Payday is the best day of the week for many of us.
But how do you actually get your hands on your hard-earned cash these days? Paper checks are old school. Direct deposit is all the rage.
In fact, a 2019 study by the FDIC on how people manage money found that 7.1 million U.S. households don’t even have a bank account.
Therefore, there’s another option gaining steam – payroll debit cards. These pieces of plastic offer a new way to access your pay.
But are they right for you? Let’s learn the pros, cons, and everything in between about payroll debit cards.
What Are Payroll Debit Cards?
Basically, they work a lot like the debit card already in your wallet. Each pay period, your company loads your earnings onto the card. Then you can use it to get cash, shop online or in stores, and more – just like a bank debit card. These cards give you a way to get your pay without direct deposit or paper checks. Perfect for folks without bank accounts.
How It All Started
Payroll cards first popped up in the 90s but have blown up recently. A 2019 survey found 7.1 million U.S. households don’t have bank accounts. Even people with bank accounts are digging these payroll card things. Use has tripled from 2017 to 2022 as folks realized how handy they can be. Experts predict the growth will keep cruising along over the next few years.
Perks for Employers
Employers are loving payroll cards too. Here’s why:
Ditch Expensive Paper Checks
Even a small stack of checks costs money to print and mail out. Payroll cards let companies slash this expense by going fully digital. Cha-ching!
Simplify Paydays
Trying to wrangle checks, direct deposit, and cash is a big freaking headache. Payroll cards let employers pay every employee the same way – easy peasy!
Enhanced Security
Checks can get lost or swiped pretty easily. Payroll cards keep your hard-earned money secure until you go to spend it. Lose your card? No prob! Your company can quickly cancel it and get you a new one.
Options for Unbanked Staff
For employees without bank accounts for direct deposit, payroll cards give a practical alternative beyond physical checks. Everybody wins!
Perks for Employees
In addition to making your boss happy, payroll cards can also do great things for you:
Faster Cash Access
Money on these cards is available on payday, rather than waiting for checks or direct deposit. Your cash is right at your fingertips!
Total Convenience
Use payroll cards anywhere debit cards are accepted online, in stores, at ATMs – the works! Way better than running to the bank to cash a check.
No Extra Fees
Some prepaid cards nail you with fees when you go to buy stuff. Not payroll cards! Shop away fee-free.
Protection from Fraud
Perks like zero liability fraud coverage come with most payroll cards to keep your money safe. No worries if your card gets lost or stolen!
Potential Pitfalls
Payroll cards aren’t all rainbows and butterflies though. There are a few potential downsides:
Annoying Replacement Process
Dealing with losing a card loaded with your pay could be a hassle, even with fraud protection. Getting a new card rushed to you could be a pain.
Surprise Fees
You might get hit with extra fees for things like out-of-network ATM use and overdraft attempts. Lame! Ask for details.
No Interest Earnings
Unlike money chilling in your savings account, balances on payroll cards don’t earn interest. Bummer!
Regulations Galore
These card programs have a web of legal rules to follow that your employer has to keep up with. No fun.
How Payroll Cards Work
If payroll cards sound decent to you so far, here’s a quick rundown of how they work:
You sign up for the card through your employer
Company sends your info to the card issuer
Card issuer makes the cards (usually Visa/Mastercard)
Your pay gets loaded onto the card each payday
Activate the card and start spending that cash!
Check your balance and statements online or on the card app
Card issuer replaces lost or damaged cards ASAP
Issuer also handles regulatory stuff, security, support – the works!
Still Have Questions?
If you still have questions about whether payroll cards are the move for you, reach out to the pros at The Payroll Company. They can clue you in on the payroll card services that could fit your needs. Give us a call today and get answers to all your payroll card questions!
The old-fashioned concept of “payday” where you anxiously await weeks for your hard earned money is ready for retirement.
Can you even imagine a world where your workday ends and boom your earnings instantly appear in your account?
No more scratching your head wondering how you’ll cover bills and expenses while counting down the days until that sacred payday finally arrives. This magical world is not some distant fantasy.
With on-demand pay, it’s reality.
Let’s see how on-demand pay works and why it just makes sense in this day and age.
