Several payment providers offer employees access to their earned income immediately after each shift. Known as daily pay, instant pay, or on-demand pay, these services have an employee cost (typically a fee to transfer funds to bank accounts, debit cards, and payroll cards). Offering this benefit reduces financial stress for hourly workers, which can improve focus and productivity. But why are companies choosing to implement daily pay?
Access to Earned Income
For employees, the biggest advantage of daily pay is accessing their wages as they are earned. This is typically offered through a platform that integrates with their bank account and transfers part of their paycheck directly to their account. Other options include mobile apps that allow employees to access wage advances, track their earnings, and schedule future payments.
The idea is to give employees better financial security so they don’t feel pressured to use expensive stop-gap options like payday loans and credit cards. Instead, employees can use their earned income on their terms, which helps lower stress and anxiety. Regarding hourly workers, the two-week standard pay period can seem a bit long. After working a shift, daily pay helps understand how much does daily pay let you take out and see how hard work is rewarded immediately, and getting paid the day they finish their job can help them feel more productive.
No Fees for Cashing Checks
Most companies don’t pay workers daily because it’s impractical and expensive. However, with new contractor-focused payroll tools, this is possible and is already being implemented by some companies in industries like construction, roofing, and door-to-door sales. The benefits of paying employees daily are significant, especially for independent contractors. When they’re not constantly worrying about how to make ends meet, they can focus on the job at hand and bring their best work every day. Employees who have to wait for biweekly or monthly paychecks often struggle with financial stress, which can lead to reduced productivity on the job. By reducing their money worries, daily payments can allow them to manage expenses better and reduce the risk of getting into debt or losing their home.
Unlike traditional paper checks, many of these daily payment options require using a payroll card that works like a debit card. The cards are typically managed by payroll software providers or payment processors such as Visa or Mastercard. They can be used to withdraw funds at participating merchants and ATMs. Employees can also track their balance online. These cards may have fees that can add up, but they can help prevent the need to resort to payday loans or other costly alternatives. Depending on how often they’re used, these fees can be less than the cost of overdraft or late fees for a bank account.
Convenience
Retaining workers with competitive employee benefits become even more critical as the labor market gets tighter. Aside from increasing wages, offering gifts or covering expenses, adding health and dental insurance coverage, and expanding time off policies, giving employees the option of getting paid daily is a powerful retention tool. With the help of technology, running daily payroll is surprisingly easy for businesses. Employers use the Automated Clearing House (ACH) network to transfer paychecks into employees’ bank accounts. The ACH network is widely used nationwide and can handle large volumes of transactions quickly and accurately.
Workers with more frequent access to their income are less likely to turn to costly payday loans or other predatory finance options. They are also more focused on work and bring their best efforts to every shift, which can lead to higher productivity on the job. For many workers, more than a two-week pay cycle is required to cover their living expenses. A growing number of employers are meeting this need by offering daily payment options to their employees. While this approach may seem disruptive to the status quo, it is a win for both businesses and workers.
Convenience for Employees
With the tightest labor market in decades, attracting and retaining top workers is a major challenge for businesses. Aside from offering higher hourly wages and providing health benefits, a benefit like daily payment can help differentiate your company in the market and attract top talent. Compared to the standard biweekly paycheck, a daily payment option offers greater convenience for employees. Employees work a shift and get a portion of their pay immediately—a cash card they can use, like a debit card, or deposit into their bank account immediately. This eliminates the hassle of submitting time sheets, waiting for a lump-sum check, and paying check cashing fees.
In addition, on-demand wage access reduces the focus on financial concerns during working hours and improves productivity. This can lead to decreased absenteeism and overall job satisfaction.
While there are some drawbacks to running daily payroll—like a risk of overdraft fees or payday loans—these risks can be mitigated using the latest payroll technology. Additionally, many companies that offer daily employee payment services do so through direct deposit. This allows them to offer daily payments for all employees (exempt, nonexempt, and contractors) while complying with payroll laws.
