How Payday Lenders Masquerade as On-Demand Pay Providers

The results are in: a 2020 poll conducted by Morning Consult and commissioned by the Center for Responsible Lending, a nonprofit aimed at protecting consumers, found that 70% of registered voters approve of limiting interest rates on consumer loans to 36%¹. The poll found that not only does this measure have bipartisan support, but survey respondents also indicated that they favor the IRS more than payday lenders. Ouch!

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5 Reasons to Use DailyPay Instead of Borrowing From Your 401(k)

While taking money out of your 401(k) may seem like an easy option during a time of financial need, the repercussions of that decision could be devastating to your financial future. What may seem like a “quick fix” in the moment can cause ripple effects of damage for years to come. There are many reasons why utilizing a daily pay benefit is a much safer and more sustainable option. A few of the biggest reasons are outlined below:

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2019: The Year of Awakening

2019 was a year of awakening for the #dailypay benefit — a year when three distinct groups awakened to this life-altering benefit and industry. Here is my take on 2019 and my prediction of what’s to come in 2020

Best-in-class employers

Given the labor challenges that several employers face today, including high turnover and modest income growth, several best-in-class companies — including recognizable brands and leading companies in their industries — embraced offering this benefit in 2019. Their executive leaders recognized the need to innovate in order to stay competitive in the labor market, and actively sought out cutting-edge benefits, including #dailypay.

2020 Prediction: The torrid pace of adoption within the Fortune 500 will only increase in 2020. Best in class companies operate best in class. We will see household names making big announcements about leveraging #dailypay as a key part of their employee engagement strategy.

Regulators

As there is more information available about the critical differences in the ways that daily pay offerings are structured, in 2019, regulators realized that there are meaningful distinctions between (i) earned pay that never have to be repaid by the employee and (ii) consumer loans that have to be repaid. Earlier this year, I testified on the floor of the California State Senate in opposition of SB-472, a bill that risked enabling payday lending a backdoor entry into #dailypay. Thankfully, that bill did not pass, protecting consumers from harmful payday lending practices.

In the fall of 2019, we partnered with the Office of Child Support and presented at the Child Support Employer Symposium. It was clear that state child support agencies are concerned with the protection of child support garnishments where on-demand pay is concerned. We were thrilled to be able to create a pay solution that protects the interests of single parents and is compliant with all state garnishment laws.

2020 Prediction: Regulators are smart, savvy, and innovation friendly. They will play a major role in separating the lending industry from the #dailypay industry through enforcement of already existing regulation. My prediction for 2020 is that regulators will rely on existing regulation and guidance to protect consumers from lending practices that have the potential of creeping into the #dailypay industry.

Payroll Companies

In 2019, almost every payroll company announced some type of strategy to participate in this space. The fact that payroll companies are beginning to announce their own solutions corroborates that there is broad market interest for this benefit. Many of these solutions naturally resemble discrete payroll runs and so the question in 2020 is how much employers are willing to do on their own to offer this benefit. Funding, time card approval, answering employee questions — all of these are responsibilities associated with running payroll and so the unanswered question is whether payroll departments are willing to assume these additional responsibilities on a daily basis.

2020 Prediction: Employers will place a huge premium on service levels when it comes to this offering, especially who is servicing the employee. My prediction is that payroll departments across the country will push back – and push back hard – on the idea that they are the ones servicing employees now on a daily basis, as opposed to bi-weekly payday basis.

As with all predictions, the only prediction that I can guarantee is accurate is that we will all be surprised by how 2020 shakes out. I can’t wait to re-visit this post in December 2020 and see how wrong we all were!

Jason

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APA Webinar with Josh Jackson and April Smith Q&A Blog Post #5: Odds & Ends

This is the fifth and final post in our five-part Q&A series addressing your questions from our recent seminar with the APA. These are your remaining questions, which span a range of topics.

1) You list reduction of paper checks as a benefit, but aren’t most organizations using direct deposit now?

82% of employees are currently paid via direct deposit, according to a study by NACHA. That means there are still almost 1 in 5 employees to convert to digital processes. DailyPay provides an incentive for those employees to register for direct deposit in order to use our technology. As an example, one of DailyPay’s partners saw paper check usage decline by 40% in just 8 weeks.

2) We already have most employees on Direct Deposit and do not offer pay advances. Are there still additional cost savings we would experience?

There are a number of benefits our Partners experience after implementing an on-demand pay benefit. A few key stats we have gathered from DailyPay Partners include:

For your business:

  • Reduction in turnover (average of 41%)
  • Partners filled open positions in half the time (52% faster)
  • Reduction in absenteeism (average of 26%)

For your employees:

  • 72% of employees feel more in control of finances
  • 77% feel less financial stress
  • 83% say it helps them pay bills on time and avoid late fees 
  • 79% of employees use DailyPay to track their earnings
  • 62% of employees state that DailyPay has helped them to avoid taking out a payday loan

3) Does any employee who wants to use DailyPay need to be on a timeclock, and will their timecards need to be approved daily?

