What is Earned Wage Access?

Earned wage access (EWA) goes by many names — early wage access, on-demand pay, daily pay benefit — but essentially they all refer to the ability for an employee to access the money they’ve earned before their scheduled payday.

The earned wage access industry is relatively new. Two years ago, very few companies had even heard of it. Today, it’s not a question of whether a company will adopt the benefit but rather when. More employers are considering earned wage access as a benefit for employees, many of whom want greater flexibility in how they are paid. About 25% of payroll professionals said in recent surveys that on-demand pay is a must-have solution for improving the employee experience, which is a top priority in 2020. 

But this isn’t just a trend for the gig economy. Instant-wage access could spread across the income spectrum in the post-pandemic economy.
Because the current lay-offs impact workers with a wide range of wages or salaries, we may see this benefit offered to more employees, including even those with higher incomes.  “The EWA use case is shifting from an individual need to a household need, as more white-collar workers are furloughed or have their salaries cut,” says Jeanniey Walden, DailyPay’s chief innovation and marketing officer.

There are plenty of benefits for both employers and employees and, with the right vendor, there are no costs and no risk involved to companies who choose to offer it.

Benefits to Employers

Let’s start with employers, especially since at the time of this writing, businesses are once again starting to reopen post-COVID. Many employers are looking to offer earned wage access as a cost-containment, voluntary benefit because it’s available from select third-party vendors at no cost. 

According to a PwC employee financial wellness survey, one in four employees have been distracted at work by personal finance issues within the past year. Of those who responded that they were distracted, nearly half spent three or more working hours thinking about or trying to handle or resolve the problem. A Federal Reserve study found that over 40% of adults would not be able to cover an emergency expense of $400 if one arose. 

Financial stress doesn’t just cause a decrease in productivity — it could lead to lower levels of pay satisfaction from employees, increased absenteeism, and increased turnover rates.

Here are some of the benefits employers have experienced as a result of offering a daily pay benefit:

  • 1.9x increased in applicants to a job that offers on on-demand pay benefit
  • 50%, on average, reduction in turnover
  • 49% average increase in employee productivity
  • Ability to fill open positions in more than half the time (52% faster)
  • 26% reduction in absenteeism

In addition, an earned wage access solution can be implemented at no cost to employers and without any changes to current payroll processes, including the timing of funds or withholding of taxes. Offering an on-demand pay benefit solution to employees also increases employee engagement, with 73% of employees stating that their opinion of their employer had improved as a result. 

Benefits to Employees

The benefits of having access to their earned wages are equally impressive for employees. At a time when 78% of all American workers are living paycheck to paycheck, the ability for an employee to access their earned income when they need it, before payday, is essential.

With access to their earned income, employees can close the gap between paychecks, pay bills on time and avoid overdraft fees, late fees and high-interest predatory payday loans. They can also meet unexpected expenses, like emergency medical care and car repairs, reducing financial stress and increasing financial health.

With access to their earned wages, employees can save up to $1,205 per year, on average, in overdraft fees, late fees and fees and interest associated with payday loans. In addition: 

  • 85% of users say access to their earned wages makes them more able to budget and pay large monthly bills like rent, utilities, car payment, etc. 
  • 78% of users say access to their earned wages helps them pay their bills on time and avoid late or overdraft fees
  • 74% of users say access to their earned wages has helped reduce their financial stress
  • 70% of users say access to their earned wages has helped them avoid taking out a payday loan
  • 59% of users say access to their earned wages motivates them to go to work
  • 51% of users say access to their earned wages has helped improve their financial health
  • 50% of users say access to their earned wages has helped  them be more disciplined about spending
  • 46% of users say access to their earned wages has helped them save more

This latest research report, On-Demand Earned Wage Access: U.S. Vendor Comparison, gathered data about key players in the on-demand pay industry, including Acrisure, Blue Yonder, Branch, DailyPay, Dave, Delaget, Earnin, Evolve Bank and Trust, FlexWage, Instant Financial, Kronos, Mastercard, PayActiv, The Clearing House (TCH) and Visa. 

With benefits like these, earned wage access is proving to be a real game-changer for both employers and their employees alike.

What Does the Best Earned Wage Access Provider Look Like? 

Any business that is considering offering a daily pay benefit, needs to do their due diligence when it comes to choosing an earned wage access provider who adheres to rigorous compliance standards

Getting access to earned wages has taken on new meaning during the COVID-19 pandemic, with millions of people scrambling to make ends meet. 

