With changing work environments comes the need for changing payment structures. Consumer expectations for accelerated pay is growing, thanks to peer-to-peer payment apps like Venmo and a rise in freelance and gig work. Workers today want to get paid quickly, and flexible pay is the most efficient and effective way to meet their needs.
Defining flexible pay
Imagine being in charge of deciding when you get paid for the work you do. Rather than wait for those two days a month for your paycheck or direct deposit to arrive, you could select your own pay cycle based on your needs. That’s what flexible pay enables you to do. You can choose the best payday for you, whether that’s getting paid every day or every week, or staying on your company’s standard pay cycle but choosing to sometimes draw on your earned pay when you need it.
How it differs from earned wage access
The most common form of accelerated pay is delivered by earned wage access apps. These apps allow employees to request their earned pay on demand on an as-needed basis, usually for a fee. Most also only provide access to a portion of earned pay, rather than all earnings. While these apps can help employees when an unexpected expense arises, they don’t give people full control over their pay frequency. They’re a band-aid to a larger problem: an outdated, two-week pay cycle.
Bottom line, not all accelerated pay options are equal. Earned wage access is about having access, when requested, to earned wages one-off. Flexible pay is about choice and consistently having a more frequent payday.
4 key benefits of flexible pay
Offering flexible pay provides several benefits:
Ease employee stress
Worrying about when money might arrive to cover the bills or help purchase necessities can be stressful for employees. The concern over the lack of funds could potentially distract them from work. When they lose that focus, productivity takes a nosedive.
Even worse, employees may feel so desperate that they turn to costly payday loans to get by. From there, the stress only increases, as they realize the payday loan just created unplanned debt and exorbitant interest charges.
Instead, having a flexible pay option enables employees to enjoy better cash flow, which reduces concerns about making it to the next payday and allows them to more easily save and budget.
Help new employees skip the waiting period
When new employees join the company, there is often a waiting period for their first check that can be anywhere from one to three weeks. The waiting period often involves completing and verifying paperwork and bank accounts.
Yet, most HR and payroll paperwork can now be digitized, meaning there’s no reason to still have these waiting periods. After all, bills don’t have a waiting period. Those dates remain the same, leaving new employees with a gap in earnings. For employees who live paycheck to paycheck or who have been unemployed for some time, this can have devastating consequences.
New employees benefit when your company offers flexible pay options. They’ll be able to get paid for the work they do in days instead of weeks on the job.
Deliver an incentive for employees to stay
To provide additional income between paychecks and to gain immediate pay perks, many people have taken on side hustles or gig jobs. Now, close to half of American workers have some type of side gig in addition to their regular jobs.
Rather than lose that talent completely to the world of freelance and gig opportunities, a company can compete with the immediate gratification that employees get from working with Uber, DoorDash, Instacart and others by offering the same payment timing. Doing so may help to channel the employee’s skills and focus on their primary job rather than share it with another job. Flexible pay benefits can also drive greater retention by bolstering an employee’s sense of loyalty to their primary employer.
Reduce the cost to employers
While it may initially sound like a more time-consuming and costly endeavor, flexible pay actually lowers a company’s time and monetary investment in its workforce. Think of it like putting your clothes away at the end of the day. If you hang up each outfit after you wear it, the task is small. Let a mound of clothing pile up on your dresser, and it’s a daunting endeavor. Flexible pay works the same way.
Typically a payroll admin waits until the end of a pay period to verify all employee hours and process payouts. To make flexible pay work, employees and their direct managers submit and approve hours more frequently, which reduces the risk of incorrect hour reporting. Because flexible pay technology is new, the platforms that support it have automated this experience to make it fast, freeing up more time to work on other tasks. For a small business owner that may not have a dedicated payroll department, switching to a flexible pay provider can return a significant time and cost savings.