Is it time to offer all employees same-day pay?
Getting paid after every workday could help ease financial strain brought on during coronavirus, and benefit provider DailyPay is advocating that more employers implement this practice.
The same-day pay benefit provider conducted a survey of its users to determine how their platform is affecting workers during the coronavirus pandemic. More than 90% of those surveyed said access to same-day pay has reduced their financial stress over the past three months.
“This is an unexpected crisis where people are running into financial challenges they didn't plan to have,” says Jeanniey Mullen, chief innovation officer at DailyPay. “Employers may not be able to pay more, but if they want to be competitive, they need to differentiate themselves by offering same-day pay.”
Mullen spoke in a recent interview about why all employees should have access to this benefit and how employers can promote financial wellness.
Why do you think employers should offer same-day pay?
Getting paid every day was actually the original compensation system. All the way back before World War II, people got paid every day after their shift. During that time, the government tried to implement taxes and restrict the money going out to help during the recession. The bi-monthly pay system we use now was born during that time to help get the economy back on track; it served its purpose, and now it’s time to rethink our current pay structure so it benefits all American workers.
How does same-day pay work? Is it a loan?
There was a lot of confusion about that when we first launched in 2015; but no, we’re not a loan. Our founder came from Goldman Sachs, and many of our first employees were from the financial industry; they felt it was important not to introduce risk to [employers], so they created a credit asset. DailyPay uses this credit to front employees money before payday; we’re repaid by their employer on the actual payday. Employers can offer our services through our partnerships with admin systems like ADP and Kronos. Using our platform, employees can track how much money they’ve earned, and they can decide how much they access early. We charge employees $2.99 to access their wages early the same day, and $1.99 for the next day. But to help employees with the challenges posed by COVID-19, we’ve decided to waive our next day fee.
Is this more suitable for hourly or salaried employees?
It’s great for both, actually. Hourly employees don’t always know if they’re going to be able to pay their bills until payday, but our platform lets them track how much they’re earning. That’s great for employers because they’ll see an uptick in productivity; in our recent survey, 56% of users said our platform motivates them to pick up more shifts at work.
While that probably isn’t going to be true for people with salaries because they earn the same amount no matter what, they still benefit from early access. Even people who make six-figure salaries have unexpected expenses; the furnace can go out, a tree falls on your car, or your child needs something for school. When those things happen, you still want to be able to maintain your lifestyle and pay your bills. About 10% of our users are salaried employees.
Both types of workers also benefit from the platform’s saving feature. You can choose to set aside a portion of your earnings to go into a savings account. The platform also has challenges to encourage employees who don’t save to start. Helping people establish good habits is a key part of financial wellness.