On a former employment, a few years ago, when this glorious moment appeared, the secretary in a clear voice announced that the “eagle had landed.” Then as quickly as possible, we all worked our way to her desk to receive the Payment for our previous month’s work. If one gets compensated once every month, it’s a long time between paychecks, so these first few days after a week or so of being flat-broke were fantastic. I can even remember when I worked in a restaurant and collected my small brown packet of cash which was waiting at the end of every pay period!

Today many workers get compensated electronically, but little else has changed.

Most people battle to save their pay from paycheck to paycheck – a recent poll revealed that over 50% of employees have trouble covering their expenses between pay periods, and almost one third claimed a surprise expense of around $500 may make them unable to meet other financial obligations. Another study discovered that nearly one in three employees run out of cash, even those earning in excess of $100,000. 12 million Americans use payday loans during the year, and each year $9 billion is paid in payday loan fees. The average annual percentage interest rate (APR) for a payday loans is 320%.

Based on PayActiv, over $89B are paid in costs by the 90M people living paycheck to paycheck, that is two-thirds of the US population. Instant payroll could each year place over $25B into employees wallets, merely through savings from insanely high APR costs.

The desire drives innovation

We are on the cusp of a new way of life which has little to do with pandemics or shifting work environments, and lots to do with why people want to receive their pay. Workers, unable to last between paychecks and tired of turning to high-interest loans to fill the gap, want to access their earned pay as and when needed. Over 60% of U.S. workers who have struggled monetarily between pay periods in the last six months know their financial situation would be enhanced if their employers permitted them immediate availability to their earned wages, free of charge.

Of course some people might think this a political issue, the fact is it is about financial health. Based on SHRM, 4 out of 10 workers are unable to cover an unexpected expense of $400. The report additionally refers to Gartner information that found that less than 5% of large US organizations with a majority of hourly-paid employees use a flexible earned wage access (FEWA) solution, yet it’s expected that this will increase to 20% by 2023.

Why would
international payroll service to wait for days or weeks to receive pay for their time and skills?

Enhancing the employee experience

Giving employees access to their money instantly might upset, maybe even, change, the way we collect pay and review our paycheck. Currently the possibility is recognized, and, in many instances, companies use it to differentiate their brand and bring in new talent. For example, to stimulate interest for workers, Rockaway Home Care, a NY care operation, is promoting its flexible pay options on social media.

Others currently provide on-demand payroll – where employees complete a shift, they can access their money as early as 3 a.m. the following day. Using an app, employees can transfer their salary to a bank account or debit card. Walmart is yet another example of a company offering its employees access to their pay. Employees may access pay early, up to eight times each year, for free. The feedback from workers has been incredible, and Walmart is expecting increased adoption. Meanwhile, Lyft and Uber each offer their workers the ability to be paid after they have earned a certain amount.

The alteration of payroll is not limited to the frequency of payments. Venmo, Zelle, and other app offer flexibility and transaction services that workers now expect from their payroll. They want to be able to receive their earnings when they want to, not every 2 weeks or a monthly period. Much of this expectation has come from the emerging economy and Gen Z generations – who expect to be able to receive the earnings they have earned when they want it.

The growing rise of workers without bank relationships

In 2018 it was estimated that more than 1.7 billion adults worldwide do not have access to a banking relationship. In America, a 2017 survey estimated that 25% of people are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey discovered that workers who either do not have a bank account, or have an account, but keep using financial services outside the banking system like payday loans to survive. In the United Kingdom, there are over one million people without bank accounts.

There are several results of having no banking account. In a few cases, it can result in difficulty getting loans or buying a house; it also presents employers with specific issues. How do you process payroll if there is no bank account to move the money into? As a result, employers are increasingly searching for other ways to process payroll, especially for hourly paid workers. Some are utilizing pay cards, which are loaded virtually every time a worker receives payment. These pay cards perform the way a debit card does, allowing holders to withdraw cash or shop online.

It is clear that on-demand pay is something that is going to be a part of the financial health discussion for some time ahead.