Why more employers are embracing same-day pay for hourly workers

Whenever I ask my clients if they've considered paying their employees within 24 hours after the work is performed, I always get a dubious look.

But this attitude is changing.

That’s why many Cook County employers — particularly those in service industries with hourly workers — are embracing “earned wage access” (also known as “same-day pay” or “on-demand pay”) as their employees struggle to keep up with their expenses and their businesses struggle to meet the challenges of finding and retaining those employees in this tight labor market.

Earned wage access means paying an employee on or near the date they did the work instead of waiting for the end of the typical one- or two-week pay period. There are companies that provide this service and, depending on the plan, paying those employees on the same day can be done without incurring any additional costs. Most importantly, offering this benefit doesn’t have to impact your company’s cash flow.

There are many benefits for your staff as well, particularly when some studies have found as many as 62% of American workers are living paycheck to paycheck. Many workers who find themselves in this situation often go to payday loan services that charge interest rates and other fees. Paying them right away helps them avoid this cost.

Stacy Greiner, chief operating officer of earned wage access provider DailyPay, says with their services, employers can provide greater financial wellness support for employees, which can lead to a happier and more productive workforce.

“Our studies have found that companies that offer earned wage access have seen their employee time on the job increase by 27% on average, or 39 additional days,” she said. “We've also shown that 67% of employees who have access to earned wages services say it has helped them reduce financial stress.”

DailyPay — like its competitors — offers various same-day pay plans that do require fees. But one of its more popular options ensures that employees get paid the day after they work, with funds being available on a debit card, an option that comes at no cost to the employer or the worker (the company earns from the merchant fees incurred on transactions). Another benefit: Workers don’t have to use credit cards to pay their expenses, so they’re also saving on interest costs.

A good earned wage access service provider handles the complex calculation of determining taxes and other payroll withdrawals on a daily basis, integrates directly with most popular payroll systems and comes with a mobile app through which workers can request payment, not just view their payroll status.

The fast-casual restaurant chain Sbarro, which operates eight locations in the Cook County area, has been providing an earned wage access benefit for its workers for going on two years.

“Over half of our more than 2,000 employees use it,” said Rohan Shearer, the company’s chief administrative officer. “Regular users love the flexibility to pay bills early or use funds for daily needs so they don't have to use a credit card and rack up interest.”

Scott Evans, director of human resources at fast-casual restaurant chain Buona, headquartered in Cook County with more than 1,500 employees, adopted an earned wage access solution in 2019 to help recruit hourly workers, particularly part-timers.

“We’re in an environment where it's difficult to offer a lot of health and other benefits to our part-time employees that we offer to our full-timers,” he said. “But those workers are important to us and we’ve added this benefit to our job advertisements. It’s made a big difference in our recruiting.”

Earned wage access platforms like DailyPay are most popular in industries like retail and restaurants where there are many hourly workers, but the company says it serves a number of additional industries from manufacturing to distribution and it’s not uncommon for salaried workers to also participate. Both Evans and Shearer said implementation was “easy” and “seamless.”

While Evans has had concerns over whether making pay available on a daily basis to workers — particularly younger workers who have less financial management experience — creates a potential motivation to spend too recklessly or irresponsibly, Shearer has a different point of view.

“I’ve found that in some ways it actually helps employees to be more responsible with their money,” said Shearer. “They’re using money that actually is there, instead of mortgaging today for a future that they hope will come.”

• Gene Marks is a CPA who owns and operates The Marks Group PC, experts in customer relationship management technologies.