Offering faster payments to your employees can help them and your organization.
The gig economy has done more than disrupt certain industries — it has also changed worker expectations around getting paid, even for those in traditional salaried jobs. There is now a clear need to develop innovative payroll processing for faster wage payments. Employers who do so can better support their employees, especially during economic shifts and simultaneously, pick up several important bottom line benefits.
The Gig Economy and Payment Expectations
One of the advantages of working in the gig economy is that payments often are available right away. For example, as soon as someone finishes their shift driving for ridesharing services, they immediately get paid for their rides through the app. The instant payment system has been around for years now, and people are familiar with it, partly because many full-time employees are choosing to do part-time gig work on the side.
That's why employers who adhere to a standard biweekly payroll frequency and send out checks every two weeks can feel like a disappointment in comparison and may not meet an employee's financial needs.
Millions of Americans live paycheck to paycheck, and nearly 40 percent could not come up with $400 to cover an unexpected event, according to the Federal Reserve. In many cases, early access to some of their wages could provide a valuable lifeline in an emergency. This is especially relevant as workers navigate this evolving economic environment.
While younger employees are more likely to expect early wage access as an option, demand for faster pay methods crosses generations. Pay cycle options may quickly become a differentiator for employers with more than 50 percent of workers saying they would pay a small fee for early access to earned wages. As employees seek faster, more flexible pay options employers will need to adjust to meet the demand.
Innovative Payroll Processing Solutions
Expediting W-2 paychecks is a little more challenging than expediting payments to independent contractors, as employers must determine the proper tax withholding. But even if payroll can't be instant like most gig economy payments, there are ways to pay your workforce more quickly. Some businesses have switched to processing payroll on a weekly or even daily basis.
Another example is workers receiving a pay card loaded with their earned wages and tips or other forms of instant payments for convenience.
Pay card features, such as early direct deposit, allow employees to receive their paycheck up to two days before payday. Employers should seek legal counsel when instituting these programs to ensure they remain in compliance with all applicable laws and regulations.
Bottom Line Benefits for Employers
Faster wage payment can also offer several major benefits for employers. For instance, it can grant firms a significant hiring and retention edge. Besides wages and benefits, speed of pay is often highlighted as a top reason for choosing a particular job.
When the economy recovers, providing faster wage payments may be a way to get back to a full workforce ahead of the competition. Partnering with ADP gives employers several options for faster pay delivery.
[On-demand webcast] Agile Payroll Practices to Support Your Organization During COVID-19