workers’ expectations of payroll systems. payroll will continue to evolve in the years to come.
The consequences of late pay
Some of the most disproportionate employees when it comes to late payments are on-demand workers and freelancers, who have the additional problem of being less financially secure than their salaried counterparts. According to a recent study, nearly a third of construction workers are paid late, with women being paid late 7% more often than men. Employees are largely paid on time, with their payroll problems taking a decidedly different form: their financial needs often do not match their employers’ pay cycles.
“The vast majority of the time they’re paid on time on their payday, but the problem is, that just doesn’t match the reality of their financial lives,” Munkittrick said. “Whether it’s an emergency payment or a car breakdown that they need to be fixed, these things don’t happen easily during a payroll cycle.”
Missing payments like these due to payroll issues can quickly become a negative feedback loop if they affect employees’ ability to maintain stable employment, causing them to miss future payments. DailyPay aims to solve this problem by offering on-demand payment when employees need funds.
How DailyPay Works to Provide Timely Payments
Workers often take drastic measures when the money isn’t ready when they need it, like taking out predatory high-interest payday loans. DailyPay’s solution to this problem is to provide employees with funds as they earn it, rather than forcing them to wait for a pay period.
“What our product does is that when you work and earn money, it makes that money available to the worker,” Munkittrick said. “So if the worker wants to get $ 100 and has $ 100 of earned wages, this product allows them to just ask for that money and it gets sent to them instantly.”
This system differs from a salary advance in that it is money the worker has already earned rather than an advance paycheck, with DailyPay funds subtracted from the next paycheck. This concept of faster payments matches the changing expectations of customers in other parts of their digital lives, where consumers are increasingly used to getting products on demand rather than waiting for someone’s schedule. ‘another.
“People are more and more used to [to the idea] that when they need something, they should be able to get it now, ”Munkittrick said. “They’re also going to be looking for more flexibility in how their money is used. They’re going to say, “I want my money when I want it and where I want it, and I want to be able to use it how I see it best.” “
This trend of instant gratification towards on-demand goods and services is found everywhere in the digital world, as with subscription-based media services like Netflix overtaking network TV among younger consumers. Companies looking to retain and keep their employees happy would benefit from learning from this emerging payroll trend as well.