Is waiting for payday creating a worker mental health crisis?

Today’s employees face increasingly challenging financial realities as the cost of living and daily expenses continue to rise across the country. With 60% of Americans living paycheck to paycheck, 77% cite being anxious about their financial situation. We are facing the stark reality that our current financial structures are not giving Americans the support they need to make ends meet.

The question remains: what can be done to mitigate our current stressful financial environment? For employers and employees alike, one potential solution is changing the bi-weekly pay cycle to better fit the needs of the modern workforce. The bi-weekly pay cycle seems as set in stone as paying taxes or paying your mortgage. Yet this traditional pay structure is not necessarily built for the needs of today’s workforce – bills are due at various times throughout the month and emergency expenses can come up at any time. Furthermore, late fees, interest payments, overdrafts, and reliance on debt products — like credit cards — to fill the gap between paychecks, has been the reality of many hard-working Americans whose bills don’t wait for payday to be due.

So, how did we get here and why does this matter?

Historically, there was a debate over the timing of payday, dating back to the Industrial Revolution. Similar to the five day workweek, worker policies have changed over time, and we are still seeing these centuries-old policies play out today. The cadence of our pay cycle can directly impact our willingness to take on additional work, responsibilities, or even jobs to make ends meet, and even then, some workers find themselves still unable to reach their financial goals.

While the bi-weekly cadence is the norm for most jobs, waiting for payday can be psychologically challenging. In today’s increasingly digital society, we are focused on speed and efficiency, and waiting for payday does not align with those norms. It gives hard-working people a lack of control, leaving them feeling financially vulnerable, anxious and more dependent on employers to alleviate higher levels of financial stress. Waiting for payday can create feelings of ‘feast or famine’ rather than its intended hope to help people budget their paychecks. The sudden influx of available funds can create an unrealistic expectation of the amount of money people have to spend even on necessities and bills. This directly impacts the ability to feel safe and secure, which can thus make decision-making more difficult and impulsive.

How a simple solution can create financial momentum

On-demand pay is an existing benefit that many workers have access to today — literally anyone with a paycheck can get paid the same day that they work. Moreover, on-demand pay can even be offered as an employee benefit employers offer to both hourly and salaried employees. On-demand pay allows people to access their pay as the work, which means in the event they need access to cash in a safe, cost-effective, and no-risk manner, they can leverage their own earnings for it, as opposed to other methods of lending, which can come with fees and can drive up personal debt.

On-demand pay gives workers the ability to avoid the ‘feast or famine’ mentality that comes with waiting for payday, while providing the confidence that regardless of what expenses are on the horizon, they have access to income that they have already earned – taking control of their finances back into their own hands. And because you can never access more than you make in a day, on-demand pay helps prevent debt. Having access to pay empowers employees with increased resilience in the face of uncertainty and provides more stable ground to stand on financially, allowing for greater opportunity and peace of mind. Peace of mind can create a domino effect of powerful results: something as minor as a happier day can lead to a boosted immune system and a stronger, more motivated employee.

Related: Employees with flexible pay see boost in financial health and job satisfaction

Moreover, if you look at the statistics from an on-demand pay app, the results are compelling. You will find that customers experience both financial and mental benefits. Sixty-two percent of customers report that they have improved spending habits, 70% report having more financial flexibility, and 81% report experiencing less financial stress.

Employers must consider the financial reality of their employees in a broader market sense. At the end of last year, US households carried $17.5 trillion of debt, averaging $104K per household), which is significant and overwhelming. One in five employees admits that productivity at work has been impacted by financial worries, and on-demand pay has the opportunity to alleviate financial stressors for both employees and employers. There is clarity to being able to plan or know you can access the very basics for yourself or those that you love. Without having to wait on a bi-weekly pay cycle, you are in the driver’s seat of your finances, and as we continue to see efforts to modernize workplace policies, pay cycles are a key consideration as we move into the new frontier of balancing work and mental health.

Michele Paiva, therapist, entrepreneur and Financial Wellness Advisor for EarnIn