The APA recently hosted a webinar titled, “The Times They Are a-Changin’ (But Your Payroll Processes Don’t Have to!),” sponsored by DailyPay and featuring payroll industry leaders Josh Jackson, DailyPay’s Director of Product Marketing, and April Smith, Payroll Consultant.
During this webinar, we received many questions from webinar participants regarding on-demand pay. We’re taking the time to answer them all in a series of blog posts, so keep your eyes open for future Q&A blog posts in this series.
1) What does “on-demand” pay actually mean?
On-demand pay is an exciting new benefit that allows employees to access their earned income whenever they need them. For example, if an employee worked an 8-hour shift and earned $125, they can access that $125 (after taxes and garnishments are deducted) at any time before their scheduled payday. This helps employees who live paycheck-to-paycheck meet their financial obligations and live more comfortably.
2) Isn’t this just a more complicated version of a pay advance? What’s the benefit for employers, other than having happier employees?
Unlike a pay advance, on-demand pay is only available for hours that have already been worked. The process is actually less complicated, as the employee will request and receive the transfer through the DailyPay app, without any involvement from the payroll team. Benefits for employers include reduced employee turnover, improved job performance, reduction in absenteeism, and greater willingness for employees to take on extra shifts. Job seekers are also 1.9 times more likely to apply for a job that offers a daily pay benefit.
3) Aren’t we just enabling workers to make poor financial choices and spend money they don’t have, without ever learning about budgeting or financial planning?
This is by far the most important aspect of implementation for a daily pay benefit. None of us want to put our employees in a position where they are even less financially secure come payday. In a recent analysis (March 2018), Gartner Group concluded “There is little evidence that instant pay leads to more impulse spending.”
With 78% of the workforce living paycheck to paycheck, poor financial planning is not always to blame for coming up short on bills. Many individuals are simply not earning enough to make ends meet for themselves or their families. Another issue is when major bill payment due dates, such as mortgage payments, are not in sync with payday schedules. When this happens, it may be difficult for an employee to save the funds necessary until that date when so many other expenses are popping up. Many employees are accustomed to paying late fees because of those scheduling issues, which is a problem that DailyPay can easily help solve.
4) How does DailyPay work when there are varying payday schedules for all employees?
Employees will make transfers as needed through the app, and DailyPay will be reimbursed on each scheduled payday for any employees transfers during that pay cycle. For example, if Jon, Nancy and Keith all get paid on Friday, then DailyPay will be reimbursed in full for all their transfers on Friday. If other employees have a scheduled payday on Monday, then DailyPay will be reimbursed in full for all of those transfers on Monday.
5) Will this create more work for the payroll team? If employees are being paid daily, is the payroll staff going to have to work overnight to ensure that happens?
After the initial implementation, there should be no extra work at all for the payroll team. Since all employee transfers come directly from DailyPay’s balance sheet and not the employer’s, the payroll staff is totally uninvolved in that process. DailyPay is repaid in full on the employer’s already scheduled payday for the sum of all employee transfers during that pay period.
6) It seems that on-demand pay would only work if employees were paid in arrears and not if they are paid “current.” Otherwise isn’t it still a pay advance?
DailyPay is not a pay advance because funds are only available for hours that an employee has already worked. Even if an employee is getting paid “currently” on a two-week cycle, that still means that they’re getting paid two weeks later for the first day of that cycle. With DailyPay, employees can have the funds from Day 1 of the pay cycle on Day 1, instead of Day 14.
7) Does this require writing off-cycle checks?
Not at all. All employee transfers come directly from DailyPay’s balance sheet, so there is no need for payroll to write any off-cycle checks. DailyPay is paid back every scheduled payday for the lump sum of all employee transfers. The process is as simple and painless for the payroll team as we could possibly make it.
8) Does DailyPay work in concert with payroll providers such as ADP, UltiPro and Ceridian, or does the entire payroll system need to be changed?
Yes, all three! DailyPay is not a payroll provider, so there’s no need to change any of your existing systems. We have a network of partnership with various system providers including ADP, Kronos, Ceridian and Ultimate Software, just to name a few. Our technology sits on top of whatever procedures and software are already in place. We have created API integrations or standardized the SFTP files with our channel partners to streamline the on-boarding process and reduce the time it takes to onboard new partners from months to just a few weeks by developing a straightforward, turnkey solution.
9) So is DailyPay just an alternative to direct deposit?
No, it’s a lot more than that. While all transfers are deposited directly into an employee’s account of choice, the added feature of being able to choose when that money comes in is what sets DailyPay apart. Also, employees have to request each transfer, unlike direct deposit, which happens automatically every payday. Employees are not automatically paid every day just because they’ve enrolled.
10) Are there costs to the employees for paycheck advances or to the employer for off-cycle pay?
Employees pay a small, ATM-like fee any time they need to make a transfer. DailyPay charges $1.99 for a next-day transfer and $2.99 for an instant transfer. There are no usage fees, inactivity fees, membership fees, enrollment fees, or any other charges whatsoever. There is also no cost whatsoever to the employer, unless they want to cover the transaction fees for their employees as an added benefit.
11) Can an employee’s bank charge them extra fees for using this, the same way they do for using another bank’s ATM?
Nope, not at all. Any transfers from DailyPay will show up on an employee’s bank statement as a credit, even though they are in essence withdrawals from their own paycheck. There are no additional charges from any outside sources for using this service.
12) Can DailyPay be used outside the USA?
While we are fully compliant in all 50 states, DailyPay is not yet available internationally. However, we have plans on our Product Roadmap for international expansion in the future.