What exactly does “on-demand pay” mean?
On-demand pay gives you instant access to the money you’ve already worked for, whenever you need it. You can withdraw your available earnings at any time instead of having to wait for a scheduled payday. It puts an ATM of your wages right at your fingertips!
For example, if you’ve already put in hours this week but an unexpected expense pops up, you simply log into the app and can immediately transfer those available earnings to your bank. Need to pay an urgent medical bill but payday isn’t for another week? No problem at all. The money you’ve already earned is right there waiting for you.
On-demand pay provides peace of mind knowing you can cover surprise expenses as soon as they arise. No more scrambling, borrowing money, or begging the boss for an advance. Your hard earned cash is already there in your account, available on-demand so you’re never left high and dry.
What kinds of perks do employees get to enjoy?
No Income Swings
On-demand pay is a total game changer for anyone with unpredictable contract work and fluctuating income. Not knowing when your next big payday is coming can make it really tough to manage cash flow and stick to a budget. You may score a huge client payment one week, then go stretches with smaller earnings.
On-demand pay smooths out those dramatic income swings by making every single hour you work accessible right away. Finish a project and funds are immediately available to withdraw. Drive passengers for a few hours and that money can be in your hands with a few clicks, not waiting until Friday.
On-demand access provides stability amid the uncertainty of freelance work. You’ll always know exactly what you’ve earned so far and can transfer funds the instant you need them. No more guessing when the next big deposit is coming – your money is readily available as you clock hours and complete gigs. Financial freedom!
Get New Hires Fast
Savvy companies are starting to use on-demand pay as a sweet perk to attract top talent. Imagine you’ve got two competing job offers with similar salaries. One company does standard paychecks twice a month. The other gives you instant 24/7 access to your earnings. Which job offer would get you more excited?
On-demand pay gives companies a major competitive advantage in recruiting. Instead of waiting weeks for a paycheck, employees can transfer their money anytime for whatever they need. Whether it’s covering an unexpected expense, funding a vacation, or paying routine bills – the funds are at their fingertips. This freedom and flexibility is very appealing!
Offering on-demand pay shows prospective hires that the company values their well-being and wants to empower them with instant access to their hard-earned wages. They don’t have to stress or wonder how they’ll make ends meet between pay cycles. The money they work for is readily available when life happens.
Avoid Awkward Cash Advance Requests
Having to ask the boss for a pay advance when you’re short on cash can be super awkward. You don’t want to get too personal about why you need money faster than the normal pay schedule. Maybe your car broke down and payday is still over a week away. Do you make up a story to save face? Paying back the advance can also feel embarrassing.
On-demand pay prevents this uncomfortable situation entirely. You simply log in to your account and transfer some of your available earnings whenever needed. Nobody has to approve it or ask why. You avoid the shame of asking for handouts or admitting you’re low on cash. With on-demand access, you can maintain your privacy and dignity instead of begging for payroll favors.
Get Paid as Quickly as You Earn
Here’s some food for thought – your work provides value to a company as soon as your shift ends. But despite enabling immediate profits, you must wait days or weeks to receive your compensation. There is a delay between your effort and the reward. With on-demand pay, that delay vanishes.
Now when your workday wraps up, the money you earned becomes instantly available for transfer to your bank account. You get paid as quickly as the work gets done without waiting around through a long lag time. The minute you clock out, your fresh earnings are ready to be claimed. Making money and accessing it happen simultaneously!
Avoid Paycheck to Paycheck Stress
Being stuck in the brutal paycheck to paycheck cycle is incredibly stressful. You anxiously stretch dollars until payday comes, hoping you don’t get hit with surprise expenses. It’s like walking a tightrope without a net. One unexpected bill can upend everything.
On-demand pay removes this constant background stress. Instead of getting paid bi-monthly or monthly, your money streams in steadily as you earn it. There’s no worrying about making it to your next payday – the funds are already sitting there waiting for you! You can transfer earnings anytime anxiety strikes about upcoming expenses. Relax knowing your money is already handy.
Lavish Perks of a CEO
Ever wonder how CEOs afford lavish lifestyles with spontaneous vacations, luxury purchases and VIP treatment? One of their money secrets is the ability to access large amounts of cash on demand.
