The Year of The Daily Pay Benefit
Business Solutions When employees are worried about money, their companies suffer. Daily pay may be the solution to relieving this financial stress.
Financial stress in the workplace is palpable and it’s a killer for companies.
Consider these facts:
Financial stress is the #1 reason why employees quit (Source)
It costs a company an average of $4,000 each time an employee quits (Source)
More than half (53 percent) of employees report that they are stressed dealing with their financial situation (Source)
Even if they stay, they waste three hours a week or more on personal finance issues, which costs a company $2,800/year (Source)
Financial stress is wreaking havoc on employee’s lives, which in turn affects their health, their productivity at work, and their work attendance.
What’s causing all this financial stress?
According to a 2017 survey by employment website CareerBuilder, roughly 78 percent of Americans are living paycheck to paycheck to make ends meet. And nearly 50 percent have a problem taking care of a $400 emergency without borrowing money from someone, taking a costly payday loan, or incurring overdraft or late payment charges.
Since a company’s biggest investment is its workforce, if workers are under stress, the business is under stress. Employees experiencing financial stress are at risk for increased absenteeism and healthcare costs, along with significantly reduced job performance.
Although the source of financial stress varies among the generations, with millennials citing student loan debt as their primary concern, and baby boomers worried about retirement savings, the bottom line is the same — financial stress impacts everything from customer satisfaction to a business’s growth potential and its bottom line.
Financial wellness is going mainstream
To address this far-reaching problem, many companies are investing in financial wellness initiatives designed to get employees out of their heads and back to work. According to a recent PwC survey of U.S. employees, financial wellness is in high demand as an employee benefit, even higher than student loan repayment.
One of the most promising initiatives is the adoption of a daily pay benefit and 2019 will be the year that it reaches critical mass. Daily pay gives employees instant access to earned, but unpaid, wages to help meet unexpected expenses or to pay bills that are due on time. For the cost of a typical ATM fee, employees can access their earned wages before their next payday, and instantly transfer the funds to a paycard or bank account, avoiding exorbitant payday loan fees and overdraft charges.
Due to the millennial and Gen Z makeup of the current workforce, instant access is no longer a perk – it’s expected. Whether it’s transportation, entertainment or food delivery, they expect to have easy access through a service or app. Their expectation regarding pay is no different - not only is a growing number open to trying a daily pay platform, in many cases they are coming to expect it.
Employers are realizing that if they can meet these expectations, they can increase their recruitment numbers, and improve employee retention and engagement. A survey from Paychex Inc. found that one of the top five payroll priorities for business owners in 2019 is “extending daily pay options.”
Now that these platforms have been in use for multiple years, there is data that shows daily pay benefits are delivering on the promise of reduced employee turnover:
Companies have seen, on average, a 41% reduction in turnover
73% of users say they are more motivated to come to work
Job candidates are almost twice as likely to apply for a job that pays daily
With the workforce being dominated by younger generations who expect flexibility and convenience, easy access to payroll funds helps to create a culture of financial security. In addition, employees have better budgeting ability because their available balance is updated each day in real time, so they know exactly what they will receive on payday - a sure way to reduce financial stress.