ALEXANDRIA, Va.—Retail workers are the hardest-to-find employees in today’s tight labor market, and for the past year, there have been roughly a million more open positions in the United States than people looking for work. The shrinking applicant pool is forcing employers to look for creative ways to lure employees in to apply, and one way to do that may be “same day pay,” also known as expedited pay, next-day pay or daily pay.
A 2019 survey of 1,180 American adults conducted by the Workforce Institute at Kronos Inc. found that 61% of employees in the health-care, retail, manufacturing and construction industries preferred immediate access to their wages, with more than half saying that offering such a benefit would be more attractive than paid time off. Two years later, a 2021 study from accounting firm PwC found that 42% of fulltime U.S. workers find it hard to meet household expenses on time each month, reports the Philadelphia Inquirer.
According to the National Law Review, direct deposit, pay cards and electronic fund transfers have given employees faster access to their funds. But for millennials and Gen Zer’s, generations who expect everything to be super speedy, PayPal, Apple Pay, Venmo and the like have upped the ante for the immediate distribution of wages.
“The bi-weekly pay cycle is a relic of a technologically limited era, when employers had to rely on outdated technology and batch processing that forced them to implement these fixed cycles,” Seth Ross, general manager of Dayforce Wallet, a same-day pay service, told Inquirer.com. “With modern advances in technology, people today can access anything they desire on-demand, from streaming entertainment to deliveries of their favorite foods. In this context, waiting for a biweekly payday feels archaic.”
Several food-service groups are testing the next-day pay model, which provides employees with almost immediate access to funds. Both Church’s Chicken and Bloomin’ Brands are offering forms of expedited pay to recruit and retain employees.
Vendors and distribution methods vary. Instant Financial provides immediate access to pay after a work shift is completed. PayActiv and FlexWage are app platforms through which employers can offer customized pay options to team members.
Some vendors charge employers for their services, while others deduct fees from employees’ pay. The fees vary, and employers must understand what they are being charged before contracting with an app provider or making an app available through a payroll processing service. Plus, employees must understand and agree to these fees.
Employers should consider a few things before offering same-day pay via one of these providers, experts advise. These include reviewing state and local laws to determine if it’s legal to pass along such fees to employees, and ensuring that all federal, state and local minimum wage, overtime, and payday requirements are met before choosing a vendor or app.
In 2019, NACS Daily reported that Parker’s Markets based in Savannah, Georgia, had introduced DailyPay technology, which gave employees the opportunity to get paid daily, weekly or on demand. Designed to promote financial wellness, offer flexibility and encourage employee retention, DailyPay enables Parker’s team members to get paid when they need money, without having to wait for a traditional bi-weekly or monthly payday.
Same-day pay may prove to be a good employee perk for businesses struggling to fill open positions. As NACS Daily reported in April, restaurants and retailers have been holding well-publicized recruitment events in an attempt hire workers. They’re also increasing wages and perks, with one McDonald's franchisee in Florida offering people $50 just to show up for a job interview, while Rutter’s recently raised starting wages to $15 an hour.