Compensation, Compensation Administration

The Future of Payroll Has Arrived, and It’s Instant

Today, takeout or groceries can be at your doorstep minutes after ordering. Burger King is delivering food to those caught in L.A. traffic jams. Nearly everything in our lives has adjusted to “Smartphone Time” and can be had instantly with a swipe.

Source: TippaPatt / shutterstock

One of the last holdouts to this lifestyle was our money. Stubborn payment rules and systems meant that we had to wait days for our bank accounts to reflect the balances on our phones. Laggard companies insisted on sending loans, insurance payouts, and rebates by paper check. But over the last few years, the advent of push payments has made instant, convenient money a reality.

Even the face of payday is changing. Gig economy companies in partnership with push payments providers have made it possible for workers to claim owed money instantly. Walmart took this a step further by partnering with Even to allow workers to take a portion of their paychecks early to handle cash emergencies.

We now stand on the cusp of instant payroll for all. No longer content with the traditional payroll cycle, workers everywhere want access to the money they’ve earned on their own timeline and terms.

Workers Are Consumers

Consumers want to be paid instantly whenever they are owed money. In fact, 65% of U.S. consumers said that it is important to be able to receive instant payments from businesses or government agencies that owe them money, and 70% reported they would select an instant payment option for disbursements if it were available.1

Workers are first and foremost consumers, often with the same expectations of employers that they learn from their other life experiences. Increasingly, that means a rejection of the traditional 2-week pay period, with more than half of all people (56%) wanting their wages available through instant payments. When it comes down to living paycheck to paycheck, 65% want their wages through instant payments, and an even greater share of gig workers (76%) want faster payments.2

Lyft’s own experience proves the popularity of instant payroll. The rideshare company began offering this option through Express Pay, allowing drivers to cash out up to five times a day. Driver response was overwhelming, with 58% of driver payouts in 2018 made through Express Pay.3

For other gig employers, offering instant payouts could be one way to improve productivity. Eighty-four percent of gig workers polled in a PYMNTS survey said they would work more frequently if they were paid instantly.4

How Instant Payroll Could Work

The inflexibility of 2-week pay periods simply does not work when bills are due today or a child has to visit the emergency room for an illness. Even when timing is not an issue, direct deposit is a pain to set up, can only be initiated according to the employer’s timeline, and can only send funds to an approved bank account. Paper checks are a hassle to consumers, too—extra delays and potentially even added fees.

The payroll of the future will be centered on instant digital delivery, complete certainty in funds availability, simple and intuitive payment controls (often via a mobile platform), and choice in account destination.

Push payment solutions deliver on all these promises, with the potential to send funds to more than 4.5 billion consumer accounts, including credit and debit cards, online wallets, and even physical cash-out locations. As a result, workers can choose when they are paid, how much, and where to send the funds.

And when the funds do arrive, they are guaranteed and immediately available for use—no more waiting for checks to clear.

Instant Payroll Is Smart Business

It could be argued that on-demand/same-day wage payment is the first major payroll innovation since direct deposit. It is made possible through the advent of new technologies and ongoing worker frustration with traditional payroll methods.

Companies that embrace instant payroll stand to earn enormous talent acquisition and retention benefits by distancing themselves from the competition in a way that endears them to workers. At the same time, it can speed up payment operations, reduce costs, and increase accountability to provide a boost to the bottom line.

  1. “US Funds Disbursements: Moving Towards a Frictionless Future,” Aite Group study commissioned by Ingo Money, 2018.
  2. “The Financial Invisibles Report,” PYMNTS.com study, 2018
  3. https://www.marketwatch.com/story/the-end-of-the-two-week-pay-cycle-how-every-day-can-be-payday-2018-10-10
  4. “The Financial Invisibles Report,” PYMNTS.com study, 2018