Are On-Demand Paychecks Set to Take Over?
We are now living in a digital age. The COVID-19 pandemic has accelerated what many people previously thought would become inevitable down the line – the majority of people working in offices now spend most of their workweek working remotely.
It is unclear if this is a trend that will be here to stay or if employers will try to get back to normal once the pandemic situation eases. The lure of saving significantly on renting commercial premises will play in the minds of many business owners. There has also not been a noted dip in productivity since this shift to working from home. Therefore, remote working at least a few days a week seems like it is here to stay when things get back to normal. Another big movement that people are pushing for is on-demand payments from employers. With payment systems becoming much faster and more affordable, a lot of people believe that they should be getting paid on demand, rather than having to wait every two weeks or month to get compensated for the work that they have completed.
What would be the benefits of on-demand paychecks?
One of the biggest advantages of moving towards on-demand paychecks for workers is that they will have better cash flow. A large portion of Americans today have to live paycheck to paycheck. Employers hold onto the wages of their employees for as many as two weeks or a month in some cases before paying them. This means that workers may have gaps in their finances between paycheck day and the next couple of weeks. It can be difficult for people to cover expenses, particularly in emergency situations when they have already spent most of their previous paycheck on other types of expenses.
On-demand paychecks for workers ensures better cash flow
Even those people earning six figures can end up in this difficult situation where they do not have enough money to cover their expenses due to the delay in getting paychecks. In a lot of cases, these people end up being forced to take out credit. If it is a short-term cash flow problem, they might resort to getting credit at extremely high-interest rates, whether through credit cards or payday loans. This can put people in a very difficult financial situation as the interest racks up even in a short period of time. A lot of workers have outlined over the years that if they had some flexibility of when they could get paid by their employers, financial situations could be a lot easier managed.
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Designed for SMBs Are on-demand paychecks possible?
For many years, the idea of an on-demand paycheck was a thing of fantasy. This was because the money it would cost employers to run such a system would be very expensive. The majority of payroll systems are not continually updating in real-time how much a person has earned and is subsequently due in the form of wages. Therefore these types of systems would find it hard to meet the needs of on-demand paychecks. However, there have been massive strides in recent years with regard to HCM and cloud technologies which make it much easier to operate real-time payment systems. This would allow an employer to have an automated system up and running to track the exact sum that a worker is owed at the end of each day while removing deductions and taxes. Therefore, the use of such systems could allow for on-demand paychecks.
Companies who offer on-demand paychecks showcase themselves as forward thinkers and an employer to work for.
In terms of what the allowance of on-demand paychecks would mean for employers themselves, there are a few different ways to look at the issue. In one way, it will be a redeeming factor for those companies who offer this form of payroll service. They can stand out from the crowd and showcase themselves as being a forward thinker and an employer that people want to work for. Workers will likely be more engaged and there is a good chance that the turnover of employees is not going to be as big. Newer and better talent can be attracted by this ideal sort of situation, which can ultimately boost the bottom line of the business.
Naturally, there can be some extra considerations a company would have to make. This includes not having the ability to as accurately make budgets and forecasts for certain periods. It might also lead to more of a focus on cash flow management to make sure that those funds are available at all times for workers to be able to submit an on-demand payments request rather than just needing the funds in place every couple of weeks.
Naturally, there are many advantages to this approach for employees. They can make sure that they get their wages when needed, allowing them to meet their payment obligations on time and avoid having to get short-term credit at high-interest rates to tie them over until they get their next paycheck. Therefore, people will have more financial control and be in a better position a lot of the time if there is an emergency.
What are the chances of widespread implementation?
The COVID-19 pandemic has led to an evolution of the traditional employer-employee relationship. The way that business is done has potentially changed forever, with a lot of employers now looking at ways to keep workers engaged and happy. A lot of the trends point toward forward-thinking companies starting to transfer to an on-demand system to pay workers in the coming years. As time goes on, it appears that it will eventually be the norm rather than an exception.
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How can an employer start offering on-demand paychecks?
Naturally, a lot of employers like the way that they are currently doing things. This includes their payroll systems that might have been in place largely intact for many years. They could look at the per-transaction costs of offering on-demand paychecks. However, many of the leading payroll companies are now offering on-demand payroll services for a reasonable price.
Some of the companies that are putting a particular level of attention in this area include the likes of Paychex, ADP, and Square. These on-demand systems are not much different than the regular payroll system an employer may be using.
In order to allow for a good level of certainty, employers will usually have the same weekly or bi-weekly spending on payroll, just with the funds being available on-demand for workers rather than them having to wait for the end of a certain period to receive their accrued wages. A happier, more productive workforce is often the result of embracing on-demand paychecks, so it is worth considering for a lot of different businesses.