In May 2020, DailyPay enlisted Mercator Advisory Group to conduct a survey of 1,000 U.S. low-income (income less than $75,000/year) salaried workers to determine the value and propensity of this demographic to participate in an on-demand pay (also called earned wage access) solution.

While much has been done to study hourly workers and their vulnerability to financial stress, far less has been done to study salaried workers and how they react to the challenges imposed by unforeseen financial hardships in between paychecks.

This study revealed that, by introducing an on-demand pay benefit, employers can help their workforce reduce the stress associated with paying monthly bills. Most notable and relevant today, nearly half (46%) of those polled are stressed by having to pay monthly medical bills. Allowing workers access to their earned income provides them with financial flexibility, and empowerment over their pay reduces their stress and increases attendance and productivity at work, all at no expense to the employer.

Pay Different: Reimagining the Payroll Cycle In Post-COVID Workplace

Recently, DailyPay enlisted Mercator Advisory Group to conduct a survey of 1,000 U.S. low-income (income less than $75,000/year) salaried workers to determine the value and propensity of this demographic to participate in an on-demand pay (also called earned wage access) solution.

While much has been done to study hourly workers and their vulnerability to financial stress, far less has been done to study salaried workers and how they react to the challenges imposed by unforeseen financial hardships in between paychecks.

This study revealed that, by introducing an on-demand pay benefit, employers can help their workforce reduce the stress associated with paying monthly bills. Most notable and relevant today, nearly half (46%) of those polled are stressed by having to pay monthly medical bills. Allowing workers access to their earned income provides them with financial flexibility, and empowerment over their pay reduces their stress and increases attendance and productivity at work, at no expense to the employer.

Access to their earnings, before payday, helps employees to avoid more financially adverse options when they need access to cash, including using credit cards, drawing down savings, incurring overdraft fees and resorting to payday loans — all which can lead to employees incurring high-interest rates, fees and penalties.

Key findings of the survey include:

  • Nearly half (48%) of respondents reported having a shortfall between payroll cycles, at least sometimes
  • 46% surveyed have difficulty paying medical expenses, at least sometimes
  • About seven in 10 reached out to external sources for funding that often incur high fees; among these individuals, many are frustrated with high-interest rates (51%) and fees (26%) associated with borrowing this money
  • 23% incurred an unexpected expense they could not pay
  • Three in 10 report some difficulty in keeping up with monthly expenses

When presented with the option for an on-demand pay benefit, also called earned wage access, respondents saw the value in it and its ability to stop the cycle of debt. In fact, more than half noted they would also use the DailyPay platform to save money and become more fiscally responsible.

  • 34% responded that they would either “definitely use” or “probably use” DailyPay if it were offered to them.
  • When asked about services that could be replaced by DailyPay, respondents indicated the same potentially financially draining options that they reported using to obtain extra money to pay a bill, including check-cashing services, payday lenders and credit cards.
  • 52% noted they would use the “Save” feature that is unique to the DailyPay platform. The “Save” feature allows Daily Pay customers to put away money for future bills and expenses before they even get paid.

Data collected in this survey reveals the critical need for on-demand access to earned pay that Americans face in typical economic times. Imagine how much more access to earned income has meant to workers during the COVD-19 pandemic.

You can review the full study here, DailyPay and the Mercator Advisory Group discussed the results of this survey during a joint webinar. Watch the webinar on-demand here.

Expect Employers to Accelerate New Pay Practices as the Economy Recovers

Since the COVID-19 health crisis began, employers have needed to speed up use of contactless on-demand pay programs (sometimes called earned wage access), according to employee payment leaders speaking during a recent podcast of The Source, by DailyPay.

The pandemic and the resulting economic shutdown is “one of those events where those in HR, Payroll and Finance have had to think through sets of challenges that they never thought through before in their professional careers,” said DailyPay CEO, Jason Lee. Employers can no longer be “looking for a five-year plan for transformation, we are looking at now,” he said.

This has meant the adoption of new pay practices at an accelerated rate.

Even before the coronavirus struck, companies already had started to address the changing pay needs of a tech-savvy generation of younger workers that “actually values pay choice and pay flexibility sometimes more than salary,” said ADP, LLC, Vice President, Future of Pay Jeff Gies. 

“This has driven the need for providing pay choices to workers,” Gies said.

