How does your company support employees with their finances? For so many workers, unexpected car repairs and medical bills make it difficult to wait until next payday. More than half the country is living from paycheck to paycheck, including 30% of people making $250,000 or more. When it comes to payroll, a little thing like daily pay not only gives employees immediate access to their earnings, but less stress and distraction.
Ever since direct deposit and debit cards (and pay cards), employees have expected fast access to the payments they earn. Several options give employees access to pay as it’s earned. Daily pay—also known as earned pay, instant pay, and real time pay—provides immediate access to funds without the common three-day wait of bank transfers.
What is daily pay?
Instead of letting employees withdraw funds in emergencies, daily pay sends earned wages after each shift. Send payments every 24 hours or shortly after employees clock out.
Daily pay requires extra planning for benefits and other deductions, but automated payroll software makes it easier than you might expect. Employees appreciate having each hard day’s work quickly rewarded.
What about earned wage access?
A compromise between daily and conventional pay periods, earned wage access gives employees the freedom to access their funds as needed. Halfway through a pay period, an employee might need a couple hundred dollars for an unexpected bill.
Earned wage access allows the employee to collect the needed amount without waiting for the next payday. Instead of a loan with interest, earned wage access may include a small transaction fee.
For maximum employee freedom, consider offering daily pay to interested employees. It’s a benefit that can help with recruiting and retention, and it may eventually become an expected payment option in some industries.
Why is daily pay so popular?
Are younger workers struggling to manage their personal finances because of their need for immediate gratification? Whatever you might read about Gen Z on social media, daily pay reflects a broader cultural shift.
Consider all the personal payment apps and instant bank transfers now available. Waiting two weeks for a paycheck feels like an interest-free loan to your employer. Older employees who have grown accustomed to the convenience of direct deposit would bristle at the idea of waiting for checks in the mail, and daily pay has the potential to become as commonplace as direct deposit.
Emerging tech and advanced payroll software opens new possibilities, but national and global trends also affect the demand for services like daily pay. The pandemic response, inflation, and other world events have left a lingering sense of economic uncertainty.
Many Americans already lived from paycheck to paycheck, and recent inflation has made it harder to build up savings. Your workers may be looking to side hustles in the gig economy to cover gaps between paychecks.
Does Netchex offer daily pay?
Yes! Daily pay might sound complicated and even intimidating, especially for smaller HR departments. Fortunately, Netchex payroll software can streamline the necessary deductions and number-crunching. Automation reduces the burden on staff, but you need quality software to reduce the likelihood of errors. Contact us today to learn more about NetDaily.
Benefits of daily pay
Employees want their money ASAP, but what benefits does daily pay offer? Both workers and employers can gain significant advantages.
Recruiting and retention
We’ve mentioned how daily pay is increasingly popular, but it’s not offered by all (or even most) employers—yet. Give your company the upper hand with recruiting and retention by catering to employees who value this service.
Participating workers will be motivated to stay with your company longer, reluctant to give up the convenience of daily pay. Alongside other emerging trends in perks and benefits, it makes your company more attractive to job applicants.
Reduced financial strain
Employees can more easily cover unexpected bills without additional financial risks. The wait between paychecks is a major reason for the troublesome payday loan industry. Payday loans tend to be risky and expensive for borrowers with high interest and sometimes aggressive collections methods.
After a long day and overtime hours, employees should be able to see their financial rewards. The two week pay period makes the weekly grind blur together, averaging out the difference between shorter and longer days. Each day’s bank account transfer gives employees a little positive reinforcement, like the dopamine hits of “likes” on social media.
Challenges of daily pay
Innovation often brings new challenges as well as benefits. Offering daily pay will require a bit of adaptation for most companies.
Payroll management and fees
Some apps for earned wage access charge a transaction fee for transfers. Deductions for benefits must be calculated and applied automatically. Obviously, daily pay wouldn’t be practical with manual calculations in spreadsheets. You’ll need payroll software that’s fully compatible with time and attendance and benefits administration HR solutions.
Possibility for errors
As a general rule, HR software reduces the opportunities for human errors. Because of the complexity and multiple variables, daily pay involves additional room for error, at least when compared to other software management.
Calculations for daily pay include weekly work days and other projections. New apps for earned wage access may have security gaps, so your company needs to be safe, secure, and cyber ready.
Major benefits like daily pay require new employee training and updates to the employee handbook. Employees may need access to optional training resources in financial planning, since inexperienced workers may initially forget to save for big expenses like rent and utilities. Compared to the familiar routine of bi-weekly checks, daily pay requires everyone to rethink how they approach budgets and spending.
Does daily pay make sense for your company? Like most perks and benefits, some employees will be more enthusiastic than others. Daily pay can make a huge difference for the employees who choose to participate. The right HR software can minimize the burden of paperwork involved. Let your workers choose the payment schedule that works best for them.
Learn more about how Netchex can improve your company’s payroll process with on-demand, daily pay:
Netchex makes Payroll easy, accurate, and worry-free. Learn more about our Payroll software:
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