In 2020, “stimulus check” and “second stimulus check” were among the top 15 Google searches in the United States.
That same year, a Ernst and Young report estimated that in the countries of the Organization for Economic Co-operation and Development (OECD), around $1 trillion in workers’ wages lie dormant in employers’ coffers every day.
“It’s basically been an interest-free loan from an employee to an employer,” said Aaron Fuchs, commercial vice president of Ceridian, a Bloomington-based human capital management firm. To laypersons, that means “it’s a software company and the software it provides is inherently HR-centric,” Fuchs said.
Stimulus checks were a way out. Ceridian is part of a growing industry that is disrupting “payday”.
In her role, Fuchs oversees Dayforce Wallet, one of several mobile apps on the market offering same-day payment. Also known as earned pay access, pay-on-demand, or real-time pay, the service allows employees to access their pay from their personal devices right after their shift. work.
Employee expectations have changed: 83% of American workers aged 18-44 believe they should have access to their pay at the end of each workday, according to a 2021 survey by The Harris Poll.
“Technology has caught up with and redefined so many other places in (people’s) lives,” Fuchs said, “They recognize that payroll is an area that really hasn’t changed since the 1980s.”
The company launched Dayforce Wallet in May 2020, expanding to Canada last year. Fuchs said it closed 2021 with nearly 1,000 customers, including large companies such as Danone and local businesses such as Lunds & Byerlys.
Since Ceridian rolled out its program during COVID to customers most in need of attracting new workers: retail, healthcare, manufacturing and hospitality.
Be competitive in the labor market
In the middle of unemployment rate and a pandemic where many public-facing workers resigned en masse, employers needed creative solutions to retain and recruit employees.
“We really wanted to leverage (same-day pay) and offer it to our people as a way to continue to differentiate ourselves in the workplace,” said Casey Enevoldsen, vice president of employee experience at Lunds. & Byerlys. “We see that the labor force continues to decline in its growth. It just means there will be fewer and fewer people available to do the work that employers are really looking to do, so we’ve been really focused on retention while trying to attract new talent.
Many employees say getting paid sooner is a key aspect of their financial well-being. Part of their strategy has been to look at a wide range of attractive measures to retain and attract new talent, including adding telehealth to various part-time and full-time positions in retail, manufacturing and support.
Enevoldsen said adding same-day payment was an easy transition because Ceridian already manages its payroll and offered the benefit at no cost to the grocer and its employees. Under this system, individuals directly deposit their paychecks into Dayforce Wallet from which they can choose to have their funds deposited to a mobile wallet or physical debit card.
Launched in 2016, DailyPay is associated with a number of fast food franchises, as well as companies such as Mall of America and Target. (The New York-based company opened its only other U.S. office in Minneapolis for operations and customer service in 2019.)
DailyPay marketing manager Jeanniey Walden said the frequency of payments had been delayed by the introduction of payroll tax in 1943. With businesses traditionally operating their own payroll systems, it was becoming cumbersome and more expensive to perform calculations for the numbers behind an employee’s paycheque. She said there were three information systems behind them: time and attendance, pay rate, and benefits like health care, dental, 401k, and wage garnishments. Financial services companies like DailyPay extract this information from employers and automate all these processes so that workers can see in real time how much they earn and in turn access that salary.
A third party audit data from DailyPay revealed that employee turnover was reduced by 42% thanks to DailyPay.
With the financial stress of the past few years, same-day payment has been key to competing with the gig economy and supporting workers on tight budgets.
“Most of the time when (people with multiple jobs are) asked, ‘why do you work for me here? and do DoorDash?’ It’s not because they don’t make enough money here. It’s like, ‘well, I need $50 this week because I have to make the deposit on my daughter’s braces’ or whatever,” Walden said.
Most non-farm workers in the United States are paid bi-weekly (every two weeks), according to a February 2020 snapshot of the Survey of current employment statistics by the US Bureau of Labor Statistics. About a quarter are paid monthly or fortnightly.
Overcome financial precariousness
Keziah Vulu works part-time at Lunds & Byerlys. She accessed her pay the same day only once. Intrigued by the novelty, she ordered food.
“I like that it’s there, but I don’t like it when my (bi-weekly) checks are short,” Vulu said.
She instead expressed relief for the company’s January switch to weekly pay. Employees can withdraw their pay for the day from the app, with the pay being deducted from their weekly check.
“(With the move to weekly pay), I was able to budget and get what I wanted. It seemed harder to save when I was paid bi-weekly and easier to overspend,” Vulu said.
Several employees noted the same – either never using same day payroll or rarely using it.
“If we had stayed on a biweekly (schedule), I would have been more inclined to personally jump on that bandwagon. But with the weekly, it works. It’s good enough for me,” said operations supervisor Nina Urman.
Sara Cramer trains the employee support teams at DailyPay and also accesses same day payroll on occasion. Being paid bi-weekly, she said easy access to wages provides peace of mind around payday.
“That (need) date isn’t your whole life,” said Cramer, who said the service was more helpful in helping him understand his daily gross earnings.
The data confirms this. More recently, academic research has explored the impact of payment frequency on worker behavior. A 2019 paper cited by the Bureau of Labor Statistics found that a causal relationship between frequent payments and household spending reads to help navigate personal finances. Earlier in April, the Consumer Research Journal published an article by business professors Wendy de la Rosa and Stephanie M. Tully and noted that “higher payment frequencies reduce consumer uncertainty about whether they will have enough resources throughout a period.”
But in addition to allaying potential worries, financial services companies say same-day payment eliminates the need for payday loans, credit cards and other traps people fall into when they run out of money. money.
“DailyPay is used to complement and connect in really unique and different ways,” Walden said.
One example she noted: “As gas prices soared, many people who, again, normally had enough money, ran out of gas to physically get to work… They had no way to get to work if they didn’t use DailyPay to get gas for their car for the next two days to get them through to payday until their check pay arrives.
According to the Consumer Financial Protection Bureau, “Before the COVID-19 pandemic, consumers consistently paid more late fees on their credit cards each year, peaking at more than $14 billion in 2019. late fees assessed by issuers have declined to approximately $12 billion. in 2020 given record payout rates and public and private relief efforts. Even during the pandemic, late fees accounted for more than a tenth of the $120 billion consumers pay each year in interest and credit card fees. In 2021, late fees have increased again.
In March, a coalition of 19 lawyers urged the Consumer Financial Protection Bureau for ensure that lenders who buy now and pay later do not engage in practices that trap consumers in a cycle of indebtedness In a letter, they expressed concern that the industry has seen “rapid and exponential growth” during the COVID-19 pandemic.
DailyPay says 88% of users credit the app with reducing or eliminating their use of payday loans, and an average of $292 is saved each year among people who incur overdraft fees, per a partnership report.
Urman said the same-day pay benefit provides peace of mind and a good safety net.
“I know if your car breaks down or an unexpected bill comes in, or even a vacation, that sort of thing, it’s really good for people to be able to do something right away without adding credit card debt or borrow money like payday loans where they get hit with a lot of interest,” Urman said. “It can be huge. So even though for me it might not be a weekly need or monthly, it’s good to know that if something happens, you have some sort of backup system where you don’t have to put yourself in an extra bad position.