In 2020, “stimulus check” and “second stimulus check” were among the top 15 Google searches in the United States.
The same year became one Ernst and Young report estimated that across the Organization for Economic Co-operation and Development (OECD) countries, about $ 1 trillion of workers’ wages lay in the employer coffers on any given day.
“It’s essentially an interest-free loan from an employee to an employer,” said Aaron Fuchs, vice president of commercial for Ceridian, a Bloomington-based human asset management firm. For lay people, it means “it’s a software company, and the software it provides is human resource-centric,” Fuchs said.
The stimulus check was a way to cope. Ceridian is part of a growing industry that is disrupting “payday”.
In his role, Fuchs oversees the Dayforce Wallet, one of several mobile applications on the market that offer same-day payroll. The service, also known as earned payroll access, on-demand payroll or real-time payroll, allows employees to access their payroll from their personal devices right after their shift.
Employee expectations have changed: 83% of U.S. workers between the ages of 18-44 believe they should have access to earned pay at the end of each workday, according to a 2021 survey by The Harris Poll.
“Technology has caught up and redefined so many other places in (people’s) lives,” Fuchs said, “they recognize that pay is an area that has really not changed since the 1980s.”
The company launched the Dayforce Wallet in May 2020 and expanded to Canada last year. Fuchs said they closed in 2021 with nearly 1,000 customers, including large companies like Danone and locals like Lunds & Byerlys.
Since then, Ceridian has launched its COVID program among a customer base most in need of enticing new employees: retail, healthcare, manufacturing and hospitality.
Compete in the job market
In the middle unemployment levels and a pandemic in which many public-turned workers resigned en masse, employers needed creative solutions to retain and recruit employees.
“We really wanted to take advantage of (same-day pay) and offer it to our employees as a means of continuing to differentiate ourselves in the labor market,” says Casey Enevoldsen, Deputy Director of Employee Experience at Lunds & Byerlys. “We see that the workforce continues to shrink in its growth. It just means that there are fewer and fewer people available to do the work that employers really want to have done, and therefore we have really focused on retention and tried to attract new talent. “
Many employees say that having access to pay faster is a key aspect of their financial well-being. Part of their strategy has been to look at a wide range of attractive initiatives to retain and attract new talent, including adding telesealth to the various range of part-time and full-time roles across retail, manufacturing and support positions. .
Enevoldsen said the addition of same-day pay was an easy transition, as Ceridian already manages its pay and offered the benefit free of charge to the merchant and its workers. Under this system, individuals pay payslips to the Dayforce Wallet, from which they can choose to have their money deposited on a mobile wallet or physical payment card.
Launched in 2016, DailyPay has partnered with a number of fast food restaurants as well as companies such as Mall of America and Target. (New York headquarters opened its only other U.S. office in Minneapolis for operations and customer service in 2019.)
DailyPay Chief Marketing Officer Jeanniey Walden said the payment rate was delayed by the introduction of payroll tax in 1943. With companies traditionally running their own payroll systems, it became time-consuming and more expensive to run calculations for the numbers behind an employee’s payroll. She said there are three information systems behind them: time and attendance, pay rate and benefits like health care, dental care, 401k and payroll expenses. Financial service companies like DailyPay retrieve this information from employers and automate all of these processes so that workers can see in real time how much they are earning and in return gain access to that pay.
ONE third party audit of DailyPay data found employee turnover reduced by 42% with DailyPay.
With the financial stress caused by the last few years, same-day pay has been crucial to competing with the concert economy – and supporting workers with tight budgets.
“Most of the time when (people with multiple jobs are) asked, ‘why are you working for me here and do DoorDash? ‘ It’s not because they’re not making enough money here. It’s that “well, I need $ 50 this week because I have to put the payout on my daughter’s braces,” or whatever it is, “Walden said.
Most non-farm workers in the United States are paid every other week (every other week), according to a February 2020 snapshot of Current employment statistics survey of the U.S. Bureau of Labor Statistics. About a quarter are paid monthly or semi-annually.
Overcome financial uncertainty
Keziah Vulu works part-time at Lunds & Byerlys. She only got access to her salary the same day once. She was fascinated by the news and ordered food.
“I like that it’s there, but I do not like when my (every other week) check is short,” Vulu said.
Instead, she expressed relief that in January the company switched to weekly pay. Employees can deduct their daily salary from the app, where the salary is deducted from their weekly check.
“(With the shift to weekly pay) I have been able to budget and get what I want. It seemed harder to save when I was paid every other week, and easier to spend too much, ”said Vulu.
Several employees noticed similar – either never having used same-day pay or used it infrequently.
“If we had stayed on another week (schedule), I would have been more likely to jump on that train in person. But with the weekly, it works. It’s good enough for me,” said operations manager Nina Urman.
Sara Cramer trains employee support teams at DailyPay and also occasionally gets access to same-day pay. Since she is paid every other week, she said that easy access to pay gives peace of mind around pay day.
“That date (with need) is not your whole life,” said Cramer, who said the service was more helpful in helping her understand her daily gross earnings.
The data supports that. Recently, academic research has examined how the payment rate affects workers’ behavior. A 2019 paper quoted by the Bureau of Labor Statistics, found a causal link between frequent payments and household expenses to be smoothing to help navigate personal finances. Earlier in April was Journal of Consumer Research published an article by business professors Wendy de la Rosa and Stephanie M. Tully and noted, “higher payment rates reduce consumer uncertainty about predicting whether they will have enough resources over a period of time.”
But more than easing potential concerns, financial service companies say payday loans eliminate the need for quick loans, credit cards and other pitfalls that people fall into when they run out of money.
“DailyPay is being used to complement and build bridges in truly unique and different ways,” Walden said.
An example, she noted: “When gas prices went through the roof, there were many people, who again usually had enough money, by running out of gasoline to physically get to work … They had no way to get to work, if they did not use DailyPay to get petrol for their car for the next two days to get through them until their payslip came in. “
According to the Consumer Financial Protection Bureau, “Before the COVID-19 pandemic, consumers had steadily paid more in credit card fees each year – peaking at more than $ 14 billion in 2019. Delayed fees estimated by issuers fell to about $ 12 billion in 2020 given record high payment rates and government “Even during the pandemic, delay fees accounted for more than a tenth of the $ 120 billion that consumers pay in credit card interest and fees annually. In 2021, delay fees were rising again.”
In March, a coalition of 19 lawyers called the Consumer Financial Protection Agency to ensure that buy-now-pay-later lenders do not engage in practices that catch consumers in a debt cycle In a letter, they noted concern that the industry has experienced “rapid and exponential growth” during the COVID-19 pandemic.
DailyPay claims that 88% of users credit the app for reducing or eliminating their use of quick loans, and an average of $ 292 is saved annually among overdrafts. a partner report.
Urman said the benefit of same-day pay provides peace of mind and a good safety net.
“I know if your car breaks down, or an unexpected bill pops up, or even vacations, that kind of thing, it’s really nice for people to be able to get something done right away without adding credit card debt or borrowing money in ways like quick loans where they are hit with great interest, “said Urman.” It can be big. So while it may not be a need for me every week or month, it’s nice to know that if something happened, you have some kind of backup system where you do not have to put yourself in an additional bad position. “