Today’s post comes to us from board member Martin Armstrong. Here he argues for the value of supporting your workers with on demand pay options.
CNBC recently reported that “the gig economy is now composed of 60 million workers, and by 2027, the majority of workers in the U.S. will be contract workers.” According to Deloitte Insights, by 2020, the gig economy in the United States is projected to triple to 42 million people.
TechTarget.com describes a gig economy as “a free market system in which temporary positions are common and organizations contract with independent workers for short-term engagements. The term “gig” is a slang word meaning “a job for a specified period of time” and is typically used in referring to musicians. Examples of gig employees in the workforce could include freelancers, independent contractors, project-based workers and temporary or part-time hires.”
With the number of gig economy workers on the rise, the fight to attract gig economy talent has never been greater, and the gig economy worker is the beneficiary of the recruitment battles. A key driver to attracting such talent is the ability to pay gig economy workers immediately after they have earned their pay, a practice referred to as “On Demand Pay”, and companies are starting to accommodate.
For example, an Uber driver no longer has to wait for their weekly payday to receive their earnings. Instead, drivers have the option to immediately “cash out” their earnings through Uber’s “Instant Pay” program, up to 5 times per day. The cost for drivers to immediately have earnings loaded to their personal debit card via this Instant Pay option is just $0.50 per “cash out”.
The idea of offering “On Demand Pay” options to attract top gig economy talent is substantiated by the following facts:
- 63% of Americans cannot cover a $500 expense without selling or borrowing something
- 43% of financially stressed employees spend 3+ hours at work dealing with their finances
- 56% of employees say they suffer from financial stress
- Only 44% of employees say their employer offers services that assist in their personal finances
- Over 70% of Millennials and Gen Xers are more attracted to a company that cares about their financial wellbeing
While On Demand Pay options readily exist for the gig economy worker, this is not the case for the W-2 employee workforce as most employers do not offer employee advances. The lack of an On Demand Pay option could present a problem, as the financial stress for a gig economy worker and a W-2 employee are not necessarily any different.
In fact, I would argue that the cost to attract and retain a W-2 employee is much higher than that of a gig economy worker, making it more important to keep them over the long run with On Demand Pay being a useful tool in this endeavor.
The question becomes, will employers of W-2 employees adopt the same On Demand Pay options that gig economy employers are using to attract and retain their workers?
Today, there are a number of third-party providers that offer “On Demand Pay Platforms”, which provide options for employees to receive a certain amount of their earned, but not yet paid, earnings.
To address the notion of On Demand Pay as an employer benefit, employers can either:
- Partner with one of the On Demand Pay platform providers (i.e. DailyPay, PayActiv, Instant, Even, and Earnin to name a few);
- Change internal policies to allow a payroll advance pay cycle that would be paid prior to their regularly scheduled payrolls; or
- Provide some other employee incentive to remain an employer of choice within their industry.
Truth is, the needs for today’s workforce have changed and as such, employers should position themselves to attract top talent to include the gig economy worker and the W-2 employee. The time for On Demand Pay adoption is now, as the workforce will not wait for those employers who can’t meet their needs.