Daily Pay Technology: Tools to support employee financial wellness

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Insights from Gallagher’s HR & Benefits Technology Consulting Practice

Corporate wellness programs have been around since the 1970s—motivating employees to be well and, presumably, to be more productive at work. Employers recognize that the whole person comes to work each day, bringing with them personal concerns and stress they experience at home. This includes financial strain.

According to Gallagher’s 2018 Human Capital Insights report, employees have never been more financially stressed, creating implications for employers looking to manage workforce health and productivity. Bank of America’s 2017 Workplace Benefits Report states that nearly six in ten employees say financial stress impacts their physical health and that employees spend a median of two hours per week dealing with personal financial matters while at work.

“Financial wellbeing” continues to be a topic of great interest in HR circles as employers seek tools to address absenteeism and low productivity associated financial stress. Scenarios range from stress associated with mis-matched timing between payday and bill due dates, to insufficient funds to pay for an unexpected expense, e.g., a car repair necessary for commuting to work.

 A 2017 national survey by CareerBuilder found that 78 percent of U.S. workers live paycheck to paycheck — and this includes one in ten $100,000+ annual salary earners. Bankrate.com reports that, annually, 20 percent of Americans save nothing while 21 percent save 5 percent or less.

Among the innovations in financial wellbeing tools are those that allow employees to draw from their earnings daily, versus the traditional weekly or biweekly paycheck. Funds are immediately deposited into a bank account or added to a company payroll card. Along with being the solution for the occasional or short-term financial problem, this technology simplifies the process of paying gig economy workers. For both gig workers and traditional employees, the daily pay concept reflects the growing power of the workforce in today’s talent-starved market. While helping employees be more productive was the original goal, a daily pay service also can help attract and retain talent.

Daily pay technology allows hourly employees to tap some percentage of their earnings for that day as soon as their “shift” ends. Providers charge a small transaction fee — typically paid by the employee and deducted from their pay but employers may opt to cover the fee (or a portion of it). This fee is usually less than the cost of cashing a check at a financial services retail location and substantially less than the fees and interest rates associated with payday loans.

Gallagher’s HR and Benefits Technology (HRBT) Consulting Practice is a big fan of daily pay technology as a method to improve employee financial wellbeing as it contributes to increased productivity and better organizational wellbeing overall. We see a growing number of alliances (in all size markets) between daily pay service providers and payroll companies, streamlining the process for employers. Stand-alone products are also available, which can be integrated with most payroll platforms.

The HRBT team’s enthusiasm around this technology comes with an important caveat: employers need to establish boundaries around the service, e.g., limiting the number of transactions per month, or capping the percent of earnings that can be accessed. While it can be argued that the employee has earned the money and should be able to access and use it as they wish, a lack of such guidelines could be a disservice. An employee who misuses the service could find themselves in a situation that results in more financial stress, which is counter to the original reason for making the service available.

Despite employers’ willingness to take on more and more responsibility for the wellbeing of their employees, we view daily pay as a tool to help an employee solve a problem, so they are present and productive in their job. Other solutions are available to employers interested in providing financial management education to their employees.

Employers and benefits consultants interested in learning more about the growing number of daily pay solutions in the market, how they impact payroll processes and how these tools can help motivate and assist current employees (as well as attract and retain new talent), should contact a member of the HR and Benefits Technology Consulting team

 

About the Author

Rhonda Marcucci, together with Ed Barry, co-leads Gallagher’s HR and benefits technology consulting practice. Their team provides unbiased, well-researched HR technology and benefits administration consulting including sourcing advice and service provider capability audits. Rhonda’s extensive and broad-based experience in finance, accounting, administration, strategic planning, information systems, sales and marketing, and operations is instrumental in helping clients identify a comprehensive strategy and execute against it.

Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as “Gallagher Benefit Services of California Insurance Services” and in Massachusetts as “Gallagher Benefit Insurance Services.” Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.