Timing is everything. This is especially true when it comes to getting paid and paying what you owe. Business owners usually have to contend with payables that are due before receivables arrive. This creates financial and psychological stress as you try to bridge the cash flow gap. Employees also have to deal with this same challenge. Many times rent, tuition, child support and utility bills are due before pay day arrives. Juggling the financial gap this creates leads to expensive late fees, overdraft charges, penalties and interest charges that can eat away a major portion of a pay check. Some workers think there needs to be a better way.
The Bureau of Labor Statistics shows that only one-third of private businesses pay their employees at least weekly; the majority pay biweekly, semimonthly or monthly. Once a company reaches 50 employees they very consistently switch to a biweekly payroll period if they aren’t using one already.
According to a recent study by YPulse the majority of “Millenials” (young adults between 18 and 33 years of age) think that they shouldn’t have to wait to collect money that they have earned; they want to get paid right away. Nearly two-thirds are confident this would help them manage their finances more efficiently. The results of this study shouldn’t come as a surprise. The first Internet generation is accustomed to real-time answers from Google, instant credit decisions, instant delivery of content via Netflix, iTunes and Amazon Prime and real-time price quotes for travel. Everything is available now! So why shouldn’t they get paid in real-time as well?
Some companies agree and they are experimenting with technology that allows employees to get paid in real time for their work. Activehours, a Palo Alto-based startup, offers employees from over 250 client companies the ability to access their earned pay from employers whenever they want. The company’s mobile app allows employees to electronically request a portion of their accrued hourly earnings in exchange for a small (currently voluntary) fee. The system is rather sophisticated, requiring employees to upload their photos while at work, take pictures of their electronic time sheets and connect their bank accounts. Activehours uses this data to determine if the employee qualifies and how much of their pending pay they can access.
Is this a good idea? Employees think so as it helps them avoid unnecessary fees and charges due to timing of payments. Many big companies agree. Bank of America, Best Buy, Starbucks and Wells Fargo allow their employees to use Activehours. The solution is also available to small employers as long as they have hourly workers and electronic timesheets.
Beyond the financial benefits, this is also one more way to attract top talent in a competitive market. Giving workers greater flexibility over their pay in a way that doesn’t cost you the employer anything is a win-win. Are millennials spoiled for expecting instant payment for their work? I don’t think so. As business owners we want to get paid sooner rather than later. Why would they want something different? What do you think? Would you offer employees this option?