B2B Payments

How Payroll Supports Employers' Position As Financial Wellness Coach

Like the rest of the financial services market, payroll is participating in the anti-paper movement. The biggest impact of this shift is businesses' decision to embrace direct deposit over paper paychecks, a trend that took off and led to nearly 94 percent of employees being paid this way, according to the American Payroll Association.

Direct deposit was one of the first major disruptors to payroll, followed by payroll cards, initially surfacing as a way for under- and un-banked employees to be paid. Adoption of payroll cards is another effect of payroll digitization, and employee demand is rising.

It's what led PrismHR to recently partner with payroll card solution provider Kurensē, enabling the HR software platform to offer payroll card tools for its clients (outsourced HR companies) and its clients' clients (small and medium-sized businesses).

According to PrismHR Senior Vice President of Business Development Tim Pratte, payroll certainly is moving away from paper, and payroll cards are a symptom of that trend. But, he told PYMNTS, there is a deeper shift occurring in this market. Employers are no longer simply the bi-weekly ATM for a worker. Employees also want financial wellness support from their companies.

“Many of our customers right now are facing pressure from their customers, meaning SMBs, to offer more on-demand payments and more financial wellness solutions,” Pratte said in a recent interview. “Anything that can benefit the employees, give them help in financial wellness or get them paid easier and faster.”

Payroll cards are reflective of this trend, too, with their ability to broaden under-banked employees' access to their funds. As adoption of payroll cards grows, there are other opportunities for the product to provide value-added services like online account management and balance visibility, or spend management and analysis solutions.

Payroll, of course, is strategically positioned to meet employees' demands, and payroll cards aren't the only solution emerging to enhance financial wellness offerings to staff. Pratte pointed to products like employee financing and student loan support as other popular areas seeing growing demand from employers that outsource their HR and payroll functions.

According to American Student Assistance data, 86 percent of employees said they would commit to a company for five years if their employer offered them student loan repayment assistance, and 89 percent said they would use a long-term financial planning solution, a report from the Society for Human Resource Management found earlier this year.

Early access to wages is becoming increasingly important for employees, too.

SMBs use outsourcing to not only get off paychecks, but to meet the changing needs of their employees, with more than three-quarters of the U.S. workforce living paycheck to paycheck, CareerBuilder research found last year.

Walmart recently made headlines with its policy allowing workers to access their paychecks before payday. While a multinational conglomerate like Walmart may be able to quickly implement cutting-edge payroll technologies to meet demands of financial wellness programs for employees, small- and medium-sized businesses often lack the resources to do the same. For this reason, Pratte explained, outsourced HR and payroll functions have become critical not only to help SMBs digitize payroll, but to offer these value-added services for their employees.

Working via a professional employer organization (PEO) allows small firms to obtain competitive rates on more sophisticated benefits packages or other payroll tools, allowing them to be able to obtain and retain their talent, Pratte noted.

As a provider of HR and payroll technologies to those PEOs, PrismHR has its hand in the payroll of an estimated 2 million workers in the country, Pratte said. As such, the company is largely guided by employee payroll demands, which continue to change.

Pratte said he expects demand for on-demand payroll solutions to continue to grow moving forward, while SMBs and their PEOs are expected to call for enhanced compliance solutions, too. As far as bitcoin? While there are some services offering wage payments via cryptocurrency, Pratte said he's not necessarily convinced that workers want such a service.

Still, there is significant room for growth with the technologies available today. The American Payroll Association's “Getting Paid in America” report found payroll cards account for less than 2 percent of payroll vehicles today. Employees are frustrated by frequent mistakes or delays in how and when they receive their wages, while employers are struggling to manage the expense of compliance.

Small businesses will have to navigate these changes in a cost-effective way if they are to remain compliant and keep workers happy. According to Pratte, regardless of the exact services and solutions workers are offered, what's important is that businesses are offering more than the bare minimum of bi-weekly paychecks.

“Having a one-stop shop as a small business owner, and being able to provide that to your employees, is essential,” he said.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.