Pay-as-you-go: Who benefits and what do you need to get started?
Record numbers of people are leaving their current jobs, with companies operating with hourly employees being particularly affected by the trend.
This scenario was not caused by one thing, but rather by an amalgamation of factors. For one thing, the ongoing health crisis has put many hourly workers on the frontlines, causing stress and concerns about their health and well-being. At the same time, an increasing number of hourly employees are facing financial difficulties.
When your employees’ livelihoods are defined less by paycheck and more day-to-day, how can you help support them while remaining competitive in the job market? The answer is pay-as-you-go, a simple approach to help you attract and retain employees without adding additional costs.
Related: 4 things you need to know about on-demand payment compliance
Also known as Earned Wage Access (EWA), Pay-As-You-Go allows you to pay employee wages as they are earned instead of waiting for each pay period to end . Pay-as-you-go is a growing trend for businesses in high-revenue industries like retail, restaurants, and hospitality, where there’s more competition for talent and typically less customer loyalty. ‘business.
Additionally, in a recent survey of hourly workers, Nucleus found that approximately 40% of respondents resorted to expensive payday loans as a stopgap between paydays.
Benefits for your business
No matter the size of your business, you can take advantage of EWA functionality in some form and at virtually no cost with the software available today. Some of the key benefits you might experience with pay-as-you-go include:
Reduced absenteeism. Nearly a third of hourly workers cited the inability to access earned wages as the reason they missed at least one shift. Absences and calls are disruptive, time-consuming and costly factors that negatively affect results. By leveraging pay-as-you-go functionality, you can expect absenteeism rates to be reduced by more than 70%.
Decreased turnover. Replacing an employee costs companies around $3,000 to $5,000 per person, and that’s on the low end. If you have multiple locations and a high turnover, the amount can easily reach millions per year. In industries where hourly employees quickly leave their jobs for better benefits, 70% of them would leave their current job for an opportunity that includes paid on-demand services. This makes EWA essential for not only attracting but also retaining quality employees.
Eliminate payday loans. As mentioned above, 40% of hourly workers use payday loans to manage living expenses between pay periods. These loans are convenient but equally burdensome with expensive fees and exorbitant interest rates. Conversely, with pay-per-day setups, the only costs to employees are bank transfers, which don’t exceed $5.
Overcome worries to get started
When Nucleus first started looking at pay-as-you-go a few years ago, organizations were still unsure about this feature. However, the reality of today’s job market has necessitated the adoption of pay-as-you-go to gain a competitive advantage, but not without some challenges.
The primary concerns for companies considering pay-as-you-go are the initial capital needed for payroll and its effect on the general ledger and payroll taxes. That’s where one-suite Human Capital Management (HCM) comes in, which integrates with your existing systems to automate the process on demand for you.
The HCM solution you choose will depend on the maturity of your current payroll software, but options exist for businesses of all levels. Most work like interest-free loans, which your business pays off at the end of the pay period. With providers like PayActiv, Ceridian Dayforce, UKG Wallet and others, your employees can access their pay without changing your company’s overall payroll practices.
As talent acquisition challenges continue and hourly staff rush to leave for other employment opportunities due to financial constraints, employers are grappling with the costs associated with replacing and training employees. new employees. This makes offering on-demand payments in hourly industries no longer a “nice to have” perk, but rather a necessity for attracting and retaining high-performing employees. Fortunately, with the right human capital management technology in place, implementing pay-as-you-go has never been easier.
Evelyn McMullen is director of research at Core search, a global provider of investigative and case technology research and consulting services. The company’s ROI-focused research approach provides unique insights into the actual results that technology solutions deliver, enabling users to cut through the marketing hype to understand real business value.