Real-Time Payments Tracker® Series Report

No-Wait Wages: Leveraging Instant Payments to Boost Employee Satisfaction

March 2024

Workers have increasingly high expectations from their employers, and traditional benefits such as retirement plans and paid time off are no longer cutting it. Among the new demands from workers is immediate access to earnings. Employers that overlook this option may find themselves facing a staffing crisis.

PYMNTS
01

Workers across the board benefit from on-demand pay, especially those who live paycheck to paycheck and cannot afford unexpected expenses. For many workers, instant payroll is something that should be taken for granted.

02

Companies are becoming increasingly aware of the demand for real-time payroll and are gradually implementing it in their workplaces. Meanwhile, some workers, growing impatient with their employers’ delays in adopting the trend, are turning to third-party services for real-time access to their earnings.

03

Financially stable employees appreciate the support they have received on their financial journeys, and organizations have a unique opportunity to offer this support in the form of instant payroll services. Doing so could encourage increased employee loyalty and reduced turnover.

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    When making decisions about employment, workers rank job benefits nearly as high in importance as the salary itself. Likewise, their expectations regarding benefits are evolving rapidly. While traditional benefits like paid vacation and health insurance remain popular, a recent study showed that workers value instant payroll access almost as much. Gig workers in particular are demanding this immediate access to earnings, with 75% of those surveyed saying they need more frequent pay access than the traditional semimonthly payroll.

    Despite the surging demand, instant pay access remains relatively unpopular among organizations. Consequently, these corporates risk losing valuable employees to competitors that have already enabled on-demand payroll. Partnering with trusted payment providers to integrate instant payroll could help them avoid a potential staffing crisis.

    Calls for On-Demand Pay Grow Louder

    Workers across the board benefit from on-demand pay, especially those who live paycheck to paycheck and cannot afford unexpected expenses. For many workers, instant payroll is something that should be taken for granted.

    79%

    of Generation Z workers say they often lack the funds to pay bills on time.

    83% of workers want more frequent pay schedules.

    Dissatisfied with the traditional biweekly or semimonthly pay period arrangement, workers want weekly, daily and even on-demand disbursements. One key driver behind this demand is the rise in inflation over the past few years, resulting in a 24% increase in average spending per person. As workers contend with these financial pressures, a growing number are exhausting their funds faster than they can be replenished by paychecks, potentially being driven into debt just to cover their expenses.

    70% of Americans feel stressed about their personal finances.

    This concern is especially pronounced among younger generations, with 75% of adults ages 18-34 expressing financial stress. Additionally, 79% of Generation Z hourly workers admit they do not always have enough money to pay their bills on time. As a result, many are turning to risky options like high-interest payday lenders to make ends meet — a choice that can only exacerbate their debt situations when they cannot repay these loans by their due dates. On-demand pay can help to ensure timely bill payments, thereby breaking the vicious circle of financial strain.

    Companies Adopt Instant Payroll

    Companies are becoming increasingly aware of the demand for real-time payroll and are gradually implementing it in their workplaces. Meanwhile, some workers, growing impatient with their employers’ delays in adopting the trend, are turning to third-party services for real-time access to their earnings.

    Workers

    are willing to pay for real-time payroll, but employers seeking to foster a healthy working environment should offer this benefit for free.

    Workers are paying third-party providers for earned wage access.

    These companies, which are essentially rebranded payday lenders, offer workers early access to their salaries but require repayment once their actual paychecks are received. Workers often find that they are paying an effective annual interest rate of 330% for this access, however, which can quickly saddle them with extraordinary debt if they do not repay their loans promptly. Businesses aiming to counter predatory programs like these should look into developing their own — free — earned wage access (EWA) systems.

    DailyPay raises $175 million for on-demand pay platform.

    An effective strategy for companies looking to implement EWA is to partner with an established on-demand payment platform. One such provider is DailyPay, which recently secured $175 million in funding, increasing its valuation to $1.75 billion. The company has partnerships with major employers across various industries, including Hilton, Target, Kroger and Dollar Tree. According to the company’s press release, employers offering DailyPay as an optional benefit to their workforces have seen positive impacts on hiring and retention.

    No-Fee Instant Payroll Drives Employee Retention

    Financially stable employees appreciate the support they have received on their financial journeys, and organizations have a unique opportunity to offer this support in the form of instant payroll services. Doing so could encourage increased employee loyalty and reduced turnover.

    46%

    of businesses say they struggle with staffing shortages.

    78% of consumers express high satisfaction when receiving instant payouts.

    According to a recent PYMNTS Intelligence study, nearly three-quarters of consumers want their disbursements paid to them instantly. However, the actual share of consumers who receive payouts via this method stands at only 36%. The study also found that free instant payments boost satisfaction by 11% and nearly double the likelihood of loyalty, underscoring the effectiveness of fee-free real-time payments as a potent employee retention tool.

    Businesses need all the help they can get when it comes to employee retention.

    Staffing shortages are a major concern among small to mid-sized businesses (SMBs), with roughly 46% of firms saying they struggle with staffing shortages and nearly 42% expressing problems with employee retention, according to a recent survey. More than half of these businesses are offering financial remuneration to their employees to promote retention. However, implementing instant payroll may provide a better return on investment, considering the high demand for this benefit and its positive effects on employees’ personal finances.

    Leveraging Real-Time Payroll to Meet Employee Demand

    Traditionally, payroll processing involves a delay of days, or even weeks, before employees receive their paychecks. With the rise of real-time payment solutions, however, businesses now have the ability to offer instant access to wages as soon as they are earned. The single biggest benefit of real-time payment solutions is the ability to improve employee satisfaction and retention. Employees who have immediate access to their wages are better equipped to manage their finances, pay bills on time and address unexpected expenses. Indeed, as studies show, earned wage access can lead to higher morale, increased productivity and reduced turnover for businesses.

    Real-time payroll solutions can also benefit employers by streamlining payroll processes and trimming administrative costs. Automated systems can handle payment processing efficiently, reducing the time and resources required to manage payroll. Additionally, real-time payment solutions can help businesses stay competitive in attracting top talent, particularly in industries where instant access to wages is in high demand.

    About

    The Clearing House operates U.S.-based payments networks that clear and settle funds through ACH, check image, the RTP® network and wire transfers. The RTP network supports the immediate clearing and settlement of payments along with the ability to exchange related payment information across the same secure channel.
    Learn more at www.theclearinghouse.org.

    PYMNTS INTELLIGENCE

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:
    Managing Director: Aitor Ortiz
    Senior Writer: Andrew Rathkopf
    Senior Content Editor: Joe Ehrbar


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