How often you pay employees is a business decision determined by individual companies. The restrictions and parameters include federal and state laws, cost of running payroll, and your employee’s financial well-being.
These determining factors don’t always work well together, especially when it comes to taking into consideration the financial wellness for your staff.
The most common pay frequencies
In an effort to toe the line between business and staff needs, most businesses select from the following, traditional, options:
- Weekly pay, which means employees receive 52 paychecks a year.
- Bi-weekly pay, which means employees receive 26 paychecks a year.
- Semi-monthly pay, which means employees receive 24 paychecks a year.
- Monthly pay, which means employees earn 12 paychecks a year.
Selecting the right cadence for payroll is always a delicate decision. The difference between 52 and 12 paychecks a year has many implications for both the employee and employer.
Pay frequency from a business perspective
Businesses need to be cognizant of their spending when it comes to processing payroll. Common costs associated with payroll include:
- Printing checks for employees
- Direct deposit costs, charged by banks
- Employee or bookkeeper’s time to calculate payroll
- Third-party costs for running payroll, if you outsource
The more a business runs payroll, the more it will cost. For this reason, it becomes tempting to consider semi-monthly or monthly pay frequencies. Those schedules aren’t favorable for employees though.
Pay frequency from an employee’s perspective
On the flip side of the coin, employees want access to their earned income. It’s likely that bills and unexpected costs of daily living happen more frequently than semi-monthly or monthly schedules. Having money on hand can mean the difference between paying a late fee or not for your employees.
Financial stress is common, too.
An Employee Financial Wellness Survey, conducted by PricewaterhouseCooper’s (PwC’s) in 2016, responses from 1,600 full-time employees, provides meaningful insights:
- 52 percent of workers worry about their finances.
- The younger the worker, the more likely he or she experiences worry.
- 64 percent of millennials said they feel stress about their finances.
- 45 percent said their finance-related stress had increased over the last 12 months.
The faster your employees can access their earned income, the more peace of mind they will have.
And, if it weren’t for costs associated with running payroll frequently, business owners would be more open to a faster payroll cycle. Unfortunately, until recently, this concept hasn’t been realistic. But things have changed.
Additional Reading: HOW FINANCIAL WELLNESS IMPROVES EMPLOYEE ENGAGEMENT
Daily payments as a financial wellness strategy
Financial wellness programs have been increasingly included in employee retention strategies. Data from benefits consulting firm Aon Hewitt shows that more than half of employers (55%) polled offer a program to aid employees in at least one financial area beyond retirement planning.
Some businesses opt for financial wellness programs that include financial advisors or budgeting consultants. While this can be a great fit for some employees, others feel embarrassed by their finances, or lack of monetary aptitude and will avoid these types of programs. Enrollment rate is not as high as it could be.
Employees would rather have more control over their finances on their own accord. This mentality is catching the attention of many corporations.
Walmart, for instance, recently introduced daily payments to their employees as a way to bridge the gap between paychecks and improve employee financial wellness. The idea took Walmart nearly two years to study and test. The final results were favorable, and now the platform is rolled out to their nearly 1.4 million employees.
As technology advances, it becomes easier for business to take on this “pay as you earn” mentality.
Apps like DailyPay make it easy to integrate new technology with existing payroll processes, without disrupting the flow.
DailyPay allows your employees to tap into their earned but unpaid income as often as they need. DailyPay works with any payroll system that currently offers direct deposit. When an employee wants to access their earned income, it will deduct from their next paycheck. It’s not a pay advance or a loan because the income has already been earned. It’s at no additional cost to a business, either.
Payroll systems run as they normally would. So, even if you ran a semi-monthly or monthly payroll, your employees don’t need to abide by the payroll schedule. The next pay period an employee would receive their total, minus what they deducted before payday.