DailyPay can accommodate both hourly and salaried employees. For hourly workers, we work with employee-reported time data from the TMS.  We do not require the employer to approve hours on a daily basis.

There are two ways we accommodate salaried employees:

  1. If your TMS system is able to convert salaried earnings into an hourly equivalent, we will receive the hourly equivalent income in the Gross Earnings file.
  2. If your TMS system is not able to convert earnings into an hourly equivalent, we receive the one additional field on the User Roster: the Annual Salary. We then estimate the hourly equivalent income ourselves.

4) In the alternate direct deposit method how much does the company have to pre-fund DailyPay to allow this to occur?

In DailyPay’s Alternate Direct Deposit model, our company Partners do not have to prefund anything; DailyPay fronts the advance and assumes the risk.

5) How are the employees hours being verified? Are they just submitting and getting advances blindly, or is a supervisor confirming the time?

The employees are not inputting the hours themselves. Rather, they are fed directly to DailyPay through your company’s time management system. As long as an employee is punching in and out honestly and accurately for shifts and breaks, the hours should be correct. There are also safeguards in place to ensure that mistakes, such as staying clocked in for 24 hours because of a forgotten punch out, are flagged in our system and that employees cannot make transfers based on those errors. There are no instant notifications to alert supervisors when transfers are being made, but they are welcome to sign into the employer dashboard and view that information at any time if they so choose.

6) I perform implementations for ADP, and DailyPay is now being offered to our clients. Is there an implementation checklist for your offerings?

There is no “one size fits all” checklist, but DailyPay has a dedicated implementation team that begins the process by running a full diagnostic of your system’s capabilities. Once that has been determined, DailyPay will work with your team to develop the four files needed to make the service work and begin implementation.

7) Does DailyPay work with staffing/temp agencies?

Yes, we do. We simply sit on top of the agency’s payroll system like we would for any other company. Because it is possible for employees to have multiple pay rates within DailyPay, it is easier for them to have the pay rates for various roles they may be working through the agency saved within the system.

8) Can DailyPay be used for issuing surprise bonus checks that are currently issued manually?

Depending on the type of payment, you could send these payments through the DailyPay platform via an off-cycle payment.

9) How does DailyPay work with on-site payroll deductions, such as employee meals or merchandise purchases?

DailyPay creates a personalized profile for every user that accounts for differences in their net pay profile, which can be built to include these elective deductions. The DailyPay advance rate is dynamic, meaning that as the pay profile of an employee changes, the advance rate will change to accurately reflect the net pay owed to the employee. This enables the user to enjoy continuous, full access to the product, even if they have a non-standard pay profile (e.g., garnishments, deductions, benefits in arrears). The dynamic advance rate accounts for these unique employee considerations by adjusting the amount made available to the employee in the Available Balance so that amount  will be net of these adjustments. The dynamic advance rate enables the employer to offer the benefit on a universal basis and not restrict access to only employees with certain pay profiles. DailyPay is the only provider who offers up to 100% of net income to salaried employees.

10) When using the deduction model, can the employer limit the amount the employees are able to receive?

Under both the deductions model and the company-funded model, the advance rate does not dynamically adjust to account for the impact of changing benefits, relying instead on a static 50% advance rate. Thus, in the event of a change to an employee benefit that brings an employee below 50% of his/her net pay, the system lacks the flexibility to account for the change. In the deductions model, (1) you could find yourself in the position of owing the vendor money or (2) in the best case, manual work will be required of your payroll team to avoid owing money to the vendor. In the company-funded model, you will also be at risk of over-extending your funding and overpaying the employee.

In the DailyPay model, our system creates a personalized profile for every user of the product which accounts for differences in their net pay profile. This profile informs what we call the advance rate (or net-to-gross pay ratio). DailyPay is unique in that we are the only vendor that creates this personalized profile for each employee. The DailyPay advance rate is dynamic, meaning that as the pay profile of an employee changes, the advance rate will change to accurately reflect the net pay owed to the employee. This enables the user to enjoy continuous, full access to the product, even if they have a non-standard pay profile (e.g. garnishments, benefits in arrears). The dynamic advance rate accounts for these unique employee particulars by adjusting the amount made available to the employee in the Available Balance such that the amount made available to the employee will be net of these adjustments. The dynamic advance rate enables the employer to offer the benefit on a universal basis and not restrict access to only employees with certain pay profiles.

What Ceridian’s New On-Demand Pay Means For the Industry

Ceridian announced yesterday that they will offer a real-time pay algorithm, called Dayforce On-Demand Pay, starting early next year.

 

With this news, they are elevating the daily pay benefits space and validating the exciting changes occurring in the payroll industry. This is a clear indicator in the market of the rapid growth of the daily pay benefits category.

 

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4 Ways to Monitor and Improve Your Company’s Bottom Line

With quarter four among us, many companies are paying close attention to their bottom lines. Often, the burden of the fourth-quarter push is directed at sales departments. However, it’s wise to take a look at business operations as a way to improve your bottom line all year-round. A “true” bottom line is the outcome of all aspects of your business.

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