On-Demand Pay: The Real Cost of On-Demand Pay

What “Free” or “Free to the Employer” Really Means

For some on-demand pay vendors, “free” often refers to the absence of fees charged to the employer and/or employee. However, soft costs also need to be taken into account as they can be more expensive than the fees themselves. Some include:

• additional workload
• implementation time
• payroll support 

Depending on the model, the responsibility of the fees may fall onto the employer or the employee, each of which has its own pros and cons.

Many employers choose not to fund an additional benefit for their employees. On the other hand, solutions with excessive costs to employees may prevent them from enrolling or building their savings.

The Hard and Soft Costs of On Demand Pay Solutions 

Questions regarding cost are often considered first and foremost in the decision-making process when implementing new benefits.

Hard Costs for Employees:

• Transaction fees
• Subscription fees
• “Tips” for transactions 

Hard Costs for Employers

• Implementation fees
• Upgrade and maintenance support
• Usage fees
• Employee service and support
• Employee education and communications 

Soft Costs for HR

• Support required to address employee questions and complaints
• Employee communications
• Enrollment management
• Onboarding
• Implementation time

Soft Costs for Payroll

• Support required for questions about paycheck anomalies
• Ongoing payroll management time requirements
• Regulatory and compliance cost implications and risk 
• Implementation time 

Soft Costs for IT

• Support costs for technical questions
• Implementation time

Make sure to ask potential providers about these costs in order to get a more accurate view of what it will actually cost to implement, offer and maintain this technology.