The challenge for employers is closing the gap between the technological tools available on a personal level to deliver experiences instantly, such as ordering dog-walking services via a mobile phone application, and the applications used to pay workers, which have lagged behind, Lee said.

While these other applications are useful and significant, one would argue that “the experience one has with pay is much more important,” Lee said.

Gies echoed the disconnect by noting that one retail chain recently reacted to the customer desire during this health crisis for a contactless pay option, which was implemented, while their workers were still getting paper pay statements, which could potentially carry virus and disease.

Additionally, employers need to recognize there remains a large segment of workers that, prior to the pandemic, had not adopted digital payment methods. These workers are having to, overnight, modify their behavior, and this is uncomfortable for them. Gies asked: “How can employers help people make that transition?”

Both DailyPay and ADP have safe, secure programs that “empower, enable and put the employee at the center,” Lee said. As employers make the transition to digital and on-demand pay quickly, they can be assured that both providers are compliant and are the “gold standard for how we protect that data and keep it secure, and we have redundant systems,” Gies said.

DailyPay, through its pay experience platform, PayEx™ seeks to “leverage technology to be sure that folks are compliant,” while staying behind the scenes, Lee said.

A key issue frequently overlooked before the pandemic struck, but now is a need-to-have for employers, is providing a “core foundation of financial wellness,” Gies said.

As employers scramble to rehire workers and those workers look to climb out of a period of financial hardship, it’s important for employers to provide “simple, real-life, easy ways to put more money back in the pocket” of workers that are living paycheck-to-paycheck, Lee said and “ADP has developed the right kind of programs to fill this need for their clients.”

DailyPay users have access to savings tools in the app, so when they look to access pay, workers can think “I’m getting my pay, and as I’m getting my pay, I’m thinking about my savings,” Lee said. “It has to be easy and native  . . . and in a way it has to be connected to your pay.”

Go to thesource-dailypay.com to hear or watch the entire podcast, and to access previous podcasts that discuss on-demand pay, also known in the industry as early wage access. 

For additional resources on this topic, see:

What employers and businesses need to know about the recently passed $2 trillion coronavirus stimulus bill

Matthew Kopko, VP of Public Policy at DailyPay summarizes the CARES Act and the impacts it will have on your business and its employees. This on-demand webinar will provide:

  1. Easily understand the specifics about the largest financial relief package ever passed in history
  2. Determine how both small and large employers are able to get loans, and which loans can be forgiven
  3. Be aware of additional provisions on tax credits and paid leave requirements including payroll tax deferral
  4. Take away a solid understanding of how the CARES Act will impact your employees or recently let-go employees directly

NOTE: None of the content on this page or in this video is intended to be legal or tax advice, and should not be relied upon as such. You should consult with your own attorneys, accountants and advisors.

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We’ve summarized some of the video contents below:

Coronavirus Aid, Relief, and Economic Security Act

  • The bill itself is technically called the Coronavirus Aid Relief and Economic Security Act or the CARES Act. It’s also known as HR 748.
  • It’s also called Phase 3 of the coronavirus response legislation (phases 1 and 2 covered immediate government disaster relief and paid leave restrictions)

Coronavirus Aid, Relief, and Economic Security Act: Overview 

  • But first let’s go over the CARES Act. This is the overview of the general sections of the CARES act. Particularly, we’ll be focusing in this segment on Titles I, II, and IV because they include the provisions that are most relevant to employers and contain the marquee programs relevant to the private markets. There are additional sections of the act, for example, Title III, which includes a lot of information on improvements to the health care system in the fight against the coronavirus 
  • And also Title V, which has a coronavirus relief fund, including grants to hospitals, airlines and other types of programs. There are other miscellaneous provisions as well but, again, we’ll be focusing on the loan and other programs that are relevant to employers and workers. 
  • So first let’s get into Title I.

Title I: Keeping American Workers Paid & Employed Act: Overview 

  • Is commonly called the small business loan section. It’s also called the Keeping American Workers Paid and Employed Act 
  • This is the marquee $350 billion loan program and, in general, the goal here is to provide loans to small companies so that they can keep operating and keep their workers on payroll during this crisis. 
  • And to effectuate that, not only is it a favorable government loan, but it is a forgivable loan to the extent you keep your employees hired, or rehire them by June 30th, and use loan proceeds to pay eligible expenses like payroll, rent and utilities. 
  • Another interesting feature of this program is the fact that it’s not issued directly by the government, but instead through a partnership with the private financial markets. So, instead of applying to the Small Business Administration, you would apply to one of many major local banks to be able to get access to this loan program.

