The Rise of On-Demand Pay: What Employers Need to Know
In today’s fast-paced world, employees are increasingly seeking financial flexibility and control over their earnings. On-Demand Pay, also referred to as Earned Wage Access, is a revolutionary payment model transforming the traditional payroll system and providing workers with immediate access to their earned wages. Let's explore what On-Demand Pay is, why it's gaining traction, and what employers need to consider when implementing this innovative approach.
What is On-Demand Pay?
On-Demand Pay, also known as Earned Wage Access, allows employees to access a portion of their earned wages before their scheduled payday. Instead of waiting for the traditional bi-weekly or monthly payment cycle, employees can withdraw their earnings as soon as they've worked the hours, providing them with greater financial liquidity and reducing the stress associated with waiting for payday.
This employee benefit has gained a lot of traction in the UK over the past couple of years, with 15% of all UK employers offering their employees the tool. In some industries, this number is much closer to a third!
Check out this demo of Level’s On-Demand Pay tool:
Why is On-Demand Pay Gaining Popularity?
There are several factors that are driving the adoption of On-Demand Pay. Some of these include:
Financial Flexibility
Employees can better manage their cash flow and meet immediate financial needs without resorting to high-interest loans or credit cards. Earned Wage Access is a much cheaper alternative to debt products such as unarranged overdrafts or payday loans. With Earned Wage Access, the user incurs only a small ATM-style transaction fee to withdraw their earnings. This means there is no debt, no individual credit checks, and no interest.
Employee Satisfaction
Offering On-Demand Pay can improve job satisfaction and reduce financial-related stress, leading to a happier, more productive workforce. This BBC article even found that improved financial wellbeing can improve sleep.
Attraction and Retention
In a competitive job market, providing financial flexibility can be a significant differentiator, helping companies attract and retain top talent. Companies which offer employees Level have seen up to a 50% reduction in staff turnover, and 62% fewer unfilled shifts. By lowering staff turnover rates, employers can save on the various costs associated with recruiting and training new staff.
Key Considerations for Employers
While the benefits of On-Demand Pay are compelling, employers should carefully evaluate several factors before implementing such a system:
Technology Integration
Implementing On-Demand Pay involves integrating new technology with existing payroll and HR systems. Employers should collaborate with reputable On-Demand Pay providers to ensure a smooth and secure integration process. Learn more here about Level’s existing integrations. Our dedicated team can integrate with more, if you don’t see the software you are already using!
Credentials and Compliance
When researching providers, it’s important to make sure you only consider companies who are compliant with the UK Earned Wage Access Code of Practice. This code sets the benchmark for quality in the industry, and all providers must adhere to the elements set out to ensure they are delivering high-quality service for both clients and users alike.
It's also worth considering the providers other credentials and compliance, to ensure the provider you choose has rigorous safeguards to protect both your employee’s money and data alike. Check out Level’s credentials here.
Impact on Payroll Process
Consider how On-Demand Pay will affect the overall payroll process. Employers need to maintain a balance between offering flexibility and ensuring that traditional payroll cycles run smoothly. Here at Level, we offer both manual and automatic reconciliation, to ensure the processruns smoothly. We are one of only two providers in the UK to offer automatic reconciliation. To learn more about what reconciliation is, check out this blog post.
Conclusion
On-Demand Pay represents a significant shift in how employees receive their wages, offering numerous benefits for both employers and employees. By providing financial flexibility and reducing stress, Earned Wage Access can create a more satisfied and engaged workforce. However, careful planning and consideration are essential to successfully implementing this innovative payment model.
For forward-thinking employers looking to stay ahead in the competitive job market, On-Demand Pay could be a game-changer. Explore how this approach can benefit your organisation and take the first step towards a more flexible, employee-centric workplace.