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What are Paycheck Advance Apps? A Guide for HR, Benefits, and Payroll Leaders

Paycheck advance apps are not loans. By definition, they aren’t even really advances – instead, they provide earlier access to earned wages.
September 9, 2020

As a leader in human resources, employee benefits, or payroll, you’re probably inundated with new technologies – and you probably don’t have the time to implement new software for your company.

One technology that doesn’t take a lot of your time, might actually save you time, and is an easy “yes,” is paycheck advance technology.

What are Payroll Advance Apps?

Payroll advance apps are fairly new, having only existed for the last five years or so. More and more companies have been coming out with their interpretations of payroll advances, but the main concept stays the same: your employees have the opportunity to get paid sooner than your scheduled payday, without messing with your payroll structure.

Historically, humans have gotten paid immediately after completing a job. Think about it this way: let’s say your HVAC at your house stops working. When the maintenance worker comes over, do you give them a pat on the back and say “great work, expect a check in two weeks?” No – they probably require a credit card right then and there.

Paying your employees should not be any different – but, as you know, it is. You also probably know that paying employees immediately after a shift would be an administrative nightmare. Especially for companies that don’t sit in the same office as their workers and for companies who have unbanked employees.

Payroll advance apps offer a solution that plugs into your current system. This works differently with each vendor – but at Rain, we partner with payroll and timekeeping systems so that you don’t have to do anything manually.

When an employee withdraws from our payroll advance app, called Rain Instant Pay, a deduction is triggered to remove the amount they withdrew from their next paycheck. Then, on your company’s scheduled payday, you reimburse us for providing the employee with an advance from our capital. You can set that up to trigger automatically.  

Payroll advance apps are also commonly called “on-demand pay,” “early wage access,” and “earned wage access” apps.

How On-Demand Pay Apps Help HR and Payroll Leaders

On-demand pay apps like Rain Instant Pay can help HR and payroll leaders in two main ways: helping you achieve your goals for your employees and creating a new direct deposit option that saves you time.

Achieving Your Human Resources Goals

As a representative for the company, you need to reduce overhead costs and manage legal guidelines. As a representative for the company’s workforce, you need to provide high-quality (but low-cost) benefits and find solutions that keep everyone happy. That’s a lot of responsibility for one department, and an on-demand pay/early wage access solution can help with all of those things.

Providing early wage access keeps your employees happy by adding a voluntary benefit. It can also reduce stress among employees who are struggling financially. A PwC survey found that about half of employees spend over three hours thinking about finances every week. A Kronos study found that 74% of employees prefer to work for employers that offer financial wellness benefits.

Thankfully, on-demand pay apps are free for businesses to implement – so you can make both your employees and your executives happy.


Using On-Demand Pay for Direct Deposit

As we’ve been speaking with HR and payroll leaders regarding Rain, we’ve learned that a lot of time goes to organizing paper checks and statements for unbanked employees. Additionally, more and more companies are using pay cards as a solution for employees who wouldn’t otherwise have access to direct deposit. Not only do payroll cards cause extra work for you to administer, but they often come with fees.

A healthier alternative for both you and your employees is Rain. Our on-demand pay app comes with a debit card that can function like a payroll card for your unbanked employees. They can set Rain up to be their direct deposit account (even though we are not a bank). Then, if they want their money early, they can still “withdraw” some of their earned wages early by loading them onto their Rain debit card.

How Paycheck Advances are Different From Payday Loans

Paycheck advance apps like Rain are not loans. By definition, they aren’t even really advances – instead, they provide earlier access to earned wages. In other words, Rain users are not getting advances on money they haven’t earned yet. They can only withdraw money from hours that they’ve already worked.

Paycheck advances through Rain are healthier than payday loans because there is no interest, just a one-time fee.

Paycheck advance programs are also different in that they are instant, but the caveat is that since you can only withdraw what you’ve earned, they won’t necessarily help for a huge expense. For some people, that could be a good thing. Getting paid earlier does not allow you to spend thousands of dollars that you don’t have in the way that a payday loan can. Instead, it’s just there for extra support during the week until your next check comes in.

For example, a paycheck advance through Rain can help people afford their groceries or pay their electric bill, but it more than likely won’t pay for a downpayment on a car or designer clothes.

How to Implement Paycheck Advances

If you’re ready to give your employees earlier access to their wages, don’t wait! Rain is 100% free for businesses, so you won’t have to worry about trying to convince your CFO that this is a good idea. Rain is a free benefit to add to your arsenal.

Rain requires very little work for you. As long as you can spend 30 minutes on the phone with us to make sure we are connected to your current payroll and timekeeping systems, we’ll handle the rest.

To sign up for Rain, click here. We can’t wait to serve you and your employees!

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