Many of us have been there – stuck waiting for payday to come when bills and expenses keep popping up. It can be stressful and is unfortunately the reality for most Americans. Currently, more than 63% are living paycheck to paycheck. How is the current pay cycle system a key player in this?
According to the U.S. Bureau of Labor Statistics, 42.2% of Americans are paid biweekly, 18.6% are paid semi-monthly, and 33.8% of Americans are paid on a weekly basis.
Why does this process take so long? From long approval processes involving managers to banks with slow processing times, the process has become outdated and inefficient. If your employees don’t have direct deposit set up, there may be even more delays! Payroll processes are in need of modernization and companies all around the country are taking on the challenge.
The History of Payroll
What do you imagine when you think about the earliest form of payroll? Surprisingly, researchers suggest that the earliest form of payroll came from Mesopotamia around 3300 BC. They used a form of writing called “cuneiform” on pieces of clay to transcribe daily beer rations for workers.
The original source of payroll as we know it today (involving money/cash flow), goes all the way back to the 14th Century. Evidence also suggests that the 5th century Greeks developed the first known payroll system that has a similar record to what we use today. Moving into the beginning of the 20th Century, the concept of payroll was popular, but most business owners outsourced it due to a lack of automated processes.
In 1982, the American Payroll Association was founded and the revolutionary automated processes began. The American Payroll Association is the national leader for payroll professionals and they lead over 36,000 payroll professionals through training courses every year.
In the times before currency and payroll, people used a barter system to instantly trade for goods and services – there was definitely no waiting two weeks. Moving into the Industrial Revolution, workers were often paid on a weekly basis. With things like payroll tax and other complications introduced, employers opted to let the banks and accountants do the work. With there now being a middleman, the process stretched out to the biweekly and semimonthly system that is now common in the United States.
In present day, the HR and payroll industry as a whole is valued at $9.9 billion dollars – quite a long way from beer rations in 3300 B.C. Over the years, payroll has become a necessity and a booming industry that aids both employers and their workers. In the last five years, the payroll industry (including HR) has grown 5.3% each year on average. This is a faster increase than the entire technology industry as a whole.
Employees Want to be Paid Faster
The times of bi-weekly or semi-monthly pay are rapidly changing. In a world where everything is becoming faster and more efficient, the same is the norm for payroll. Research suggests that “3 in 5 employees think they should not have to wait until their scheduled payday to access their earned wages.” Of those workers in the study, 65% were in retail, 61% in healthcare, and 54% in manufacturing.
Demand for early wage access spans across many industries and income levels. A study done by CareerBuilder found that 1 in 10 workers who make over $100,000 are living paycheck to paycheck. Additionally, over 50% of workers expressed a preference for early-wage access over additional paid time off.
More than 1 in 4 American workers do not set aside any savings per month. When workers don’t have access to their wages early, they can fall prey to predatory services like payday loans. Adding early wage access to your benefits package for your employees is essential in today’s economy and climate.
A Holistic Approach to Pay & Perks
In addition to pay volume, employees are seeking out a more holistic approach to the way they are compensated by their employer. Post-pandemic, 63% of Americans are living paycheck to paycheck. This means that even though your employees are receiving pay, there is still a tremendous need for financial wellness resources and coaching.
Creating a financial wellness program is a cost-effective way to add to your benefits package. “79% of employees would prefer new or additional benefits to a pay increase.” With a pay increase costing way more than adding financial wellness benefits, this is a win-win situation. Additionally, 89% of employees who were at companies with financial wellness benefits expressed that they’d be more likely to recommend their employer, which has an impact on job applications as well.
Employees are seeking out this benefit and enterprise employers like Uber and Walmart are already offering it. A survey completed by the National Business Group on Health (NGBH) found that “9 out of 10 large and mid-sized companies now offer financial wellness programs, and another 10% are considering adding them.”
For additional ideas on how to add to your benefits program, check out our blog “Employee Benefits That Help The Employer Too.”
The Benefits of Earned Wage Access
Earned Wage Access (EWA), also known as on-demand pay, is a mutually beneficial perk for both the employer and the employee. With 46% of Americans unable to cover an unexpected $400 expense, the odds are that your employees struggle with their finances too. Additionally, “72% of workers admit to worrying about their personal finances at work” and 1 in 3 of those workers expressed that they worry more than once a week. When your workers are stressed out and worried about their finances, their productivity goes down.
A study from the Workforce Institute found that 57% of employees would stay longer at an employer that offers EWA, which means that it also positively impacts turnover rates. Research also shows that 69% of workers admitted to feeling stressed about their finances at work. Providing your employees with EWA pay takes this stress off of their shoulders and creates a more efficient workforce, impacting your bottom line and creating a culture of wellness.
In today’s modern workplace, creating a culture of wellness is crucial to your and your employee’s success. Strong company culture can quadruple revenue and 57% of workers said they would work harder and longer at a company that offered an early wage access benefit. In addition, you can include EWA or on-demand pay in your job postings, which boosts the amount of applications you receive throughout the recruiting process.
In addition to on-demand pay, the Rain app also provides free financial coaches that users can live chat with as well as access to an entire library of financial wellness resources, providing a holistic remedy to the paycheck to paycheck dilemma. When you implement apps like Rain, it costs you nothing as the employer but provides an immensely positive impact on your employee’s financial wellness.