A growing number of workers are turning to platforms like Uber, TaskRabbit and Upwork to earn extra money – or even to make gig work a main source of income. Yet, while the gig economy is upending many aspects of the traditional employee-employer dynamic, the way gig workers are paid has scarcely kept pace with these developments.
In fact, the paycheck cycle long favored by employers can wreak havoc on the finances of gig workers, whose schedules and workloads are often anything but regular. This is especially the case for workers who lack savings and struggle to pay their bills, or those considered to live “paycheck-to-paycheck.”
Some gig platforms, including Uber and Lyft, have introduced the option of receiving immediate payment for jobs. However, there is another innovation in compensation that may prove even more compelling for gig workers. Pay advances enable workers to receive full or partial payments for jobs they have been assigned but not yet completed. PYMNTS research indicates that this payment option would help gig workers to gain financial control and stability in an economic arena in which these are often lacking.
PYMNTS’ ongoing research series Pay Advances: The Gig Economy’s New Normal, a collaboration with Mastercard, explores the potential for this novel approach to compensation. In the Pay Advances Playbook: Breaking The Paycheck-To-Paycheck Cycle, we analyze the survey results of more than 2,200 gig workers to reveal insights into how workers who tend to experience the greatest degree of financial strain view pay advances.
Our research shows that for a large majority of respondents, working in the gig economy is indeed a paycheck-to-paycheck affair. More than 70 percent of gig workers live paycheck-to-paycheck, meaning they either lack savings, struggle to pay their bills or both. Among these workers, interest in pay advances is extraordinarily high — and these gig workers don’t just view pay advances as a means to cover immediate expenses and bills. They also view them as a means to smooth out the uneven cash flow that is often inherent in juggling ad hoc jobs.
More than 84 percent of workers living paycheck-to-paycheck are interested in pay advances — to the extent that two-thirds of them would consider switching to gig platforms that offered them and more than half would be willing to pay fees of 1 percent or more.
Pay advances would have immediate and more long-term financial benefits, from the perspective of many paycheck-to-paycheck gig workers. More than 53 percent would use pay advances to cover bills and expenses, however, to a similar degree, they also believe that early payment would reduce overall financial stress and provide greater financial flexibility. These two benefits were cited by 50.8 percent and 48.5 percent of respondents, respectively.
The introduction of pay advances raises an important question: What would motivate gig workers to follow through on completing assignments for which they’ve already been paid? While some gig workers cite potential legal or financial consequences, they are far more likely to cite their work ethic. Nearly 80 percent of paycheck-to-paycheck workers say they would complete jobs out of a sense of commitment — to a considerably greater degree than more financially stable gig workers.
To learn more about how pay advances can help gig workers overcome some of the challenges of living paycheck-to-paycheck, download the report.