Title I: Who is Eligible

  • First let’s talk about who is eligible. Again, this is called the small business loan program, so generally small businesses are eligible. This is defined as businesses that generally employ 500 or fewer employees.
  • One major exception, which impacts a particularly hard-hit segment of the economy during this crisis, are hotels and restaurants and similar businesses who classify themselves under NAICS Code 72. For them, even if they have more than 500 employees, they will still be eligible to the extent that they have no more than 500 employees in any single location.

Title I: Loan Size

  • The general rule of thumb under the small business loan program in Title 1 is that you’re entitled to a loan of approximately 2.5 times your average prior monthly payroll capped, in any event, at $10 million.
  • For most businesses, it’s defined as the average monthly payroll for the 12 months prior to when the loan is made. There are exceptions for seasonal employees or recently created businesses that have different time periods for measuring prior average monthly payroll.

Title I: Borrower Requirements

  • Borrowers requirements are very minimal and there is explicit increased eligibility in the Act itself but borrowers will need to be able to certify in good faith that the loan is needed because of the coronavirus pandemic; that the funds will be used for eligible loan purposes for payroll, mortgages, lease rental payments and utilities; that they do not have any double-dipping applications pending before the government; or that they are not receiving any duplicate payments. 

Title I: Eligible Use of Proceeds

  • If you’re successful in getting a loan, there are only certain types of things that the loan can be used to pay. The most critical item is, of course, payroll costs. 
  • A couple things to note about the payroll cost requirements are that they include all forms of employee compensation, not just wages. So, that would include salaries, commissions, severance, leave or other types of compensation arrangements. But for any individual employee they are capped at $100,000 per year, on a prorated basis. So, that means to the extent you have employees earning more than $100,000 in a given year, you are able to use the proceeds to pay their compensation up to $100,000 and, after that, they would not be an eligible expense with the loan proceeds. 
  • Additionally eligible use of proceeds include certain group benefits like healthcare, interest on any mortgages related to the business, rent payments for your office space or other facilities, utilities, and, also important, interest on any existing debt obligations. 

Title I: Loan Forgiveness/Deferral

  • Most critical to this loan program is the concept of loan forgiveness. In essence, if you are able to manage this loan process effectively, either a large portion or potentially all of the loan you get will be able to be forgiven by the federal government and you will have no liability to repay the loan.
  • Loan forgiveness is provided under the Title I program for eligible costs of payroll, interest on mortgages, rent and utility payments. Again, the restrictions on $100,000 per employee apply, but to the extent you are paying payroll, interest, rent or utilities, and you can document those payments, you are able to get forgiveness to the extent of those payments and potentially get forgiveness of the entire loan. 
  • If you fire people during this process and your average FTEs shrinks during the period you have the loan and afterward, the amount of forgiveness will be reduced relatively to the number of employees you have currently, as opposed to the number of employees that you had right before the pandemic hit. Similarly, to the extent you cut wages of your employees by more than 25%, you also have reduced forgiveness benefit. 
  • The program also includes loan deferral. Applicants are presumed to be entitled to at least a six-month deferral of all payments, fees, principal and interest. That can be expanded up to 12 months, but it’s going to be at the discretion of the Small Business Administration and your lender.

Title I: Documentation for Loan Forgiveness

  • When it comes time to seek the actual loan forgiveness, be sure to keep good records, because your lender and the government will require documentation showing how many employees you have and pay stubs and pay rates to ensure that the payroll payments qualified under the restrictions under the loan program. So, you’ll be able to keep your IRS pay stubs and other type of critical payroll documentation to show payroll payments.
  • Additionally, to the extent there are other qualified expenses, like rent, mortgages or utility payments, you will have to document that as well. On top of all of this, a business executive will have to certify that the documentation is true and correct and not fraudulent, and that the loan was actually used to make eligible expenses such that forgiveness is legitimate.
  • As always, the government provides a provision that allows the government to request any additional information, and this case is no separate. 

