While living paycheck to paycheck is often associated with low-salary or part-time workers, the data tells a different story. As it turns out, the white-knuckled wait for payday is something that affects consumers up and down the economic ladder, something a glance at the PYMNTS Financial Invisibles Report quickly confirms.
There’s a fairly large swath of college-educated consumers earning an excess of $60,000 a year who reported that they frequently fall behind on bills, and regularly use places like pawn shops to fill in the gaps between financial needs and their next payday. According to a CareerBuilder report, 75 percent of consumers reported living paycheck to paycheck in 2017, up 7 percent from 68 percent in 2016. Even those making over six figures a year aren’t immune — 10 percent of those workers reported living paycheck to paycheck, and 59 percent of them reported having debt.
Given that the majority of consumers also reported having less than $1,000 in savings, an unexpected cost, particularly at the end of a pay cycle, can be a hard hit. Ending up at a pawn shop or payday lender are among the worst-case scenarios associated with living paycheck to paycheck, but even though that usually doesn’t happen, a stressful, energy-sapping and productivity killing wait for funds is a common reality in the life of an average American worker.
However, that may not be for much longer. The two-week pay cycle may become a thing of the past, with an increasing number of firms embracing instant payments as an option for workers, and as a tool to both recruit and retain employees. As the movement has been gaining momentum, particularly over the last six months or so, it is looking more likely that workers may soon live in a world where every day can be payday.
Instant Payments' Big Year
The news of the week, when it comes to instant payments for workers, came from ADP, which announced a new integration with DailyPay to make it possible for ADP merchant customers nationwide to offer the daily pay benefit to their workforce, via the ADP Marketplace.
“An increasing number of employers tell us that workers ask for the ability to access their pay with greater flexibility and in a responsible way,” said Craig Cohen, general manager of the ADP Marketplace in a press release. “DailyPay enables our customers to offer instant payments to their employees so that they can avoid late fees or payday loans.”
The new offering, according to ADP, gives its customers the option to offer daily payments to their workers — a daily payments solution that adheres to all wage deductions and tax withholding laws, and doesn’t require current payroll processes, including the timing of payroll funds, to change in any material way.
“We were looking for a daily pay benefit that was compliant in all 50 states,” said Andrew Lotter, area director of human resources at 21c Museum Hotels — a contemporary art museum, hotel chain and long-time ADP customer. The firm reported that the integration of daily payments has been a valuable recruiting and retention tool for the firm. “Since offering DailyPay, we’ve already seen an increase in recruitment and improved employee retention,” he added.
ADP is the latest — but, by far, not the largest — firm to embrace instant payments for employees in a big way. Last month, Postmates and Visa rolled out a solution that will allow Postmates workers to instantly receive their earnings in their bank accounts, via their Visa or Mastercard debit cards, for a small fee, instead of waiting four to seven days for their scheduled payouts delivered via ACH.
“Think about all the delivery services out there,” said Cecilia Frew, SVP and head of North America push payments at Visa, at the time of the announcement. “The majority of them use freelance workers, and this is going to be a competitive differentiator for Postmates. Eventually, I think this will become table stakes.”
The biggest push for instant payments this year, however, has come from the nation’s largest retailer, Walmart. In December 2017, Walmart announced it was partnering with Even to offer instant payments for its employees. Using Even’s financial planning tools, Walmart employees were offered eight instapays each year for free of charge, plus an additional eight for a marginal fee. Those instapays allow for a portion (up to 50 percent) of wages that workers have already earned during the two-week pay cycle.
The addition has been very popular thus far — as of six months in, more than 200,000 workers had signed on with the program.
“That is actually incredible, particularly when you see it compared against other benefit participation for things like 401(k), which comes in at about 3 percent,” Even CEO Jon Schlossberg told Karen Webster in a conversation about the roll out. “This is a product that helps employees with the problem they have. When people are living paycheck to paycheck, you don’t have room for error, and what we have seen is people really want to make good decisions.”
As PYMNTS data shows, people are increasingly interested in accessing instant payments to make those better decisions.
Changing Worker Wants
When PYMNTS and Visa spoke to consumers for the 2018 edition of the How We Will Pay study, the enthusiasm for being paid more quickly had clearly exploded among workers. Nearly 70 percent of those surveyed expressed a desire for shorter pay cycles, with 45 percent saying they were interested in being paid every week and 24 percent expressing interest in being paid as their money is earned.
As for reasons why customers wanted to be paid faster, cash flow management and bill payments led the field — 53 percent of consumers named one of them as a primary reason. Those consumers said that if they were paid faster, they would be able to better manage their cash flow and pay bills.
Faster payments are particularly important among the up-and-coming Bridge Millennial demographic as well, with 32 percent expressing a strong interest in faster access to their pay.
Among gig workers the enthusiasm is even stronger, according to the PYMNTS Gig Economy Index data. Frew said that about 84 percent of gig workers would work more if they were paid faster.
Today, the national unemployment rate stands at 4 percent — a near-historic low. This has made the competition for workers tight, a fact retailers are running into hard in 2018, as they struggle to find workers to fill the hundreds of thousands of open jobs in stores and warehouses nationwide. Wages, as would be expected, have also started to rise as the competition gets tighter.
However, as retailers and employers look to attract and retain workers, the emerging trend and preference among consumers isn’t only to be paid more (though we are sure no one would object to a raise). They also want to be paid better. As the data and recent trends among retailers indicates, these days, better often means faster. Make that instant, if at all possible.