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During a previous employment, a few years ago, when this glorious moment appeared, the secretary in a booming voice stated that the “eagle had landed.” Which our previous month’s working. If you get compensated once a month, it’s a long time between paychecks, so these first few days after a week or so of being without money were great. payroll service can even recall when I worked in a restaurant and collected my little brown envelope of cash that was waiting at the end of each week!

These days most workers are compensated electronically, but little else has changed.

Many people suffer to save their money from paycheck to paycheck – a recent study revealed that over half of employees have trouble covering their costs between pay periods, and nearly a third claimed a surprise cost of less than $500 could make them unable to pay other financial obligations. Another study found that almost one in three employees run out of cash, even those earning in excess of $100,000. 12 million Americans use payday loans all year, and each year $9 billion is collected in payday loan fees. The average annual percentage interest rate (APR) for a payday loans is 310%.

Based on PayActiv, over $89B are paid in fees by the 90M people living paycheck to paycheck, that is two-thirds of the US population. Real-time payroll would annually place over $25B into employees accounts, just from reduction of abusively high APR costs.

When desire pushes innovation

We are on the verge of a new paradigm that has relationship with pandemics or shifting work environments, and a lot to do with how people desire to receive their remuneration. Employees, not able to survive between paychecks and frustrated from turning to high-interest loans to bridge the gap, need to receive their hard-earned pay as and when wanted. Over 60% of U.S. employees who have struggled financially between payment periods over the last six months know their financial situation would be enhanced if their employers permitted them instant access to their earned pay, free of charge.

Perhaps various people could think this a political point, the fact is it is about financial wellness. According to SHRM, 40% of workers are not able to cover an unexpected expense of $400. The report also references Gartner data that discovered that less than 5% of major US organizations with a majority of hourly-paid employees use a flexible earned wage access (FEWA) solution, but it’s expected that this will grow to 20% by 2023.

Why should a worker need to wait for days or weeks to get paid for their time and skills?

Improving the worker experience
Providing employees access to their money instantly could upset, perhaps even, change, the manner in which we receive payroll and review our paycheck. Currently the possibility is observed, and, in some cases, companies use it to differentiate their brand and attract fresh talent. For example, to encourage interest for workers, Rockaway Home Care, a New York care operation, is promoting its flexible earning options on the internet.

Others are providing on-demand pay – where workers finish a shift, they can access their money as soon as 3 a.m. the next day. Via an app, workers may move their salary to a bank account or debit card. Walmart is yet another example of a company that offers its employees access to their payroll. Employees can access pay early, up to eight times each year, without cost. The feedback from workers has been amazing, and Walmart is expecting increased adoption. Meanwhile, Lyft and Uber both offer their workers the ability to receive pay once they have earned a specific amount.

The change of payroll isn’t limited to the amount of payments. Venmo, Zelle, and other app provide flexibility and transaction services that workers currently expect from their paycheck. They want to be able to receive their earnings whenever they need to, not each 2 weeks or a monthly cycle. Much of this demand has come from the emerging economy and Millennial generations – who expect to be able to receive the earnings they have earned when they need it.

The increasing rise of workers without bank relationships
In 2018 it was calculated that in excess of 1.7 billion adults worldwide don’t have access to a banking relationship. In the US, a 2017 survey estimated that 25% of people are either unbanked or underbanked – 7% unbanked and 17% underbanked. The survey found that workers who either don’t 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 in excess of one million people without bank accounts.

There are many consequences of having no banking account. In some cases, it can result in difficulty getting loans or buying a home; it also presents companies with specific issues. How do you process pay if there is no bank account to transfer the money into? As a result, employers are frequently looking for alternative ways to process payroll, specifically for hourly paid workers. Some are utilizing pay cards, which are topped-up virtually every time a worker gets paid. Those pay cards function the way a debit card does, allowing owners to remove cash or shop online.

It is obvious that on-demand payroll is something that’s going to be part of the financial wellness conversation for a while to come.