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Title II: Relief for Workers Affected by Coronavirus Act

  • Title II is the section that covers individual benefits and business tax relief. As you’ll see in Subsection A and B, these are some of the most well-known programs that have been reported by the press. They include the $1200 and $2400 checks given to individuals and also the unemployment insurance top off.
  • Through the coronavirus stimulus bill, the federal government is expanding unemployment insurance by adding a federal increase of $600 per week on top of state benefits. 
  • Additionally, since most independent contractors and gig workers are typically ineligible for unemployment assistance, this bill allows such contractors to be able to be eligible for assistance through the unemployment insurance provisions of this bill. 
  • In Subsection B, large numbers of Americans will be able to get $1200 checks, per individual, and $500 checks, per child, as critical spending money to get them through this crisis. 
  • To the extent you earn $75,000 or less, you will get the full check and the check will be phased out between $75,000 to $99,000, such that anyone earning more than $100,000 will not be entitled to get any of these payments. 
  • There are also other tax provisions that have been modified through this act that are beneficial to the individual, including educational assistance provisions and relaxation of charitable contribution restrictions. 

Title II, Subsection C: Payroll Tax Credit

  • To the extent you’re impacted by the coronavirus pandemic, you’ll be able to get a credit of the amount of 50% after the first $10,000 per employee for employees that are impacted by the crisis. If you have less than 100 employees, all employees will be eligible, but if you have more than 100 employees, only employees that are being paid but are unable to work, will be eligible for this type of credit. 
  • To ensure against double dipping to the extent you take advantage of the forgivable Title I loan program, you will not be eligible for these tax credits. 

Title II, Subsection C: Payroll Tax Deferral 

  • The bill also includes a payroll tax deferral for the tax year 2020. To the extent you’re an employer and paying payroll taxes, you will have no tax liability for payroll taxes in the year 2020, and they will instead be paid in 2021 and 2022. That means that 50% of the payroll tax obligation, instead of being due for the tax year 2020, will be due in 2021, and the other 50% will be due in 2022. 

Title II, Subsection C: Other Provisions

  • There are also other tax provisions that have been modified under this Title II of the stimulus bill and they include suspension of loss limitations for the Tax Cut and Jobs Act, which will impact your net operating loss provisions and mechanisms, and also a change to the corporate AMT. 
  • There are also other technical changes, but they are not the subject of this summary 

Title IV Coronavirus Economic Stabilization Act of 2020

  • In addition to the $350 billion small business loan program, there is a $500 billion loan program intended for larger employers. About $50 billion of that loan program is specifically earmarked for airlines, cargo carriers and national security-sensitive companies, or more commonly thought of as the Boeing exemption. 
  • The other $450 billion of the loan program is available generally to larger businesses.
  • This is administered by the Treasury Secretary in coordination with the Federal Reserve and there is no loan forgiveness. 
  • Eligible borrowers under the large loan facility will be typically U.S.-domiciled companies with employees that are principally based in the United States.
  • The loan term will be not more than five years and there are very favorable interest rates at which you’ll be able to get the loan. For the special industry loans, that is national security and airlines, the government will also require warrants to be issued in the government’s name.

Title IV: Restrictions for Borrowers

  • There are lots of restrictions that come along with taking advantage of this loan program. 
  • Firstly, you’re not able to issue dividends or stock buybacks or other capital distributions for the duration of the loan and for a full year after.
  • Secondly, you’re going to be obligated to maintain at least 90% of your existing work base as, again, the main purpose of this entire program is to ensure that workers are not fired during this crisis. 
  • You’re also not allowed to transfer proceeds of the loan to any offshore affiliate, and there are limitations on compensation for high-paid employees and very high-paid employees. 
  • There are even further restrictions to the extent you’re taking advantage of the very low interest rate loans. In addition to having to maintain 90% of your workforce you’ll have to agree to commit no outsourcing, not just for the term of the loan but for two years after, and then, importantly, you’re not allowed to abrogate any labor agreements and to the extent any labor dispute or unionization efforts spring up, you will have to maintain neutral, not just for the period of the loan but again for two years thereafter. 

Title IV: Additional Airline & Banking Provisions

  • There are special provisions that we won’t cover in detail that cover specifically the airlines and banks. 
  • Airlines, for example, are required to maintain air service in smaller communities and healthcare supply chains. 
  • There are a variety of changes to bank rules that allow for flexibility during this crisis. 

Title IV: Consumer Forbearance

  • Title IV also includes very important and valuable consumer forbearance rules. 
  • For customers of banks who receive loan modifications or forbearance, they will not get adverse credit reporting.
  • There is also a foreclosure moratorium and forbearance on individual mortgages, which is not forgiveness of mortgage payments, but it is forbearance, and there are more restrictive and smaller forbearance for multifamily properties. 
  • There is a 120-day moratorium on evictions, so that people who are behind on rent payments are not going to be kicked out of their apartments during this crisis. 

