It may seem odd, but mobile apps that allow employees to access their earnings every day instead of having to wait for payday are turning out to be helpful in reducing turnover.
The Society for Human Resource Management reports that the apps, which allow workers to access half the pay they earn in a day as a way to cover unexpected expenses and avoid pricey payday loans, are useful to companies in attracting and keeping employees in high-turnover jobs.
With the apps, pay is typically downloaded to debit cards, and taxes are deducted when workers get their final biweekly or weekly paycheck. For those using payday apps, most workers take only an average of $27 per early access to their money; in addition, it’s not something they do every day—maybe an average of two to three times per pay period.
While Instant Financial, an instant pay app provider, charges organizations $1 per employee per month to use its service, other vendors charge workers to use the pay option. Employers do still have some additional cost if employees are charged, since the platform has to be integrated into its existing payroll system.
Among the apps charging employees is Daily Pay, which charges employees $1.25 per transaction if they want their pay the next business day and $2.99 if they want pay instantly after being earned, Jason Lee, founder and CEO of New York City-based Daily Pay, says in the report.
In addition, Daily Pay allows employees to draw 100 percent, rather than 50 percent, of what they earned the previous day. Lee says in the report that on average, those using the service access 44 percent of their overall pay using the daily option, receiving the remaining 56 percent of pay on their regular biweekly payday.
“The benefits of the instant pay option are twofold,” Lee is quoted saying. He adds, “The employee has more control over when and how they receive their pay, allowing them to meet any pressing financial obligations. For employers, when employees receive this benefit the data shows they tend to stay with the organization longer. Employers increasingly see this as a way to differentiate themselves in tight labor markets where there is flat wage growth.”
“We’re seeing a lot of traction for instant pay apps in companies with large hourly workforces where employees live paycheck to paycheck and unexpected expenses can cause big disruptions to their lives,” Ron Hanscome, a research vice president at Gartner in Minneapolis who specializes in HR technologies, is quoted saying.
Hanscome adds, “It can be a differentiator in markets where turnover is high and organizations are looking to create a more stable workforce.” Hourly employees who can access pay immediately can be less likely to leave in search of a 25-cent or 50-cent per-hour pay increase at a competitor, he says in the report.
Among the companies using some version of the pay option are Outback Steakhouse, McDonalds, Dial America and Maids International; some say it’s helped to reduce hourly workers’ turnover rates. Even Walmart is adding an app called Even that will allow its workers to get access to some of their pay before payday.
And employers aren’t seeing irresponsible behavior or impulse spending in employees who seek cash ahead of payday; instead, they’re looking for ways to cope with minor financial emergencies without having to resort to payday loans or end up delinquent on an unpaid bill.
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