The new "Instant Payments" offering lets employers fund payroll in close to real time, eliminating the lag between when funds leave an employer's account and when those funds arrive in employees' accounts, which Square says can stretch to as much as four business days. The lag has the effect of depriving an employer of the use of the funds in order to provide them to workers in time.
"Instant Payments allows Square Payroll customers to fund their payroll using the money in their Square Balance, where sales they process via Square are stored. By expanding the functionality of an employer’s Square Balance and enabling sellers to select it as a payment source, Square receives confirmation of payroll funds instantly and can initiate payouts to employees immediately," Tuesday’s news release states. "Team members and contractors who have elected to be paid via Cash App receive their pay within minutes, while those paid via direct deposit get their pay as soon as the next business day."
In a case study provided today by Square, Teresa Blevins, owner of Lil' Bit of Heaven Cupcakes in West Virginia, stated: "As a small business owner, I am constantly looking for products and partnerships that ease some of my burden while still providing excellent results. Having to run payroll on a Monday to get my team paid by Friday can be a struggle, especially given [that] our business is closed on Sundays and Mondays. Instant Payments allows us to get some sales under our belt at the start of the week and lets me hold onto my money for a few days longer while still ensuring my staff gets paid when they expect it, which is super important in today’s economy.”
Square also unveiled a service called "On-Demand Pay" to give workers faster access to wages than they typically have under electronic payment setups.
"Because businesses still run payroll on a fixed schedule, employees are paid days or weeks after they’ve worked. We created On-Demand Pay for employees so they can access their earnings when they need them, as soon as their shift has ended," Caroline Hollis, general manager of Square Payroll, stated in the news release. "For employers, it can take up to four days for payroll funds to move from their bank account to their team. With Instant Payments, employers can now fund their payroll instantly, getting money to their team faster."
According to Square, there are 80 million hourly workers in the United States.
The company stated in today's news release: "Now, each pay period, eligible employees using On-Demand Pay can transfer up to $200 of their earned wages whenever they need them, for free to Cash App, Square’s mobile payment service that allows individuals to spend, send, store and invest money. Some employees will also have the option to transfer their on-demand pay to a linked debit card for a 1 percent fee per transfer, not to exceed $2."
In a related case study also distributed on Tuesday by Square, Angelica Barragan, owner of Angelica B Beauty salon in San Diego, stated: "Everyone is going through a difficult time right now, so it's amazing to find a tool that helps my team react to the current situation and get money a little quicker when it's needed."