3 reasons on-demand pay is worth the hype

Nearly everything is on-demand now. So why shouldn’t there be on-demand pay?

Consider this: Remember what it was like to wait for a movie to run its course at the theater so you could rent it? And by rent it, I don’t mean pulling it up on Netflix for $5.99. You had to drive to a storefront like Blockbuster, hope it wasn’t already rented, and bring it home to play in your DVD or VCR player.

Or, remember watching the latest episode of your favorite TV show meant at its designated air time? When the episode ended in a cliffhanger, you had to wait an excruciating week to see if your favorite character lived or died.

We had to have patience. Life wasn’t quite as instantaneous and on-demand. And it wasn’t even that long ago. Not everyone reading this will remember those days, but for those of us who do, the good news is the waiting is over. Unless you’re nostalgic for the good ole days or enjoy delayed gratification, the era of on-demand is a welcome relief. And it stands to reason that more and more aspects of our life will continue to become instantly accessible — including our pay.

Why instant access to pay is gaining traction

In about the time it takes you to read this sentence, you can open the Amazon app on your phone, scroll through products, select one (or many), tap “buy now,” and in some cases have that product delivered to your doorstep by the end of the day.

You can also open a mobile payment app like Venmo and pay your friend, your hairdresser or the hotel valet in seconds. Then, just as quickly, any funds that have built up in the app can also be instantaneously transferred to your bank account.

Younger generations, especially Gen Z, have grown up amid paperless transactions and quick resolutions at their fingertips. Just as everything else in their life is on-demand, they are increasingly expecting their pay to follow suit.

Reports show 61% of Gen Zers would like their employer to provide the option for daily pay. And both millennials and Gen Zers believe they deserve instant access to wages they’ve earned.

On-demand pay — or earned wage access as it’s sometimes called — is not just a “nice to have”; it’s now a recruitment and retention tool for HR teams. It’s a reason a candidate will choose you over your competitors. And it’s a reason they could choose to stay at an organization even when other offers are on the table.

Where the resistance lies

“What’s the issue?” you may ask. Why isn’t on-demand pay something every employer across the globe offers?

HR leaders have navigated a monumental amount of change over the last few years. Hybrid work and working from home still pose challenges, and finding workers at all is often difficult. At a time when pressure is high and struggles abound, the last thing HR teams want is something else to worry about.

Let’s look at some myths.

Myth 1: On-demand pay creates more work

The reality is, no extra effort is required to manage on-demand pay. It is a low-impact, high-value benefit.

For example, some providers offer on-demand pay both internally for employees and externally to customers, and the process is easy. On-demand pay requires no more work than you’re currently doing and may actually reduce your payroll runs each month.

Myth 2: Employees won’t be financially responsible

I hear HR and payroll teams say they worry employees will take advantage of instant access to their pay and have nothing left come payday. They fear they’ll have to police employees to prevent them from spending everything they earn as soon as they earn it.

Rest assured, that is not what organizations experience. Employees are not emptying their accounts. Instead, they are taking only what they need when they need it. CloudPay customer data shows withdrawal amounts are between $80-$130, suggesting people simply use on-demand pay to manage their daily expenses.

Employers are also in full control of how wages are made available. Limits can be set by both the employer and the employee for a maximum percentage or amount of earnings that can be withdrawn at any time. 

Why on-demand pay is worth the hype

Here are three key reasons on-demand pay could be worth the hype.

1. Flexibility and control

The pandemic ushered in a demand for workplace flexibility. Workers have choices for employment, and they’ll choose employers who allow them to work how and when they want. Similarly, employees want benefits they can leverage when and how they want.

By offering on-demand pay as a 100% employer-sponsored benefit, accessible anytime and anywhere, you signal to employees that you embrace their desire for flexibility and control. You’re giving them control of payday instead of the other way around.

When workers’ pay is available at their fingertips, it prevents potentially embarrassing exchanges. If an employee faces financial hardship and needs an advance on their wages, they don’t have to ask for permission. Because the control is in their hands, they can avoid the potential shame associated with revealing personal struggles.

2. Employee and financial well-being

During uncertain economic times, the ability to manage funds and expenses is critical to overall well-being. More than half of Americans are now living paycheck to paycheck. And 70% said they feel stressed about finances. On-demand pay gives employees the opportunity to leverage their wages as needs arise.

On-demand pay is an option employees can turn to instead of going into credit card debt or stressing about paying back a loan with a high-interest rate. They simply use money that’s already theirs.

Many on-demand pay providers help employees manage their money by sharing historical data about how much they’re spending, when and why. This provides a better understanding of where money is going and helps identify areas where they can save. Many solutions also offer guides, tips and information about how to manage finances better to support financial well-being even further. Research from Everest Group shows wellness programs have the highest impact on a positive employee experience.

3. Ease of accessibility

Most on-demand pay solutions are available via a mobile app, giving employees that anytime, anywhere access they want. No need to fill out a form, go to the bank or wait for funds to transfer. Access to wages is only a few taps away.

If integrated with payroll, HCM and time and attendance systems, on-demand pay allows simple, seamless and compliant processing of funds in real time.

On-demand pay here to stay

I anticipate that at some point in the near future, on-demand pay will become the expectation. Just as instant shopping, transportation, and communication are the norm, so too will the ability to access salary when people want it.

Maybe some people pine for the days of in-person movie rentals and waiting for next week’s TV episode. But the younger generations don’t, and they’re the ones HR teams need to attract most.