A small number of employers and start-ups are assessing different options for giving employees faster access to earned wages. Generally, most workers get paid once every week, once every other week, or twice per month. This practice has allowed employers to retain funds that they could be use in the interim between paydays. Despite the tradition of weekly and bi-weekly payments, employees have voiced concerns about waiting to receive their pay. As a way to mitigate these concerns, a growing number of employers have opted to use payroll cards and ATMs in order to enable their employees to take home their pay as soon as it is earned.
Approaches
Generally, fast access to wages has been considered one of the benefits of “gig” services, such as bartending or ridesharing, but now more employers of “traditional” workers are looking for ways to transfer this benefit to their employees.
For workers in the ride-sharing industry, instant access to wages has become an industry standard. Both Uber and Lyft have provided their drivers with the option to obtain their wages on the same day that they were earned. Uber gives each of its active drivers a prepaid debit card, while Lyft offers drivers the option to cash out immediately at the end of the day, instead of waiting for their weekly payday.
Another way employees can gain access to their wages before payday is through the use of ATMs. Recently, a nonprofit based in California has allowed its employees to use an ATM at their facility to withdraw from their next paycheck up to $500 or one-half of the wages that they have already earned. In this type of transaction, the vendor running the ATM fronts the money to the employees. Then, once payday comes around, the vendor receives the paid-out wages from the employer. Vendors that help provide workers with fast cash may also be set up so that they make payments directly to employees from the employer’s account, instead of waiting for a reimbursement.
The final payment structure that a vendor providing fast access to wages can take is to receive reimbursement directly from the employee. In this situation, the vendor advances the cash for hours that the employee has worked. The employee verifies his hours by sending a picture of his time sheets to the vendor. On payday, the vendor goes directly into the worker’s checking account and withdraws the amount owed from the advance.
Benefits
Some employers believe that instant access to wages is a great incentive for people to want to work for their organization. Additionally, fast cash may encourage employees to be more productive and work longer hours, especially if the employee is a little short on bills or rent. If an employee is able to receive some or all of his wages when he needs them, it may prevent some pressing financial issues from becoming worse. For example, if an employee cannot afford to purchase medicine or pay the utility bill, that worker’s living conditions will suffer; however, if they were able to access a few extra dollars it would make a big difference. Following this logic, use of same-day or early access to wages will likely reduce the need for payday loans, which often carry high interest rates.
Costs
All of the services that provide fast access to wages charge fees, generally on a per transaction basis. These fees can range from $0.50 to $5.00 depending on the vendor and the way the transaction is structured. While employers can choose to help pay for some of the transaction fees, the worker is typically on his or her own.
Although the transaction charges can add up, they usually remain lower than the fees that employees would have to pay for payday loans, bank overdrafts, or late payments, making use of the services worthwhile for the employees.
More people in traditional jobs are seeing instant payments as a convenient method for supplementing weekly budgets in emergency situations, or purchasing necessities such as groceries. Providing same-day or early access to wages is a growing trend that progressive employers are watching and testing to determine which methods will give the most benefits to their employees.