On-demand pay puts this financial power and flexibility within reach of everyone. Treat yourself to first-class flights, book a vacation on a whim, splurge on upgraded seats at a concert. Your available earnings are there any time you want to live like a CEO. Reward yourself with instant access to the money you work hard for!
What Are The Advantages For Businesses To Take Part?
Here’s an amazing fact – enabling on-demand pay costs companies absolutely nothing! All it takes is partnering with a payroll service that offers flexible access. The employer doesn’t pay extra fees or need new software.
Offering this benefit builds major goodwill with employees for zero dollars. On-demand pay gives workers control over their hard earned money between pay periods. This freedom improves recruitment, satisfaction, engagement and retention at no cost to the employer. It’s a financial wellness perk that pays for itself in talent and productivity.
Happier Workers And Higher Performance
Imagine having instant access to your wages instead of waiting weeks for payday. How would you feel? More empowered, less stressed, greater peace of mind. Employees consistently report higher satisfaction when offered on-demand pay.
Happier workers mean better performance, stronger company loyalty and less turnover. When people feel financially secure knowing they can access earnings anytime, they’re more engaged with their jobs. Eliminating payroll restrictions improves lives both in and outside of work. It’s a win-win for companies and staff!
Smoothing Out Your Budget
Sticking to a monthly budget around a bi-weekly paycheck schedule can be frustrating. You deal with dramatic income spikes then shortfalls until the next pay period. It’s difficult to plan spending smoothly when payday arrives as a flood every two weeks.
On-demand pay provides consistent cash flow you can count on daily or weekly instead of massive paycheck deposits. Your income trickles in steadily as you earn it. Budgeting becomes much simpler without the rollercoaster highs and lows of a paycheck cycle. No more guessing game – just reliable funds that stream in as you work.
Lead the Way into the Future
The world moves fast and payroll practices need to keep up. Outdated paycheck systems that make employees wait long periods to access earnings seem ancient. On-demand pay represents the future.
Jump ahead of the curve by offering it at your company now. Show your team you care by providing cutting-edge, flexible compensation tools. Attract top talent in a competitive hiring market. Demonstrate thought leadership in your industry. Adopt the pay system of the future.
The Cost of Convenience
Of course with any new payroll system, there are usually growing pains. One potential drawback is increased costs, especially at first. Most instant pay services charge per transaction, so more frequent withdrawals can add up.
Besides, rare glitches may grind things to a halt. Adding third party instant pay vendors opens more potential failure points.
If a provider experiences trouble, it could temporarily block access to earnings. However, reputable companies have safeguards like redundancy to minimize disruptions. Vet vendors thoroughly and ensure they have rock-solid business continuity plans.
Some solutions let you pass costs to employees directly. But workers may resent fees to access their own wages. Make sure to explain charges upfront so employees understand the rationale.
Final Thoughts
The days of waiting weeks or months for a paycheck are coming to an end. On-demand pay offers undeniable advantages for employees and employers alike in the modern world. The flexibility, convenience and control provide a better way – no more payroll handcuffs!
Most employees get their paycheck every week or every other week. But in an age of quick satisfaction, those days could be coming to an end. With an increasing number of payroll providers, employees may now get their paychecks sooner rather than later—a concept referred to as “on-demand payment.” However, can your company make sense for on-demand payment, and if so, how would you provide it to your staff members? Continue reading to find out more about this payroll trend and if your company should adopt it.
What is pay on demand?
Employees may get their salaries as they are earned with the on-demand pay mechanism. Employees sometimes have access to a limited amount of their paychecks or are subject to a maximum amount each pay period; the remaining amount is paid on their next regular payday. Payroll processors and businesses that specialize in giving workers on-demand pay services both provide this service.
While most payroll providers include the cost of using on-demand pay alternatives in their offerings, there is normally a fee associated with using this service. These businesses charge the workers for the service, as opposed to payroll processing, where the employer bears the cost.
Employees using on-demand pay services may choose to get paid for the days they haven’t been paid in the past or for the day they worked. Employees may choose how they wish to be paid using on-demand pay services. This gives them some comfort in the event that an unforeseen bill arises.
