With 78% of all Americans living paycheck to paycheck, employers that offer a benefit that contributes to financial wellness and security will be more favorable to employees. That’s why daily pay benefits are becoming mainstream, and employers are already seeing impressive results.
I predict that the daily pay benefit goes mainstream. Employers are impressed with the results they are seeing in terms of reduced turnover, greater employee engagement and retention, and a growing candidate pool who want the daily pay benefit that potential employers are offering.
If you’re still feeling skeptical, it’s time to come around to understanding why this benefit is going to reach critical mass this year — and that’s because one of its biggest benefits is helping your employees to feel more financially secure. And with 78% of all Americans living paycheck to paycheck, offering a benefit that contributes to financial wellness and security is critical to increasing employee engagement.
The daily pay benefit empowers employees
Financial stress is palpable in the workplace and, according to a PricewaterhouseCoopers Employee Wellness Survey, 34% of Generation X, 16% of baby boomers and 37% of millennials say they’re distracted by their finances at work. The same survey also states that almost half of these employees spend more than three hours per week dealing with personal finance issues.
A daily pay benefit can help to substantially relieve this stress. With access to view their earned wages, employees can better budget for upcoming expenses and make decisions about discretionary spending, like eating out or going to the movies. They can also decide to request extra work shifts if they see a shortfall in their earnings for the current pay period.
Employees who experience an unexpected expense, such as a flat tire on the way to work or an emergency room medical expense, can also request an instant transfer of any or all of their available balance to pay for it. This helps them to avoid costly overdraft charges and exorbitant payday loans that only help to continue the cycle of debt when they can’t be repaid when an employee receives his or her next paycheck.
Skeptics have expressed concern about how employees will use this transfer option, worried that it will be overused and that employees won’t have anything left to receive on payday. Experience and ongoing data analytics prove the exact opposite to be true. While employees may check their balances on average five times a week, they request a transfer on average only once a week.
Clearly, this demonstrates that employees are more interested in using the balance feature for transparency, budgeting purposes and for making decisions about expenditures. Typically, they transfer some of their earned wages only for emergencies or to pay a bill when a bill is due prior to payday and they don’t have enough money.
The daily pay benefit makes good business sense
Kronos and The Human Capital Institute (HCI) recently conducted a study of 234 organizations to better understand their recruiting strategy for hourly and salaried talent in today’s competitive labor market. Because it’s taking longer to recruit and hire, turnover costs are increasing as well.
Turnover costs include:
- Time spent on preparing paperwork, interviewing, screening and hiring for the vacant position
- Orientation, training, and employee onboarding
- Bringing an employee up to speed to become as productive and competent in the position as his or her predecessor
- Impact on employee morale; employee engagement tends to deteriorate as a result of high turnover, leading to even higher attrition
Many employers have realized a substantial decrease in turnover as a result of offering a daily pay benefit. Several years into offering this benefit we are seeing impressive data that shows the daily pay benefit is delivering on the promise of reducing employee turnover:
- Companies have seen, on average, a 41% reduction in turnover
- 73% of our partners’ employees say they are more motivated to come to work
- Job candidates are almost twice as likely to apply for a job that pays daily
The time to put skepticism aside is now
By 2025, more than 75% of the workforce will be comprised of MAGGIEs (Millennials And Gen Z who Get Instant Everything), who are accustomed to instant everything. MAGGIEs want full access to their pay instantly because that is what they have come to expect in every other area of their life. They also crave transparency — they track steps on their Fitbits and track every move their Uber driver makes so they know when to leave their apartments. They want the same transparency and control when it comes to their financial services.
The ERINs (Employees Requiring Income Now) in the workforce want their earned wages today because they represent the 78% of the workforce who live paycheck to paycheck. Providing them with a daily pay benefit gives them the financial flexibility and security they crave because they can see their accumulating available balance and they have access to earned wages should they did it.
In order to appease employees in both of these demographics, offering a daily pay benefit will become the norm. The time to embrace it is now; actual results should dispel any lingering skepticism.