Even employees who save money can run into a bit of financial trouble. A new payroll option might make their lives easier.
ADP, Daily Pay, Kronos, Even and other online payroll administrators now give employers the option of offering their hourly employees access to their paychecks for work already completed before payday.
The payroll app is paired with an employer’s current scheduling and payroll system and an employee’s direct deposit account. The app keeps track of when an employee completes a scheduled shift and the amount of money earned. Employees can access some or all of their earnings from that shift. There is a fee for the service — ranging from $1 to $5 — which is paid by either the employee or employer.
Bankrate, a financial services company, reports that nearly 20 percent of Americans don’t save any of their annual income, meaning they live paycheck to paycheck. Having immediate access to their paycheck often means they won’t have to rely on high interest credit cards or expensive payday loans or pay bank overdraft charges.
A downside is that employees might choose to take early payments often and find themselves under the same financial problems they were hoping to avoid. Walmart has an app that helps employees avoid this by letting employees figure their monthly expenses before accessing their paycheck.
Employers who decide to offer this benefit should know there may be costs when enrolling your workforce into the app. There also may be legal ramifications if you’re not in accordance with state and federal law concerning pay. For example, pay rates must be based on an hourly wage, rather than a flat daily rate.
Despite these concerns, many employers report the app has improved recruiting, retention, absenteeism and morale. Some employers discovered their employees are willing to work longer hours and more shifts when they see an immediate return for their efforts.
