The drawbacks of legacy payroll and HR systems have grown more evident in recent months as businesses and their employees adapt to the challenges associated with COVID-19. With the workforce turning over quickly due to shifting work restrictions and budgets, current infrastructure falls short in affording companies much-needed flexibility.
Employees are also struggling. In fact, Mercator reports that 60% of the workforce in 2020 is unsure about their ability to handle economic uncertainty. High cell phone bills, surprise medical expenses, and the loss of household income create an urgent need to access earned income on demand. If employees’ financial stressors aren’t addressed, the result is likely to be lower productivity and more frequent absences.
To boost efficiency—and your bottom line—you must look for solutions to alleviate the financial stress of your employees, including off-cycle pay options. Payroll platforms with on-demand options give employees fast access to tips and earned compensation, allowing them to pay emergency expenses and reducing financial stress. Just as importantly, these technologies can aid employee transitions; support long-term business resilience; and digitize outdated, paper-based processes.
Traditional Pay Solutions Are No Longer Working
Although many business processes have evolved alongside advances in technology, pay processes remain outdated. We’ve been paying employees every 2 or 4 weeks since the Social Security Administration was founded in the 1930s, forcing the adoption of a more predictable pay period. Many of us haven’t questioned the biweekly pay period until recently because the system has become an institutionalized part of work culture.
With hourly and essential workers at the forefront of national news during the ongoing public health crisis, Americans are coming to understand the need for flexible pay. Biweekly pay periods fail to meet the mark when major life events occur and employees can’t access the pay they’ve earned. Without access to funds, families typically have to max out credit cards, face overdraft fees, or dip into savings—incurring hefty interest rates and fees.
Our payroll routine needs to change, and it’s time for HR leaders to reimagine the way employees access and manage pay. As more Gen Zs enter the workforce, they’re bringing with them an expectation that everything be available on demand. And given the ongoing economic strain caused by the pandemic and recession, flexible pay is no longer a preference—it’s a necessity.
Modern earned income solutions make sense because they present a low-cost strategy for reducing financial stress and improving business outcomes.
On-Demand Pay Technology Benefits Both Your Employees and Your Business
Businesses looking to attract and retain top talent gain a competitive advantage by leveraging flexible pay solutions. Many new hires have been impacted by the economic downturn and eagerly await their first paycheck.
On-demand pay solutions can be integrated into existing payroll systems, helping employees regain financial stability without disrupting your current processes. With a reduced need to cut off-cycle checks, businesses benefit from modern payroll solutions in several ways:
Save money by sending checks digitally. Between check printing and mailing fees, companies spend thousands of dollars a year sending out biweekly checks. In addition, mailing checks is an error-prone process. An incorrect address or net payment necessitates a voided check and restarted process, and mail delivery isn’t always reliable.
In fact, over a third of Americans have had to pay a bill late due to problems with their paychecks. Digitizing the pay process saves paper and shipping costs and ensures your employees are paid on time for the work they do.
Give employees real-time access to earned income. Modern pay solutions allow employees to pay for rent and emergency bills that don’t coincide with traditional pay periods. Jobseekers today want to work for organizations that invest in personal and financial well-being, and offering pay on demand is an important way to do that: A recent survey found that one in six people looking for a job are seeking employers that offer an on-demand benefit. Investing in the financial health of employees motivates employees to grow in the workplace.
Increase retention and reduce turnover. Real-time access to earned income in turn helps retention efforts and decreases turnover. When employees are stressed at work, productivity falters and employee absences start to rack up—and stress in recent months has only increased. Though flexible pay won’t eliminate all issues workers face, it reduces financial stress, helping employees feel more motivated to come to work and stay at their job.
Improve payroll efficiency. The typical process for a one-off payment to an employee is long. After determining the correct net payment, departments must coordinate to issue a paper check, then send it with overnight delivery—or repeat the process in case of a mistake.
Paperless disbursement tools allow payroll teams to quickly send funds with the click of a button, saving companies several hours a week and almost $50,000 in saved paper and printing, according to DailyPay data. And with regulatory changes likely to impact all industries, businesses must have tools to rapidly pivot business strategies and redirect funds.
As an employer, you must stay attuned to changing workforce expectations as businesses reopen and teams grow. Low-cost, on-demand pay solutions help build employee trust, improve productivity, and boost customer satisfaction.
Many workers won’t want to return to traditional office settings following the pandemic, and most won’t want to return to the traditional biweekly pay structure either. Employers that respond to these expectations now gain a competitive advantage by preparing for the future of the pay process.
Jeanniey Walden is the CIMO at DailyPay. Before joining DailyPay, Walden (formerly known as Jeanniey Mullen) was the Global Chief Marketing Officer at Mercer. Walden also held prominent positions at Ogilvy, Barnes and Noble, JCPenney, and Zino. She received her BS and MS degrees from the University of Pittsburgh. In her spare time, she likes to scuba dive.