Phase II Bill: Coronavirus Paid Leave Requirements

  • We’d also like to touch briefly on the paid leave requirements passed under the previous phase of the legislation also called Phase II.
  • This was technically called the Families First Coronavirus Response Act and was passed several weeks ago and is becoming effective, April 1, 2020. 
  • It generally has two paid leave requirements: 1) Emergency paid sick leave and 2) Emergency Family and Medical Leave Act expansion. 
  • We’ll also be covering in this section one example of state laws – New York, though state reactions to the crisis vary and obligations for leave vary by state. 

Coronavirus Paid Leave Requirements: Emergency Paid Sick Leave

  • Emergency paid sick leave covers employers with fewer than 500 employees, who have employees who are not able to work, and who are meeting one of the six technical coronavirus-related criteria, for example, if you have to take care of your children because school closings or childcare closings have occurred.
  • The paid sick leave is limited to 80 hours of paid sick leave per full-time employee and for part-timers based on recent work. So 80 hours or the equivalent of two weeks. 
  • For those directly quarantined by COVID-19, their regular required rate of up to $511 per day will have to be covered. 
  • For other people in different categories, a smaller amount, up to $200 per day, will have to be covered. And although it is controversial, healthcare employers are generally exempted from this requirement due to the work requirements in healthcare facilities at this time.

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Coronavirus Paid Leave Requirements: Family Medical Leave Act

  • Family Medical Leave Act Expansion generally covers employers with fewer than 500 employees and for those employees who are not able to work and who now qualify for the Family Medical Leave Act, having to care for their children because they’re out of school. 
  • Employees can be eligible for up to 10 weeks of Family Medical Leave following the first 10-day leave period provided for in the previous slide. 
  • The required amount to be paid under this part of the bill is generally 2/3 of the regular pay rate up to $200 a day and $10,000 in the aggregate. 
  • And again, healthcare employers are generally exempted from this requirement. 

Coronavirus Paid Sick Leave Requirements in New York 

  • New York also passed its own leave modification requirements in the middle of March. 
  • It covers almost all New York employers, but those who are subject to a mandatory or precautionary order of quarantine who cannot work. 
  • New York employers with more than 99 employees must pay 14 days of paid leave to covered workers. 
  • Smaller employers have to cover 5 days of paid leave at a regular pay rate.

Key Takeaways 

  • Small and some not so small businesses can now get multi-million dollar loans from the federal government and potentially some, or all, of those loans can be forgiven. 
  • Large employers are also able to get loans, but they must maintain their workforce and there is no forgiveness. 
  • There are a variety of tax credits as well and a payroll tax deferral for employers. 
  • This bill also includes the well-known stimulus check provisions that provide direct checks to individuals and substantial grant programs for hospital, airlines and other industries. 

About DailyPay

  • DailyPay is a major way to preserve employee financial health and wellness in the long and short term. 
  • By providing our on-demand pay benefit, partners across the country have been supporting their employee financial wellness and increasing retention of their employees. 
  • Employers across the economy love being able to provide their employees the benefit to be paid daily instead of once or twice a month when it’s convenient for their employer.

If you’d like to be able to offer DailyPay to your employees, and take advantage of all the fee waivers and other benefits we are offering to workers during this crisis, please reach out to our team. We’d love to work with you and we’d love to bring you and your employees into the DailyPayNation. Thank you very much.

COVID-19 Notice: DailyPay has waived all next-day transfer fees so that employees can access their earned and unpaid earnings when they need it, until further notice. We are committed to getting your company up and running as quickly as you’re willing to move, so reach out to our team at joinus@dailypay.com today.

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DailyPay on Workforce Activity Impact During COVID-19 Crisis

by Alexey Nefedov, PhD, Lead Data Scientist, DailyPay 

UPDATE April 27, 2020

Here’s the latest update on the latest DailyPay Workforce Index statistics: We are seeing a decline in the number of working employees for Call Centers and HospitalsFor QSR, we are seeing signs of a slight increase in the number of working employees.For Supermarkets, numbers for this week look pretty similar to the previous week.On April 22, 11% of all advances that indicated a specified reason were related to COVID-19.

