Many small business owners can’t afford to raise their team’s pay right now. But it’s now become possible to make workers’ pay available to them the same day that the employees log their hours. Read on to learn more about same-day pay services.
Many small business owners can’t afford to raise their team’s pay right now – even if they would like to reward everyone for putting in extra efforts to make it through the pandemic.
At a time when employees may be facing extra financial burdens, that can leave entrepreneurs feeling powerless to help. Many small businesses are like a family, and if you as the owner know that someone can’t afford to replace a blown tire or pick up prescription drugs, it can really hurt.
A new trend may offer employers an option to do more for their employees’ financial wellness. It’s now become possible to make workers’ pay available to them the same day that the employees log their hours.
What services enable same-day pay?
Services such as Branch, DailyPay and PayActiv allow employers to do this.
- For instance, Branch offers a free checking account to employees and a debit card – helping to ensure that your employees are not among the “unbanked.”
- DailyPay allows you to transfer workers’ pay into any bank account or onto a payroll card or prepaid card the same day.
- PayActiv lets employees receive the money on a bank, debit or prepaid card.
Employees can typically log into one of these systems and request their pay whenever they need it. That way, if their rent is due on Tuesday and their paycheck doesn’t come until Friday, they don’t have to wait until Friday and pay it late. They can tap the money they already earned then and there.
What businesses should use same-day pay services?The trend is particularly relevant to employers of low-wage workers who are not in a position to raise wages. For instance, if you employ cashiers and the going rate in your area is $15 an hour, it would be very difficult to pay them $50 an hour, even if you know that would make life more comfortable for them.
Most businesses aren’t bringing in enough revenue to make that sustainable. While giving employees quicker access to their pay isn’t the same as giving them a raise, it can make it easier for them to manage their income.
That’s important at a time many employers are making it a priority to help workers protect their financial wellness. Letting workers tap their pay the same day may help prevent them from going into debt. Rather than put additional charges on their credit card – or going to a payday lender and paying high interest rates, the workers can pay their bills with money they’ve earned.
See related: How your small business can survive the holidays
Which same-day pay service should you choose?
Of course, if you go this route, it’s important to understand the requirements for employers in using the services and to investigate them thoroughly to find the one that’s right for you.
Branch does not charge employers or employees to use the service, and there is no requirement to pre-fund the employees’ pay. DailyPay funds the advance payments; employees do not have to pre-fund them. PayActiv, which says it offers free and low-cost options, does not have an impact on employers’ cash flow. Like DailyPay, it fronts the money to the employees.
It’s also important to investigate any potential costs for employees, such as transaction fees, as these may be a concern for some workers.
With all of the innovation going on in the financial technology space, it pays for employers to stay on top of tools like this. Great people are hard to find, and any investment you make in their financial wellness is likely to have benefits for your business, too. They could prove to be a great retention tool.