Same-day pay, also known as earned wage access or on-demand pay, is being paid for the day’s wages at the end of the day. Another way of looking at it is shortening the payroll period to a day rather than weekly and biweekly.
Same-day pay offers an alternative to pay-day lending, overdrafts, and credit cards. It often comes with little to no cost if offered as an employee benefit.
Many employees prefer same-day pay with more day-to-day expenses that need to be covered immediately, along with the flexibility of which days they work. According to an Ernst & Young Employee Financial Wellbeing Survey, 35% of workers fall short on an expense between pay periods. The annual cost to employers in lost productivity due to employee financial stress equates to about $300 billion.
Employees gain a lot from accessing their funds between pay periods to cover expenses earlier and track exactly how much they earn. Another benefit is covering surprise expenses such as broken appliances, car repairs, etc. This system allows an employee to maintain their lifestyle while still paying the bills.
Employers benefit too. Employers have an opportunity to support employee financial well-being, which in turn improves productivity and increases retention. When employee retention is a driving factor in a company’s success or failure, company owners and leaders need to be mindful of trends regarding hiring and maintaining employees. 20% of turnovers can be attributed to the financial stress of employees. Inflation continues to affect this, especially during current times of extreme price jumps for everyday expenses like gas and groceries.
Employers tend to see a rise in enthusiasm and productivity as employees can view their funds daily and see the immediate results of working overtime, picking up extra shifts, or simply affording an unexpected expense.
One of the main driving factors for the surge in same-day pay is the gig economy’s growth. As people’s preference for independent contract work grows, so does their preference for same-day pay. Employees want to control when they have access to their money rather than being forced to wait for the next pay period. This approach primarily benefits contract employees who need or want the flexibility of the temporary positions.
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