As the majority of the freelance workforce shifts toward younger, technology-savvy contractors, organizations that can't promptly pay will fail to attract the services of this mobile-first demographic.
The gig economy benefits employers and employees alike.
Organizations can stay nimble by relying on contractors for special projects, while freelancers have the ability to pick and choose clients and assignments. But as the pool of self-employed workers expands, organizations will recognize that they must have fast and flexible freelance payment options if they want to attract the best talent.
Promising a paper check in the mail won't likely please many freelancers. For that matter, even making an electronic deposit to a bank account may fail to attract contract workers who handle their financial transactions on digital pay services that grant access to earned wages almost immediately. Why wait a day or two for an electronic deposit to clear when funds can be accessed within hours?
That's why paycards are an attractive payment method for businesses. As soon as a project is completed, the organization electronically deposits payment into a paycard account, enabling the freelancer to promptly withdraw the money or use the card for point-of-sale purchases. Important to note, a recent study from the ADP Research Institute® (ADPRI) revealed that 64% of 1099 workers are more likely to expect employers to offer nontraditional payment methods such as paycards in the next 10 years.
The Workforce is Increasingly Unbanked and Mobile
Estimates on the number of contract workers in the U.S. vary greatly, with sources calculating that between 1.3 percent (according to a recent Bureau of Labor study) and 36 percent (says Freelancers Union) of the total workforce is comprised of freelancers. Many of these workers have reported difficulties with receiving payment. While freelancers enjoy the flexibility to choose assignments that best suit their talents, they also don't want to haggle for their pay.
A PayPal study found that 58 percent of freelancers in four Southeast Asia markets have faced the dread of not being paid by clients, according to Vulcan Post. Bonsai, a services platform for freelancers, analyzed three years of invoicing data belonging to contract workers from around the world and found that 29 percent of the invoices were paid after they were due. More than 75 percent of those late invoices were paid within 14 days of the due date, and 90 percent were paid within a month.
As the freelance workforce shifts toward a majority that is comprised of younger, technology-savvy contractors, organizations that can't promptly pay may fail to attract the services of this mobile-first demographic.
"Younger workers want to take advantage of technology," said George Mavrantzas, a Vice President of Strategy & Thought Leadership at ADP. "There's a money movement. Young people prefer to use a virtual wallet and not be associated with a traditional bank. They want to have everything at their fingertips."
If a business makes the paycard one of its freelance payment options, it will not only satisfy the younger, unbanked niche of contract workers, but it will also provide several other advantages. Organizations will lower their payroll costs because the electronic-based paycard system is less expensive than the production and handling of paper checks. Employers are less susceptible to losses from fraud occurring on paycards as opposed to paper checks.
Value Freelancers by Reciprocating with Prompt Pay
Workers operate as freelancers for many reasons, but the power to remain unbound to one employer and one type of assignment is a top motivation. The freedom to manage money outside of a traditional bank is also quickly becoming a primary factor in determining which clients appeal most to freelancers. If your business relies on contract workers and expects to attract the most capable ones, you should consider how you will pay them. Providing a paycard option will help freelancers get fast access to their earned pay.
If you'd like to explore how paycards work and how they can fit into your payroll processes and how they can benefit you and your freelance workforce, visit Wisely Pay by ADP.
To learn more about people and pay, download the ADPRI report: The Evolution of Pay