For nearly a century, it has been common practice for businesses to pay staff either weekly or on a biweekly basis. However, in the age of instant gratification and employee recruitment/retention challenges, these traditional payroll programs are being questioned, and new approaches are being explored.  

Inflation is on the rise, and it’s creating challenges for workers who live paycheck to paycheck. Also, employees now know that they have some power behind their demands due to nationwide staffing shortages. The bottom line is workers don’t want to wait for compensation. They want to collect a paycheck more frequently — an emerging model known as on-demand pay. 

This is a payment method in which employees can choose to receive their wages as they earn them — after each shift or for the days since they were last paid. In most cases, employees can only access a certain portion of their wages per pay period — the rest is paid as usual on the employee’s next standard payday. Regardless of what employees choose, an on-demand pay service gives them the freedom to decide how they want to get paid and provides them with some reassurance should an unexpected expense occur. 

Of course, nothing is free. There is a fee to access wages on-demand. But unlike situations where payroll providers might charge employers additional processing fees, most on-demand service providers instead charge employees for the ability to access funds early. These charges might seem small when examined individually, but they can quickly add up over time.

To learn more about on-demand payment options, Contracting Profits spoke with David Murphy, CBSE, president of Supreme Maintenance Organization in Greensboro, North Carolina. Murphy began offering this benefit to his staff in July 2021. In this Q&A, he reflects on how things are going. 

What benefits have you experienced as a result of offering on-demand payment services to your frontline workers?   

Offering on-demand payments has created more engagement for team members and it has allowed them to fulfill immediate financial needs. For instance, almost 25 percent of the advances we issue are used for transportation to and from work. We believe it has improved our retention numbers among those who are using it.  

What administrative work had to be done prior to you offering on-demand pay to your staff?

We had to decide with our payroll/software company between API (application programming interface) integration or file uploads. We decided on uploads. We also had to provide pay schedules for the year and tests to make sure it would work with our existing pay card.   

Does offering on-demand payroll services impact payroll processing on an ongoing basis?  

The impact has been minimal on the actual processing of payroll. On a bi-weekly basis we must download and upload a file to update direct deposit. Everything else happens in the background on a schedule. 

How has providing on-demand pay aided in your recruitment and retention strategies of frontline workers? 

We have advertised this benefit heavily in our recruiting efforts. I can’t say our recent hires were a direct result of this offering, but new hire enrollment is sitting at 64 percent. We have also seen a reduction in the number of open positions, and I believe offering this benefit has helped with that retention.  

What percentage of your staff utilizes this on-demand payment option?   

Fifty-seven percent of our staff is enrolled in the service. This means they get daily updates on their available balance via email. Thirty-two percent of our staff is actively engaged in using the benefit, meaning they have two or more transactions. 

Is this benefit available to both hourly and salaried employees? 

Yes. It is available and used by both hourly and salaried team members.

Is there a fee to offering this service to your staff and if so, who is responsible for that?  

There is an instant transfer fee of $2.99 that is paid by the team member, which is deducted from the actual transfer. That said, we do offer our team members free next-day transfers. The only cost to us has been the initial setup with our payroll/software company. 

Have you experienced any downsides to offering on-demand payment, such as errors in payment or challenges with taxes?  

We have experienced very few genuine errors. For example, there have been accounts that will not accept the ACH (Automated Clearing House — a financial network used for electronic payments and money transfers) from the on-demand company. On some occasions, the load of pay from payroll is slow — a team member may receive pay later in the day on payroll rather than first thing in the morning. Other than that, team member confusion is the biggest downside. Many of our ‘problem with payroll’ calls are due to not understanding the service. 

Corinne Zudonyi is the editor-in-chief of Contracting Profits magazine. She oversees multiple publications, as well as the online resource, CleanLink.com. 




POSTED ON: 9/19/2022