Disbursements

Why Making Payroll Faster Slows Employee Churn

Wages

Even in the best of times, turnover wastes employers’ time and money, and the problem only gets worse with low unemployment. But what if one could combine digital technology, payment processing, existing card rails and easy, instant access to daily wages to build a perk that can help persuade workers to stay put?

That’s the thinking behind the latest edition of the PYMNTS “Walk to the Elevator” podcast series. Karen Webster talks with Chuck Schmitz, CFO of senior living facility operator Christian Horizons; Jason Lee, CEO of wage payment service firm DailyPay; and Tammi Shapiro, vice president of product strategy and management for Fiserv, about how using such a tool can make labor and management happier.

 

The tool strives to upend payroll tradition by allowing workers to get their pay now instead of waiting for the end of a payroll period.

“We are trying to do something that will move the needle” on employee retention, Schmitz said. “We want to let employees access their money anytime they want it.”

Worker Retention

Among the biggest issues in the assisted living industry is the difficulty of keeping employees. These workers often work entry-level jobs that are in high demand as the population ages. When Christian Horizons started using DailyPay earlier this year, turnover stood at 64 percent. In general, the workers Christian Horizons had trouble retaining were also people who had the most trouble paying bills, often accumulating late fees and risking services being cut off or housing disappearance.

The service is not just for people living paycheck to paycheck, however. Lee from DailyPay pointed out that 12 percent of the service’s users in the workforce earn six figures a year, underscoring the difficulties that various social and income classes can have with bills and money management.

After four months of offering DailyPay to all workers (not just lower paid ones), the Christian Horizon turnover rate has ticked down to 56.8 percent, Schmitz told Webster during the podcast interview, with declines coming in each of those months.

DailyPay has turned into a better retention tool than the company’s mentorship program. Christian Horizons has tried assigning experienced, trusted employees to guide and help new workers, offering a bonus to mentors after a 90-day period.

“We spent a lot of money (on that program), but did not move the needle,” on retention, Schmitz said.

The Product

How does DailyPay work?

The company works with mid-cap to large enterprise companies in services industries, including healthcare, retail, hospitality, call centers and more. Its technology exists as an “overlay” on top of payroll and time management systems, and requires no change to a company’s current payroll process or timing of payroll funds.

Employees use the DailyPay app to request their wages; they can access their pay and direct it toward a bank account, payroll or debit card. Accelerated access to funds is always available as an optional perk, and workers are not required to move money during any specific period, Lee said.

The role of Fiserv in this wage payment service involves “the payment processing and delivering those payments in real time,” Shapiro said during the podcast.

Fiserv is making an enhancement to the Digital Disbursements product that will allow the recipients of disbursements payments to pay bills directly within the app where they request funds. The company provides the payment rails behind the scenes to facilitate workers in accessing their wages instantly. It also provides capabilities to address payments compliance requirements and manage risk, she said. Fiserv has nearly 25 million active bill payment users at almost 4,000 financial institutions.

Isn’t there a risk that employees using the service will run out of pay by the end of the pay period? Schmitz said he hasn’t seen that happen. He credits that to the fact that DailyPay serves as a money management tool, updating pay details three times a day, which leaves no attentive employee surprised about how much pay they still have coming.

According to Lee, only 9 percent of workers who use DailyPay take out more than 50 percent of their wages before the end of the pay period. And those workers are not usually the same people, he said, because two-thirds of that 9 percent “is different each week.” He likened the wage service to health insurance, drawing a comparison to the variability and need-based nature in how people access this on-demand capability.

“Very few of us use it every single day,” Lee said.

Future Appeal

The broader healthcare industry accounts for approximately 30 percent of DailyPay corporate clients, Lee said. The ongoing “labor shortage and the boomers exiting the workforce” will work to keep the labor market tight in that industry.

That labor market in healthcare — along with other industries — will almost certainly include younger workers, and that’s another competitive advantage for Christian Horizons offering such a perk, according to Schmitz.

Offering quicker wage payments via mobile phones will appeal to those younger workers, who are already used to scheduling shifts and performing other tasks with those devices, Schmitz said.

Millennial [employees] will be our workforce going forward,” he said.

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