Module 2

The Real Cost of On-Demand Pay

Breaking down the hard and soft costs of implementing and maintaining an on-demand pay solution.


Many companies that want to improve their benefits packages and their employee experience have a very limited budget to work with and aim to see the best results for the least amount of money. One such benefit is on-demand pay. While many on-demand pay vendors may advertise their technology as free or free to the employer, there may still be hidden costs that need to be taken into consideration.

In this module, you will learn about the following:

  • What “free” or “free to the employer” really means
  • The hard and soft costs of implementation, maintenance and support
  • How various on-demand pay models make their money

What “Free” Really Means

We all know that few things in business are truly free, and on-demand pay solutions are no different. Each model has both hard and soft costs that need to be understood, as the details differ from one vendor to another. The best thing you can do is to dig in and educate yourself so that you can make the most informed decision about which cost structure will likely work best for you and your employees.

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

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.

Real Costs of On-Demand Pay Solutions

Questions regarding cost are often considered first and foremost in the decision-making process when implementing new benefits. Let’s explore the possible hard and soft costs associated with on-demand pay providers.

Potential hard costs

For Employees

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

For Employers

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

Potential soft costs

  • HR support costs, including time to address employee questions and complaints
  • Payroll support costs when there are questions about paycheck anomalies
  • IT support costs for technical questions
  • Implementation time from HR, Payroll and IT
  • Ongoing payroll management time requirements
  • Employee communications, enrollment management and onboarding
  • Regulatory and compliance cost implications and risk

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.

How Each Model Makes Money

Another important element to consider when choosing an on-demand pay provider is how the company makes money. Although a particular company may have no hard costs to the employer, there may be many fees to the employee or vice versa. While payday lenders make their money from high-interest rates and fees, on-demand pay providers tend to charge a nominal subscription fee, transaction fee or merchant fee. It’s important to have all the facts when choosing the best fit for you and your business.

This table illustrates how various vendor models are funded and considerations for each:

Key Takeaways

During the process of selecting an on-demand pay vendor, the best thing you can do is get educated on the details about this technology. By looking more closely at the hard and soft costs associated with implementing and maintaining an on-demand pay solution, employers can make a much more informed decision on which vendor will best fit their budget and serve the needs of the company and its employees.

Sample RFP Questions

When considering partnering with an on-demand pay provider, it’s critical to holistically evaluate each solution you’re considering in order to make the most educated selection. Thoroughly assessing the product experience for employees and employers, as well as security, privacy and compliance for each solution will help you choose the best solution for your company.

Questions to consider asking based on the teachings in this module are:

  • As the vendor, how are you paid back?
  • What are the upfront costs associated with implementation?
  • How does the fee structure work and what are the costs to employees?

Receive the Sample On-Demand Pay RFP