Facts to Know About On-Demain Payroll Services
Prior to providing on-demand pay services, it’s critical to comprehend payroll processing procedures in general. Knowing that will guarantee that you are ready to choose the kind of payroll schedule you want to provide for your staff.
What kinds of payroll services are available on demand?
Instant Financial is one of the systems that gives employees greater discretion over their compensation; it is used by companies like McDonald’s, Taco Bell, KFC, and even Walmart. With the help of this service, workers may choose whether to be paid right away for their labour after receiving a smartphone signal that indicates their workday is over. If customers accept, the funds are placed into their bank accounts or moved to a prepaid debit card.
Extra services that employers may use Numerous payroll companies are providing this option on top of their standard payroll services. Employers may get on-demand payment services from The Payroll Company, an Albuquerque, New Mexico payroll service company.
The two-week pay schedule was implemented in the United States about ninety years ago and is a holdover from the manual calculation of payroll taxes. According to the Bureau of Labour Statistics, approximately forty-three percent of firms follow this plan.
Suggestions to Think About
It would be wiser for you to switch to an all paperless payroll procedure if you do want to provide on-demand pay services. People who get paid on multiple days will find that having everything done digitally will save them a ton of time.
Benefits and Drawbacks of On-Demand Pay
Both businesses and workers might experience a number of benefits and downsides from on-demand compensation.
For Employees
For employees, the benefits of on-demand compensation include:
Employees can experience faster pay with on-demand payroll. Employees who get on-demand payment don’t have to wait until their next paycheck to be paid. Employees may receive, save, and spend money according to their own schedules because of this flexibility.
It provides them with a safety net for their finances as well. On-demand pay might assist an employee in promptly meeting unforeseen costs or other pressing expenditures if they arise.
The following are some drawbacks of on-demand compensation for employees:
With on-demand pay, employees will have to deal with unnecessary charges. Some workers may get irate if they have to pay fees in order to get their earnings on demand, just as some individuals contend that paying ATM fees to withdraw cash equates to paying for money. When on-demand pay is used to pay unforeseen expenses, workers could believe that these costs exacerbate the situation.
Taxes would become more complicated with on-demand pay. Employee withdrawals from most on-demand pay providers are tax-free. These withdrawals are not, however, free from taxes. Instead, companies take these taxes out of the employee’s next salary, which can result in a smaller cheque than the person had budgeted for.
Were You Aware?
On-demand payment methods may be especially appealing to restaurant staff, especially in jurisdictions with low minimum wages that need tips. For some fantastic alternatives for your restaurant workforce, check out our list of the top payroll services for restaurants.
For Employers
Employers may benefit from on-demand compensation in the following ways:
Employers can experience rates of staff retention. Workers may see their employer’s use of on-demand compensation as evidence that they value their well-being. Employees may thus feel less pressured to quit their employment.
More effective workers. Financial difficulties on a personal level might divert workers. Paying workers on demand might increase their financial security and reduce distractions.
For employers, the drawbacks of on-demand compensation include:
Errors in payments. There is a slight possibility—albeit a small one—that workers will be compensated for hours worked on-demand when on-demand pay is implemented. Employers may end up paying the same salary twice as a result.
Levies. Taxes on on-demand compensation must be subtracted by employers from regular payments that are sent later. Employers that fail to comply risk penalties from the IRS.
Payday has arrived every week or every two for the majority of workers for over a century. But those days may be coming to an end in a world where everything is instantaneous. More than 75% of full-time employees in the US, according to research, are living paycheck to paycheck. Payroll firms are beginning to shorten the intervals between paychecks. After every workday, employees have the opportunity to pick up their paychecks from these payroll providers. On-demand pay is the name given to this new paradigm.
Understanding the basics of on-demand pay
An employee payment option called “on-demand pay” allows workers to be paid as they work. Employees often get a part of their salaries, up to a maximum amount, each pay period; the remaining amount is paid on their next regular payday. Payroll processors and businesses specializing in on-demand pay services for staff members both provide this service.
Businesses providing this service usually charge a fee, even though the cost of using on-demand pay alternatives is often included in the fees a payroll provider charge. But unlike payroll processing, which is free of charge to the employer, these businesses bill the workers for their services.
