With job vacancies in the UK and the US at record highs, there’s no denying the pandemic’s ripple effect on the global workforce.
The Office of National Statistics estimates the UK has 1.1 million open job roles (up from 784,500 in the first three months of 2021), while in the US, the ‘Great Resignation’ continues to gather pace with a record 4.4 million people leaving their jobs in September alone.
COVID-19 has caused many to rethink their work-life balance, while others have grown tired of unsteady or overly demanding work.
In response, employers are having to radically rethink workplace policies and benefits to attract new hires and keep the staff they currently have.
While ping pong tables and free lunches were once sought-after employee perks, staff are no longer so easily swayed.
Employers need to provide new and relevant employee rewards strategies that align with the changing needs of their workforce. This starts with a critical, yet often overlooked benefit: payroll.
The problem: The state of payroll today
The proportion of workers paid weekly has diminished over many years, while the number paid monthly has ballooned.
A Resolution Foundation report published in June 2020 showed that “in 2000 [in the UK], around half of the lowest earners were paid weekly or fortnightly, with the other half paid monthly. Now just 17% are paid weekly, while three-quarters are paid monthly.”
How did it become a regular practice to pay employees so long after the actual work they have completed?
These long pay cycles are relics of a technologically limited era when employers had to rely on outdated technology and batch processing that forced them to implement fixed pay cycles.
The idea of ‘waiting for payday’ has become entrenched in society, but a growing body of research shows that employees are far from happy with this arrangement.
In the UK, wage payment in arrears contributes to workers spending nearly half of their disposable income (43%) within 24 hours of being paid, and in the US nearly 1 in 3 workers run out of money before payday – even those earning above $100,000.
With few options in front of them, many employees are forced to turn to credit cards and ‘payday loan’ companies to cover their expenses until the next payday.
The solution: On-demand pay
Earned wage access (EWA) goes by many names: from ‘on-demand pay’ to ‘instant pay’. But it essentially means the ability for employees to withdraw money they have already earned whenever they need it, rather than on a set payday.
People today can access anything they desire on-demand, from streaming entertainment to deliveries of their favorite foods.
There’s a strong case for disrupting current conventional pay practices. With modern technology, it’s possible to revolutionize payroll and provide more flexibility in how workers get paid.
The evidence is clear: EY research found that 70% of all workers are paid either monthly or every two weeks, yet 80% of workers want their pay to be calculated on-demand.
Financial wellbeing has a part to play here too.
PWC’s Annual Employee Financial Wellness Survey found that 47% of employees said finances have been a distraction at work. It’s called “presenteeism”— financially stressed employees who don’t bring their best to work. They’re distracted and therefore less productive.
For a company of 10,000 workers, lost productivity can translate to a loss of 1,922 hours and $28,830 each week, according to MetLife.
Unsurprisingly, the concept of financial wellbeing is becoming increasingly prevalent amongst business leaders. More than half of the companies surveyed by the Employee Benefit Research Institute say that financial wellbeing is a key initiative for them.
However, findings from Ceridian’s UK Pay Experience Report revealed that when staff were asked if they think their employer cares about their financial wellbeing only 19% of employees said their employer cares “very much,” and a further 30% responded “a little.”
Providing employees with financial wellbeing support for both their work and personal lives can also improve an organization’s brand perception.
This positively impacts how potential future employees and customers view the company, and helps with recruitment and retention.
A toolkit for success
Organizations looking to provide their employees with a modern and flexible EWA solution will find that there are different options on the market. Here are a few things to consider when evaluating the right solution for your workforce.
1. The type of provider
In general, there are two types of on-demand pay providers. The first is a standalone third-party vendor which partners with standard payroll platforms and generates revenue through transaction fees paid by employers or employees to access their earned wages.
The second is native on-demand pay built into a payroll system that can offer the service free to employers and employees.
2. Whether it is a real payroll run.
Some providers process on-demand pay requests as a regular payroll with the appropriate taxes withheld. With a real-time, continuous calculation of net pay, employees can only withdraw their true available pay (net of taxes and deductions). This is access to a worker’s earned wages – not an approximation or a loan.
3. The impact on your organization’s existing payroll processes.
On-demand pay done the right way ensures payroll and tax compliance with legislative requirements and company policies. Taxes and garnishments should automatically be remitted to applicable agencies and, as a result, provide minimal to no disruption in an organization’s payroll processing.
As businesses navigate an increasingly borderless, fluid, and on-demand workplace, they need to adopt modern workplace practices that help workers thrive in today’s fast-paced world.
Technology is a critical driver that will help remove traditional barriers in the world of work and facilitate the flexibility and immediacy employees expect.
On-demand pay is an important step companies can take to create better employee experiences, while increasing employee engagement and retention in the process.
We found search results for
- Case Study
- How To Guide
- Product Spotlight
- Roundtable Insights
- Clear filters