We’d also like to report results from a recent DailyPay survey that indicated that 16% of all respondents applied to their current jobs because they offer DailyPay. Over half of those respondents work in the on-demand space for companies like BiteSquad, EatStreet, Waitr and G4S with the remainder primarily working in health care or home care.

UPDATE April 16, 2020

Here’s the latest update on the latest DailyPay Workforce Index statistics:This week, three industries — Call Centers, Hospitals and Supermarkets — continued to show a decline in the number of working employees.
On April 15, 13% of all advances that indicated a specified reason were still related to COVID-19 crisis.

UPDATE April 6, 2020

We want to provide you with an update on the latest DailyPay Workforce Index statistics: During the past week (Mar 29 – Apr 4), all four industries — Call Centers, Hospitals, QSR and Supermarkets — continued to show declining numbers of working employees.
Call centers showed the strongest, double-digit decline. They were followed by Hospitals, Supermarkets and QSR, which showed weaker, single-digit declining trends.
On April 3, 13% of all advances that indicated a specified reason were related to COVID-19 crisis.

All four industries are showing declines in working employees, due to reasons likely to be caused by direct and indirect impact of coronavirus (layoffs, restructuring, quarantine, sickness and anxiety). While it seems to be counterintuitive that the number of working healthcare employees is declining, we are speculating that many healthcare workers who are not actively engaged in the treatment of COVID-19 patients are asked to stay at home.

Every employer in the United States is taking drastic action when it comes to safeguarding the health and well-being of their employees and their families as we work through the COVID-19 pandemic. We see that this is starting to have a dramatic impact on millions of people in the workforce, especially the hourly worker. I have picked DailyPay partners from four industries — Hospitals, Call Centers, Supermarkets and QSR — as a starting point to determine if there are changes in the hours worked by employees, the number of employees working, and the reasons why these employees are accessing their earned income before their company’s scheduled payday. I want to share some insights with you so you can get a better understanding of the impact this is having on all of us.

Looking at these four industries and DailyPay usage reasons, we are starting to see various changes that differ greatly by industry. We’ve summarized our observations below (fully anonymized), as well as in a report of more detailed industry trends. We expect to refresh this data periodically.

  • This week, all four industries — Call Centers, Hospitals, QSR and Supermarkets — showed double digit decline in the number of working employees in comparison with the previous week
  • Additionally, QSR and Supermarkets continued to show decreasing average hours worked by employees
  • On March 26, 16% of all made advances with specified reason were related to COVID-19 crisis.

To support the ability for all working Americans to have access to funds they need, when they need it, on March 17th, DailyPay announced that we would waive early access fees. We encourage all employers to take actions like these to enable employees to have access to their earned income as it is needed. After all, the shelves at the grocery stores don’t wait for payday.

To help our partners and all employers, we’re hosting a webinar titled, “Supporting Your Workforce’s Financial Security Through the COVID-19 Crisis” on Tuesday, March 24th. We’re in active discussions with the APA and HR associations regarding ways to support all employers and employees through this. We are all in this together. Let’s do something positive for everyone.

Stay safe and healthy. Thank you — Alexey

nefedov

          Alexey Nefedov

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Earned Wage Access: Key Compliance Considerations

Earned wage access is certainly gaining momentum in the workplace. It’s good for employees who may need to access their earnings prior to payday for an emergency or to pay a bill on time. And it’s good for employers because it’s been proven to reduce turnover by up to 72% and it helps to increase recruitment, engagement and retention. 

What is Earned Wage Access? Earned wage access (EWA) means giving access to wages earned—in this case, before they would typically be paid out on payday. it is a way to remove the gap between the time an employee earns his or her money and the time he or she can access it.  But all earned pay access providers are not all the same when it comes to compliance, a key concern of payroll teams. In fact, quite a few are wolves in sheep’s clothing — with practices that are similar to payday lenders

If you’re considering offering a daily pay benefit, you need to do your due diligence when it comes to choosing an earned wage access provider who adheres to rigorous compliance standards. Here are a few of the things you need to look for:

Learn More About Compliant Earned Wage Access

Does the earned pay access provider debit employee accounts to recoup any early pay transfers in any state?

Some earned pay access providers debit the employee’s bank account to be paid back. This practice has high regulatory and reputational risk. Recent regulatory inquiries in New York, Connecticut, Illinois, Maryland, New Jersey, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota and Texas indicate that regulators view debiting an employee’s account as a primary indicator that the transaction is a loan. Companies should be very careful not to include debiting as a means of payback for the vendor.

