Think about it this way: once, you had to wait for a rerun if you missed your favourite satellite TV show. Apart from being disappointing, it also led to serious FOMO! Especially when everyone was discussing what happened and you couldn’t join in. However, today’s streaming services give us immediate access to content anytime, anywhere.
Instant gratification has become a part of our culture at home and work. That’s why managed payroll and HR companies like OPS have created on-demand pay systems. It gives employees access to their earnings as required and improves overall job satisfaction.
What is on-demand pay
Also called instant pay, earned wage access, wages on-demand, and payroll on-demand – the names say it all. It’s an up-and-coming payment option that gives employees access to their wages as the funds become available. In other words, they don’t have to wait for a scheduled fortnightly or monthly payday.
Employees can usually choose from several pay out options. They vary from one service provider or company to another. This way, many employees gain access to part of their earnings within a period before their next real payday. Depending on the service, the employer or employee typically pays a fee for on-demand pay.
Why is it becoming popular?
On-demand pay allows employees to receive payment after a day’s work or for the number of days they’ve worked since their last payment. Employees who can make such decisions enjoy increased satisfaction and peace of mind. It gives them a greater sense of control over their finances too.
What are the benefits of on-demand pay for employers?
Happy employees often perform better. So, it’s no surprise that keeping them satisfied helps businesses too. In fact, payroll departments that have embraced this payment option can confirm employers also reap the benefits.
Increased Financial Stability
It’s human nature to want financial stability at the best of times. Even more so during uncertain economic periods. Giving employees a choice of when to receive payment empowers them to deal with unforeseen and everyday expenses as soon as they come in.
By offering employees this kind of financial stability, they’ll want to continue working for your business. In turn, it ensures your business’ financial stability as well.
Reduced employee turnover
On-demand pay has become a huge driving force for employees to join or keep working for a company. Employee turnover costs are high, but companies can avoid them by offering this payment option. It shows that an employer cares about those currently working for them.
Higher attraction of top talent
Few things give companies an edge over business rivals like offering instant pay. It can indeed attract more top industry talent than mere high salaries. That’s because the financial freedom it provides is such a significant selling point.
More productive employees
Good financial wellness means happier and more productive employees. The flexibility of on-demand pay gives a greater sense of security and alleviates financial stress. In turn, this leads to improved moods and increased productivity.
What are the drawbacks of on-demand pay?
Like any other payroll system, earned wage access has drawbacks and may not suit every company. However, there are certainly ways to manage and minimize potential disadvantages.
WPS reporting
Some employers are legally bound to pay salaries via a wages protection system. Consequently, they must prove they’re paying employees’ complete salaries on a specific pay date. It poses the question: how do you remain compliant if you offer on-demand pay?
By working with OPS, businesses can upgrade their payroll system to include ‘employee loans’. This allows them to create deductions as a salary advance.
Calculation Error
Automated payroll systems indeed reduce the likelihood of calculation errors. However, as the frequency of payments increases, such as with wages on-demand, so does the potential for errors – even if only slightly.
Employees could, for example, end up with pay cheques that include their instant pay hours. It means employers pay the same earnings twice. Decrease the odds of errors occurring by outsourcing your payroll to a dedicated service provider.
Insatiability
Some employees may find the prospect of earned wage access too alluring, causing them to over withdraw from their earnings. To keep this from happening, employers should consider offering workers financial wellness training. It’ll ensure they use the service responsibly and can still meet their living costs like rent, bills, and more.