In business, timing is everything. This is especially true when it comes to getting paid and paying what you owe. Business owners usually have to contend with payables that are due before receivables arrive, which creates financial challenges as you try to bridge the cash flow gap.
But did you realize your employees also have to deal with this same challenge? Many times house payments, rent, car payments, tuition and utility bills are all due before payday arrives. Unsuccessfully juggling these financial deadlines can lead to expensive late fees, overdraft charges, penalties and interest charges that can consume a major portion of a paycheck. That's why some workers think there needs to be a better way.
The U.S. Bureau of Labor Statistics reports that only one-third of private businesses pay their employees at least weekly; the majority pay biweekly, semimonthly or monthly. And once a company reaches 50 employees, they very consistently switch to a biweekly payroll period if they aren’t already using one.
According to a recent study by youth marketing and millennial research firm YPulse on behalf of payday alternative company Activehours, the majority of millennial workers think they shouldn’t have to wait to collect money that they've earned. Instead, they want to get paid immediately. Nearly two-thirds are confident this would help them manage their finances more efficiently.
The results of this study shouldn’t come as a surprise. The first Internet generation is accustomed to real-time answers from Google, real-time price quotes for travel, instant credit decisions, instant delivery of content—everything is available now! So why shouldn’t they get paid in real time as well?
Some companies agree with this line of thinking, and they're experimenting with technology that allows employees to get paid in real time for their work. Activehours, for instance, offers employees from more than 250 client companies the ability to access earned pay from their employers whenever they want. The company’s mobile app allows workers to electronically request a portion of their accrued hourly earnings in exchange for a small (currently voluntary) fee. The system is rather sophisticated, requiring employees to upload their photos while at work, take pictures of their electronic time sheets and connect their bank accounts. Activehours uses this data to determine if the employee qualifies for their service and how much of their pending pay they can access.
Is this a good idea? Employees think so, as it helps them avoid unnecessary fees and charges due to timing of payments. Many big companies also like it. Best Buy and Starbucks allow their employees to use the Activehours service. The solution is also available to small employers as long as they have hourly workers and electronic time sheets.
Beyond the financial benefits to your employees, it's also another way to attract top talent in a competitive market. Giving workers greater flexibility and access to their pay in a way that doesn’t cost your business anything is a win-win.
So are millennials spoiled for expecting instant payment for their work? I don’t think so. As business owners, we all want to get paid sooner rather than later. So why would they want anything different?
Is this something you'd consider for your business? Share with us in the comments below.
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