Pay-as-you-go: 60% of American workers want daily access to earned wages
By Christopher Wood, RPC.
A new national study that analyzed the impact of same-day pay found that, among other things, more than 60% of American workers believe that all employers should offer their employees immediate access to their daily pay.
Payment Frequency. Most employers pay their employees salaries for services rendered on one of the following frequencies: weekly, bi-weekly, semi-monthly and monthly. At the federal level, there are no pay frequency requirements. The US Department of Labor’s (DOL) Fair Labor Standards Act (FLSA), which regulates minimum wage, overtime, hours worked, record keeping, and child labor, does not dictate when an employee must be paid. However, some US states have certain payment frequency requirements.
For example, in New Hampshire, employers must pay employee wages on a weekly or bi-weekly schedule. Semi-weekly and monthly payroll frequencies must be approved by the New Hampshire Department of Labor (NHDOL).
In California and Michigan, the frequency of pay depends on the occupation. In California, wages, with some exceptions, must be paid at least twice in each calendar month on days designated in advance as regular paydays.
Access to anticipated/earned salary. Over the past decade, a new pay frequency has been used by more employers and third-party payers that allows employees to receive their pay the same day they provide the services. These arrangements are commonly referred to as Earned/Early Wage Access (EWA) and these pay-as-you-go programs are becoming increasingly popular, especially in certain types of jobs.
Application-based drivers. In 2016, app-based driving company Uber partnered with Green Dot, a fintech and bank holding company, for an EWA program for its workers. Uber’s website explains that drivers can pick up up to five times a day. A few years later, Lyft offered an EWA to its drivers with instant access to wages after each ride and no transfer fees.
How EWAs work. Typically, employees use mobile apps to access accrued wages before the end of their normal payroll cycle and the amounts are transferred to a bank account, prepaid debit card, or payroll card. This process differs from a payday loan because the worker has already done the work for which they are being paid.
Benefits for employers and employees. According to the American Payroll Association (APA), EWA programs are becoming a more established business practice and part of the employee benefits package. An obvious benefit for an employee is gaining greater financial security.
There are also potential benefits for employers. During a financial wellness workshop at the APA’s annual Congress event in Las Vegas last May, Felicia Cheek, director of HCM product strategy at Oracle, said that financial wellness of an employee is a way to help employers acquire and retain talent as a way to ‘combat’ the Great Quit, which occurred at the height of the coronavirus (COVID-19) pandemic.
Cheek also pointed out that financial stress among workers can impact an employer’s bottom line with a chart that shows the cost of financial stress per employee, per year in lost productivity and absenteeism is increasing (2,412, $00 per employee in 2021).
Federal government proposal on EWAs. The United States Treasury Department’s 2022 annual publication “General Explanations of Administration Revenue Proposals” discussed the treatment of pay-as-you-go arrangements or EWA programs. According to the report, employees who receive EWA advances can be considered to be in “implicit receipt” of their wages, which creates withholding and deposit charges on wages for employers to reconfigure payroll systems to take into account. of these holds and deposits more frequently than the typical two weeks. or monthly pay cycle.
The Treasury Department says in its proposal, which would take effect next year, that EWA vendors appear to have largely ignored “implied receipt” obligations to date and has proposed the following changes to the Internal Revenue Code :
- Provide a definition of compensation terms upon request.
- Clarify that on-demand payment terms are not loans.
- Provide for on-demand pay arrangements to be treated as weekly pay periods, even if employees have access to pay during the week.
- Provide special deposit rules for on-demand payment terms.
New survey on the impact of same-day compensation. In 2018, Instant Financial, an EWA company, conducted a survey of the U.S. workforce to understand the effects and perceptions of wage frequency on job consideration, application, and employment. acceptance of job offers. Instant said the results highlighted the impact of pay frequency across generations and provided insight into how pay frequency can influence factors beyond just financial health, including workforce commitment, loyalty, etc.
In July 2022, Instant released a follow-up national research study in partnership with the Center for Generational Kinetics that analyzed the impact of same-day payment. For this report, Instant sought to understand how perceptions have changed around wage frequency, primarily due to the impact of the coronavirus (COVID-19) pandemic, and what impact wage frequency may have on the financial health and other organizational factors.
The report asks why employees generally continue to be paid every two weeks when “we live in a real-time world, where everything on demand is becoming the norm?” The report’s responses show that “implementing an EWA program can minimize the adverse effects of a difficult labor market, improving both recruitment and retention, while helping to improve the financial health of the worker. typical American”.
Overall study results. Key findings from the study indicate that more Americans:
1) fear making their paycheck last until their next payday (54% in 2022 compared to 29% in 2018);
2) end up running out of money before their next payday (51% in 2022 versus 24% in 2018); and
3) Want to be able to get paid their salary the same day they work (79% in 2022, 30% more than in 2018).
Employee retention. Another aspect of the survey shows that American workers would stay in a job longer if they had immediate and free access to their earned wages after each day of work (56% of workers in the 2022 report).
More value and engagement. Another interesting aspect of the study explains that respondents would feel more engaged and valued as an employee – and would recommend the company to family and friends for employment – if the employer offered the EWA for free. after each working day.
A change of feeling. Instant said it’s clear that “there has been a significant shift in employee sentiment over the past four years, and a changing economic and labor landscape has impacted organizations and employees” .
Impact of COVID-19. One of the survey results highlights that around 58% of respondents said that having immediate access to their earned wages after each working day is more important to them now than before COVID-19. Survey results showed that from 2018 to 2022, 12% more Americans worry about making their paycheck last until their next daily payday.
Requests for salary advancement have increased. The study also notes that three times as many Americans would ask an employer for a payday or salary advance compared to the 2018 study. According to Instant, this is the largest increase from 2018 to 2022, this which, according to EWA, “further underscores the need for a solution such as access to earned wages to ease the financial burden that many are clearly facing.”
Impact on employee retention. According to the U.S. Bureau of Labor and Statistics (BLS), the quit rate in the past year in the United States has reached highs not seen since the launch of the Job Openings and Job Openings Survey program. BLS staff turnover in December 2000. This recent phenomenon is generally referred to as the “Great Resignation”.
Employee retention is important to employers and the 2022 research study shows that more than half (56%) of American workers would stay one month to more than one year longer at a job if they could have a immediate access to their earned salary after each day of work at no cost.
More benefits. One of the questions asked what an individual would be likely to do if an employer offered immediate access to a portion of their earned wages after each working day at no cost? And as noted earlier, approximately 70% of respondents said they would recommend the employer to friends, family or others looking for a job. Other comments to this question show that:
- 67% of respondents would see a longer career with this employer;
- 69% of respondents would stay longer with this employer;
- 69% of respondents would take extra shifts or work more optional days; and
- 72% of respondents would feel valued and appreciated in such a position.
Universally attractive EWA; the younger generations a little more interested. The study shows that 79% of all American workers would be more interested in applying for a job that pays them the same day they work, up 30% from the 2018 study. However, millennial workers (84%) and Gen Z (87%) showed more interest in applying for a job that pays them the same day they work.
Christopher Wood, CPP, is an editor for Thomson Reuters. This article used with permission.