- According to a survey of more than 1,100 U.S. workers, 72% want to access their paychecks ahead of payday.
- Only 6% of U.S. workers are currently paid on demand, though 43% said they would choose that method if given the option.
- 53% of respondents said financial stresses are a distraction at work.
Since its passage in 1938 and its subsequent amendment in 1940, the Fair Labor Standards Act set the 5-day, 40-hours a week work schedule that a vast majority of U.S. workers still operate under today. It was established to standardize labor regulations and bolster the American economy by giving people time to spend their hard-earned paychecks. Although these standards have worked for generations, a new study suggests workers are tired of the schedule and want to adopt a more radical approach to work and how they are paid.
According to The Death of the Traditional Pay Check, a survey by The Workforce Institute at Kronos that polled 1,180 American adults online in October 2019, approximately 70% of respondents called the current 40-hour workweek "outdated," and 61% said they shouldn't have to wait for payday in order to get their wages.
Joyce Maroney, executive director at The Workforce Institute at Kronos, said today's push for near-instant gratification has shifted how workers view their paychecks. "The world has changed dramatically to usher in a generation of on-demand services, yet most organizations still think about payday as a rigid, set-in-stone process," he said. "Employers who can ease the burden of financial stress by being more agile around payday and offering creative financial wellness benefits will be repaid by orders of magnitude in productivity and engagement."
With an eye on immediate access to their wages, workers told researchers what they felt were the pros and cons of the idea, regardless of whether they would rely on paycards or some other method to receive their wages.
Switching to modern payment methods
Despite technological advances that have made running a business easier for all parties involved, there are countless Americans who still rely on regular paychecks that they receive via direct deposit. Once the money comes in, it's likely to take a few days to clear in a bank account. [Read related article: Paycards vs. Direct Deposit: Which Is Right for Your Business]
That kind of lag time between payday and actually having the funds available has proven to irritate workers, as 61% of respondents said they "should not have to wait until their scheduled payday to access their earned wages." According to the survey, most workers in the retail (65%), healthcare (61%) and manufacturing/construction (54%) industries want earlier access to funds.
If you break down the group of respondents by how much they earn per year and how they view on-demand pay, employees with a household income less than $50,000 per year were more likely to want the perk (87%) than those who got paid more (67%).
When it comes to the benefits of on-demand pay, 51% of respondents said that would be a "more attractive benefit than additional paid time off." While that may be the case, just 6% of responders said they already had access to the perk, and 43% said they would choose to get paid via on-demand if given the choice.
Why on-demand pay is so appealing
If you've ever had to cash a paycheck, you know that your money usually isn't available until at least the following business day. That may present a challenge to workers, as they may have bills due before they can access the money from their paycheck – which can lead to fees for late payments or account overdrafts. That kind of situation can weigh on a person's mind and cause unwanted distractions in the workplace.
According to the study, researchers found that 66% of respondents wanted earlier access to their wages to cover their bills and emergency expenses like car repairs and unexpected medical care. "For some employees, not having cash on hand to pay the babysitter actually prevents them from accepting an overtime shift where they can make much more. For others, they may be a flat tire away from losing their job because they can't pay to get it fixed," said Martin Armstrong, CPP, DBA, vice president, payroll shared services at Charter Communication and an advisory board member at The Workforce Institute at Kronos. "Employers have embraced the responsibility of offering physical wellness programs to employees, and as we welcome 2020, it's time they consider doing the same with financial wellness and on-demand pay."
Slightly more than half – 53% – of employees said financial stress often serves as a distraction during the day, with employees 35 to 44-years-old (67%) and 18 to 34-years-old (65%) saying they were more likely to feel that way than their 45 years and older counterparts (39%). Employees with children under 18 years old were also more likely to get distracted by financial problems (61%) than those without a child under 18 (48%).
To more easily facilitate such a perk, researchers learned that 75% of hourly and 71% of salaried workers said they would consider paying a maximum $5 fee to get access to just $50 of their paycheck before payday. Approximately 8% of workers polled said they would consider paying a $50 fee to get access to $50 of their paycheck early. Researchers said that kind of agreement "could signal a desperation among some for safe and reliable access to their own money as an alternative to short-term payday loans." [Read related article: How Payday Apps Can Help Small Businesses]
On-demand pay and financial planning as a recruiting perk for new employees
Like unlimited paid time off and student debt repayment, on-demand paychecks and overall help with financial wellness could be an effective way of attracting new employees. According to researchers, 74% of respondents said they "would prefer to work for an employer that offers financial planning, budgeting, and automated savings tools," and this percentage increases to 88% for 35 to 44-year-old workers.
"As previous Workforce Institute at Kronos research shows, younger employees want the flexibility of gig work but the stability of a traditional full-time job – and the same can now be said for how they want to be paid," said Bob Clements, president of the Axsium Group and advisory board member of The Workforce Institute at Kronos. "Organizations that embrace an on-demand pay model will be one step closer to offering an engaging, future-ready workplace experience that will lure the top talent and position them for success for years to come."
Approximately 64% of respondents said they would like their employers to help cover unexpected life costs, either through short-term loans, on-demand pay and other financial assistance. Meanwhile, 57% of those polled said they would "work harder and stay longer at a company that offers on-demand pay."