How does on-demand pay work?
When using on-demand pay systems, workers have the option to get payment for the days they were previously paid or for the day after their shift ends. Employees who use on-demand pay systems have more control over how they are paid and feel more secure in the event of unforeseen expenses.
It’s important to understand the basic workings of payroll processing before providing on-demand pay services. If you are aware of it, you will be more equipped to decide what kind of payroll schedule you want to provide.
Which on-demand payroll services are some examples of?
Instant Financial, a tool used by restaurant companies, is one that gives employees greater control over their compensation. When the workday is over, these services allow workers to get a notice on their smartphones and choose whether or not to pick up their cheque that day. If so, the funds are placed straight into their bank accounts or moved to a prepaid debit card.
Although many payroll providers provide this capability, some organizations use add-on services like Even and Instant Financial in addition to their payroll service. Payroll providers that provide on-demand pay include Gusto, Paychex, and Paylocity.
Implemented in the United States about ninety years ago, the two-week pay schedule is a holdover from the manual calculation of payroll taxes and is reportedly used by around 37% of companies, according to the Bureau of Labor Statistics.
Though we wait days or weeks for payment, our kids already have a better payroll system than we do. They get paid when they babysit or mow the yard. People shouldn’t have to wait around to be compensated for job they’ve already done, especially with the advances in technology.
Although workers may find the idea enticing, he sees more chaos than stability. More confusion and fears are produced by it. You are always in a rush if you get payment on a daily basis. You forfeit a present built-in buffer in order to avoid having to wait for payday. In a way, the two-week period is a forced savings mechanism.
People have greater flexibility in allocating their lump sum payment every two weeks. However, having to decide where money should be spent when you are paid every day might cause unnecessary stress. It could be making the ingrained fears of the working class’s lower classes worse. One of the issues is how much it costs to use these services. While many payroll providers charge the company a fee, others charge the workers a price for early withdrawal of funds. If workers are bearing the expense, the sum may mount very rapidly. Over the course of a year, it could cost workers a significant chunk of their wage, even at $3 or $5 each day. Payday lending is what it is, even if it is in a better form.
Tip –
If you do want to provide on-demand pay services, it can be more advantageous for you to switch to an all paperless payroll procedure. With everyone being paid on a different day, doing everything online will save a ton of time.
Exploring the pros and cons of on-demand pay
For both companies and workers, on-demand compensation has a number of benefits and cons.
Pros and cons of on-demand pay for employees
For workers, on-demand pay has the following benefits:
speedier payments. Workers no longer need to wait until their next paycheck to be paid when they accept on-demand payment. Employees may receive, save, and spend their money according to their own schedules thanks to this financial safety net. On-demand pay enables workers to promptly meet unforeseen costs or other pressing obligations if they arise.
For workers, the drawbacks of on-demand compensation include:
Payments. Employees who have to pay fees in order to obtain their earnings on demand may become irritated, much as some individuals contend that paying ATM fees to withdraw cash equates to paying for money. Employees may believe that these costs compound the harm when they are required to pay unforeseen expenses with on-demand compensation.
Duties. Employee withdrawals are generally tax-free for on-demand pay providers. These withdrawals aren’t tax-free, however. Employers are forced to take these taxes out of an employee’s next salary instead, which might result in an even smaller cheque than the worker had expected.
Pros and cons of on-demand pay for employers
For employers, on-demand pay has the following benefits:
increased rates of staff retention. Workers who work for an organization that offers on-demand pay may see this as evidence that their company values their welfare. As a result, workers may not feel as pressured to quit their company.
more effective staff members. Employees may get distracted by personal financial issues. By providing an increased financial safety net, on-demand compensation might reduce employee distraction.
For employers, on-demand compensation has the following drawbacks:
Mistakes in payment. There is a small but possible risk that workers may be paid for hours worked that were completed on-demand when on-demand pay is implemented. As a result, companies can end up paying the same salary twice.
Taxes on earnings paid on demand must be subtracted by employers from regular paychecks that are subsequently provided. If employers neglect or are unable to comply, the IRS may take enforcement action.
