With changing work environments comes the need for changing payment structures. Consumer expectations for accelerated pay is growing thanks to the rise in gig work and peer-to-peer payment apps like Venmo. Workers today want to get paid quickly and flexible pay is the most efficient and effective way to meet their needs.
Running payroll can already be a challenging operation and payroll administrators aren’t looking for more work when it comes to payroll management. If flexible pay is done right, employers and employees alike can benefit from faster pay cycles.
What is flexible pay?
Imagine being in charge of deciding when you get paid for the work you do. Rather than wait for those two days a month for your paycheck or direct deposit to arrive, you could select your own pay cycle based on your needs. That’s what flexible pay enables you to do. You can choose the best payday for you, whether that’s getting paid every day or every week, or staying on your company’s standard pay cycle but choosing to sometimes draw on your earned pay when you need it.
4 benefits of flexible pay
1. Flexible pay options help workers feel less financial stress
Worrying about when money might arrive to cover the bills or help purchase necessities can be stressful for workers. Concern over the lack of funds could potentially distract them from work and when they lose that focus, productivity takes a nosedive.
Even worse, employees may feel so desperate that they turn to costly payday loans to get by. From there, the stress only increases, as they realize payday loans create unplanned debt and exorbitant interest charges.
Instead, having flexible pay options enables employees to enjoy better cash flow, which reduces concerns about making it to the next payday and allows them to more easily save and budget.
2. Flexible pay is actually less demanding for payroll teams
While it may initially sound like a more time-consuming and costly endeavor, flexible pay options actually lowers a company’s time and monetary investment in its workforce. Think of it like putting your clothes away at the end of the day. If you hang up each outfit after you wear it, the task is small. Let a mound of clothing pile up on your dresser, and it’s a daunting endeavor. Flexible pay works the same way.
Typically a payroll admin waits until the end of a pay period to verify all employee hours and process payouts. To make flexible pay work, employees and their direct managers submit and approve hours more frequently, which reduces the risk of incorrect hour reporting.
Because flexible pay technology is new, the platforms that support it have automated this experience to make it fast, freeing up more time to work on other tasks. For a small business owner that may not have a dedicated payroll department, switching to a flexible pay provider can return a significant time and cost savings.
Many flexible pay tools also offer more advanced mobile payroll capabilities, so payroll admins aren’t tied to their desktop for hours when trying to run payroll. With mobile payroll capabilities, admins can view a request for payment on their phone and approve with a few clicks, whether they’re in a meeting, traveling to a job site or wrapping up for the day.
3. New workers don’t have to wait for payment
When new employees join the company, there is often a waiting period for their first check that can be anywhere from one to three weeks. The waiting period often involves completing and verifying paperwork and bank accounts.
Yet, most HR and payroll paperwork can now be digitized, meaning there’s no reason to still have these waiting periods. After all, bills don’t have a waiting period. Those dates remain the same, leaving new employees with a gap in earnings. For workers who live paycheck to paycheck or who have been unemployed for some time, this can have devastating consequences.
New workers benefit when your company offers flexible pay options. They’ll be able to get paid for the work they do in days instead of weeks on the job.
4. Flexible pay is an employee retention incentive
To provide additional income between paychecks and to gain immediate pay perks, many people have taken on side hustles or gig jobs. Now, close to half of American workers have some type of side gig in addition to their regular jobs.
Rather than lose that talent completely to the world of freelance and gig opportunities, a company can compete with the immediate gratification that employees get from working with Uber, DoorDash, Instacart and others by offering the same payment timing. Doing so may help to channel the employee’s skills and focus on their primary job rather than share it with another job. Flexible pay benefits can also drive greater retention by bolstering an employee’s sense of loyalty to their primary employer.
Is flexible pay and earned wage access the same thing?
The most common form of accelerated pay is delivered by earned wage access apps. These apps allow employees to request their earned pay on demand on an as-needed basis, usually for a fee. Most also only provide access to a portion of earned pay, rather than all earnings. While these apps can help employees when an unexpected expense arises, they don’t give people full control over their pay frequency, and they can be cost-prohibitive to people who are already struggling to make ends meet. They’re a band-aid to a larger problem: an outdated, two-week pay cycle.
Earned wage access is about having access, when requested, to earned wages one-off. Flexible pay is about choice and consistently having a more frequent payday.
Flexible payroll solutions
Not all accelerated pay options are equal. Some payment tools are just that: single applications that offer daily pay—often using the earned wage access model that charges a fee per deposit. Others offer flexible pay options, so workers can be paid weekly or daily.
Many payroll admins prefer to skip the headaches that come with managing multiple tools and choose a full-service HR and payroll solution with flexible pay capabilities. Looking for an easy-to-use platform that allows employees to get paid on their schedule? Check out Everee.