Deep Dive: Why Paying Gig Workers More Quickly Is a Winning Proposition for the Businesses That Employ Them

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Download Disbursements Tracker November 2021

Efficiency is everything when it comes to payments, and this is true for both consumers and businesses. Microbusinesses, in particular, are eager to improve both the speed and efficiency of their payments operations, especially when quick access to funds is crucial to their business relationships and fiscal viability. Microbusinesses typically consist of just a handful of employees at most, and delays can prove devastating to their bottom lines.

Maintaining smooth payments is also quickly becoming a necessity as firms do more and more work with contractors and other gig workers, most of whom value speedy and efficient digital payment methods. PYMNTS’ Disbursements Satisfaction Playbook: Who Pays, Who Collects And What Payment Methods Are Used found that payments to independent contractors or for online goods accounted for 64% of payments to microbusinesses and 29% of payments to consumers. The survey defined microbusinesses as companies with annual revenues of less than $500,000 and three or fewer employees.

It appears that employers still have work to do to meet gig workers’ payments expectations, however. Data from 2020 reveals that just 7% of employers that hire gig workers pay out wages daily. Sixty-one percent of employers conceded that their freelancer payments are typically handled via traditional payroll systems, many of which can lack the flexibility that gig workers seek.

The following Deep Dive examines gig workers’ growing need for faster disbursement options, why it pays to pay them on time and how offering these options can ultimately be a boon for the firms that hire them.

The Appeal of Faster Freelance Payments

Predictability and speed are critical payment concerns for gig workers in today’s pandemic-battered economy, with many eager to receive swift disbursements so they can take on additional work and pay their bills. Unfortunately, the bulk of income and earnings-related payments to microbusinesses and consumers, such as payments for gig work, are still being made using legacy payment methods, and these can be detrimental to businesses in several respects.

PYMNTS’ Disbursements Satisfaction Playbook: Who Pays, Who Collects And What Payment Methods Are Used found that 49% of income and earnings disbursements made to consumers, and 52% of those made to microbusinesses, rely on outdated methods. Gig workers have said more than half their payments are made via methods that are not instant. These include automated clearing house (ACH) transfers, which settle more quickly than paper checks but can still take days to clear.

Independent contractors say most of their payouts are tardy because 30% of businesses’ payments are made via paper checks. Another 30% are disbursed using faster methods, but still without digital options.

Instant payment methods are increasingly in demand, but recent PYMNTS research found that they are rare when it comes to paychecks. Just 6% of microbusinesses reported receiving instant disbursements, for example, while 65% of organizations are still handling payroll manually.

The Global Gig Payment Issue 

Sluggish gig worker payments are not confined to the U.S. For example, 36% of self-employed workers in the U.K. said late payments have soared 28 percent in the past 19 months. One in six gig workers reported that they lacked the cash to cover work-related expenses, and 15% said they could not afford to pay for basic living expenses.

Addressing these payment needs is now a necessity for employers, meaning they must offer faster payouts or risk losing their gig workers to other employers that do. One poll found that 89% of these workers were likely to sign up for immediate payments, while more than half reported that they preferred instant payouts. Workers who already receive instant payments were also the most satisfied.

Faster payments are no longer just expected in the gig work sector — they are needed. Freelancers depend on reliable, rapid access to cash to pay their bills, purchase work supplies and satisfy a whole host of other requirements. Offering instant, digital payments will ultimately be crucial to giving businesses an edge over their competitors in attracting top talent in the growing gig economy.