Does the earned pay access provider engage in pay discounting?

If the provider deducts the full amount of any early pay transfers from the employee’s paycheck, the provider could be in violation of the laws in 13 states where pay discounting is illegal. If you are not in one of those states, you may still wish to check with your management team to ensure there are no future plans to expand into those states. Your safest bet? Choose a vendor who is 100% compliant with pay and hour laws in all 50 states in one consistent structure.

Will the employee’s pay stub reflect 100% of pay earned during the pay period?

When rolling out a daily pay benefit, it’s critical that your company chooses a provider that allows you to continue to fulfill your obligation to report properly all of each employee’s pay.

Having a record (the pay stub) of an employee’s full net pay being remitted is a critical compliance requirement and an affirmative defense for your company if litigation arises for any reason concerning an employee’s pay. Without such a record, you will be at risk of being unable to prove that you remitted full pay to the employee in a court of law.

The Fair Labor Standards Act requires that employers keep accurate records of employees’ pay and hours worked. Although certain states may not require employer-issued pay stubs, employees have a right to request their payroll records at any time.

Printed pay stubs are mandatory in the following states: Arizona, Colorado, Connecticut, Hawaii, Iowa, Maine, Minnesota, New Mexico, North Carolina, Texas and Vermont. Employers may be able to supply electronic pay stubs as long as:

  • Employees can electronically access their pay stubs 
  • Employees have a secure and unique login
  • Employees can print their pay stubs 

Could there ever be an accusation of pay theft?

In order for an employer to avoid an accusation of pay theft, the pay stub must be accurate. Pay theft litigation can arise in a number of situations, including non-payment of overtime, not giving employees their last paycheck after they leave a job, and not paying for all the hours worked.

Here are some examples involving pay theft litigation:

  • Chipotle (2016): 10,000 employees brought a class-action lawsuit alleging they were told to work hours “off the clock.” Nearly 3,000 workers were removed from the suit since they had signed class-action waivers upon employment, but the litigation is still ongoing for the other employees.
  • Staples (2010): settled a class-action lawsuit “related to allegations that the company had not paid its assistant store managers overtime to which they were entitled.”
  • Walmart (2008, 2012, 2014-2015, 2016): Walmart has had to pay several pay theft penalties over the years, including settling $352M in 63 pay violation lawsuits in 2008, $5M in back pay in 2012, $188M in 2014-15 for Walmart and Sam’s Club employees in PA, and $54M for failing to pay a certified class of truckers for time spent on work-related, on-duty tasks.

Some states have additional requirements to prevent pay theft. For example:

  • Under the New York Wage Theft Prevention Act (WTPA) and the Hospitality Wage Order, pay stubs must contain the following information: hours the employee worked – both regular and overtime, rates of pay, any allowances taken against pay (for example, tip credit, meal allowance, etc.), dates of work covered by the payment of income, name of employee, name of employer, address and phone number of employer, gross pay, deductions and net pay.
  • It is also imperative that employers keep copies of each employee’s pay stub for at least six years. The pay stub copy can be paper or electronic, but it must be compliant and accessible. Employers assume their payroll companies have and maintain these records, but we often find that the payroll company does not maintain the copies. 
  • Minnesota enacted changes to its Wage Theft Law, effective on July 1, 2019, that affect earnings statements. Earnings statements provided at the end of each pay period must include all previously required information, plus:
    • The basis of pay, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission or other method and the specific application of any additional rates
    • Allowances for meals or lodging
    • The address and phone number of the employer

As you can see, compliance is complicated, and there are plenty of hornets nests to avoid if you’re considering offering a daily pay benefit. Hopefully, the questions in this article provide a strong foundation for discussion with potential earned wage access providers to ensure that, when it comes to compliance, they’re dotting all their i’s and crossing all their t’s. 

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Netspend and Dailypay Boost Financial Security Through Direct Access to Earned INCOME

According to the Federal Reserve, 40% of Americans cannot afford an unplanned $400 expense.

 

Let that sink in.

 

Expense volatility is an extremely real concern for consumers across incomes and occupations, and it causes financial instability that leads to lack of savings, late fees and, in many cases, debt. Today, we’re excited to share the news that we have joined forces with DailyPay to help tackle financial insecurity so that people around the country can take better control over their hard-earned income. Continue reading “Netspend and Dailypay Boost Financial Security Through Direct Access to Earned INCOME”