In 2020, “Stimulus Check” and “Second Stimulus Check” were among the top 15 Google searches in the United States.
In the same year, a Report by Ernst and Young estimated that on any given day in Organization for Economic Co-operation and Development (OECD) countries, there was about $1 trillion in workers’ wages in the employer coffers.
“This was essentially an interest-free loan from an employee to an employer,” said Aaron Fuchs, vice president of commercial at Ceridian, a Bloomington-based human resources firm. In layman’s terms, “It’s a software company, and the software they offer is inherently human-centric,” Fuchs said.
The stimulus checks were a way to get through. Ceridian is part of a growing industry disrupting “payday.”
In his role, Fuchs runs Dayforce Wallet, one of several mobile apps on the market offering same-day payments. Also known as Earned Wage Access, On-Demand Pay or Real-Time Pay, the service allows employees to access their wages from their personal devices right after their shift.
Worker expectations have shifted: According to a 2021 survey by The Harris Poll, 83% of US workers ages 18-44 feel they have access to their earned wages at the end of each workday should.
“Technology has caught up and redefined so many other areas of[people’s]lives,” Fuchs said, “they’re realizing that payroll is an area that really hasn’t changed since the 1980s.”
The company launched Dayforce Wallet in May 2020 and expanded into Canada last year. Fuchs said they closed 2021 with nearly 1,000 customers, including large companies like Danone and local ones like Lunds & Byerlys.
Since Ceridian rolled out its program during COVID to a customer base most in need of onboarding: retail, healthcare, manufacturing and hospitality.
competition in the labor market
Midst unemployment figures and a pandemic that has seen many exposed workers quit en masse, employers needed creative ways to retain and hire employees.
“We were keen to take advantage of (same day paid) and offer this to our employees to continue to differentiate ourselves in the job market,” said Casey Enevoldsen, vice president of employee experience at Lunds & Byerlys. “We see that the labor force continues to shrink as it grows. It just means fewer and fewer people will be available to do the work that employers really want done, so we’ve really focused on employee retention and tried to attract new talent.”
Many employees say earlier access to payments is a key aspect of their financial well-being. Part of their strategy has explored a wide range of attractive measures to retain and attract new talent, including adding telemedicine to the various part-time and full-time positions in retail, manufacturing and support.
Enevoldsen said adding same-day payments is an easy transition because Ceridian already manages its payroll and is offering the benefit to the grocer and its employees at no cost. With this system, individuals deposit paychecks directly into Dayforce Wallet, from where they can choose to have their funds deposited into a mobile wallet or a physical debit card.
Launched in 2016, DailyPay works with a number of fast food restaurant franchises, as well as companies like Mall of America and Target. (The New York-headquartered company opened its only other US office in Minneapolis in 2019 for operations and customer service.)
Jeanniey Walden, DailyPay’s chief marketing officer, said the payment frequency was delayed by the introduction of the payroll tax in 1943. For companies that traditionally operated their own payroll systems, it became time-consuming and costly to perform calculations for the numbers behind an employee’s paycheck. She said three information systems are behind it: time and attendance, pay rate, and benefits like health care, dental care, 401k, and wage garnishments. Financial services companies like DailyPay pull this information from employers and automate all of these processes so workers can see how much they’re making in real time and access that pay.
A Third Party Verification of DailyPay data found that employee turnover was reduced by 42% with DailyPay.
Given the financial strains of recent years, same-day payment has been critical to competing with the gig economy — and supporting workers on tight budgets.
“Mostly when[people with multiple jobs]are asked, ‘Why are you working here for me? and do DoorDash?’ It’s not because they don’t make enough money here. It’s like, ‘well, I need $50 this week because I have to put down my daughter’s braces,’ or whatever it is,” Walden said.
Most nonfarm payrolls in the US are paid bi-weekly (every two weeks), according to a February 2020 snapshot Current survey on employment statistics from the US Bureau of Labor Statistics. About a quarter is paid monthly or semi-monthly.
Bridging financial precariousness
Keziah Vulu works part-time at Lunds & Byerlys. She only accessed her salary once in the same day. Intrigued by the novelty, she ordered food.
“I like that it’s there, but I don’t like my (biweekly) checks being short,” Vulu said.
Instead, she expressed relief at the company’s move to weekly pay in January. Employees can pull their daily pay from the app, with the pay being deducted from their weekly check.
“(With the move to weekly pay) I was able to set my budget and get what I wanted. It seemed harder to save when I was getting paid every two weeks and easier to overspend,” Vulu said.
Several employees made similar observations – either they had never or rarely paid on the same day.
“Personally, if we had stayed on a bi-weekly (schedule) basis, I would have jumped on that bandwagon. But it works with the weekly newspaper. That’s enough for me,” said operations manager Nina Urman.
Sara Cramer trains staff support teams at DailyPay and occasionally accesses same-day payments as well. Because they’re paid biweekly, she said having easy access to wages around payday offers peace of mind.
“That date (of hardship) isn’t your whole life,” said Cramer, who said the service was more helpful in helping her understand her gross daily income.
The data backs it up. More recently, academic research has looked at how payment frequency affects employee behavior. A 2019 paper The study, cited by the Bureau of Labor Statistics, found that a causal relationship between frequent payments and household spending helps manage personal finances. At the beginning of April this year the Consumer Research Journal published an article by economics professors Wendy de la Rosa and Stephanie M. Tully and found that “higher payment frequencies reduce consumer uncertainty in predicting whether they will have enough resources over a given period of time.”
But more than addressing potential concerns, financial services companies say same-day payments eliminate the need for payday loans, credit cards, and other traps people fall into when they’re short on cash.
“DailyPay is being used in a really unique and different way to complement and bridge,” Walden said.
One example she noted: “When gas prices went through the roof, a lot of people who normally had enough money to physically get to work ran out of gas… They had no way of getting to work if they used.” DailyPay to fill up her car for the next two days to tide her over until payday until her paycheck comes in.”
According to the Consumer Financial Protection Bureau, “Prior to the COVID-19 pandemic, consumers were paying more in credit card late payment fees each year — peaking at more than $14 billion in 2019. Late payment fees estimated by issuers rose to about $12 billion back in 2020 amid record payment rates and public and private relief efforts. Even during the pandemic, late fees accounted for over a tenth of the $120 billion consumers pay annually in credit card interest and fees. In 2021, late fees increased again.”
March, a coalition of 19 lawyers demanded the Consumer Finance Protection Bureau Make sure buy now, pay later lenders don’t engage in practices that trap consumers in a debt cycle In a letter, they expressed concern that the industry had experienced “rapid and exponential growth” during the COVID-19 pandemic.
DailyPay claims that 88% of users credit the app with reducing or eliminating their use of payday loans, and an average of $292 a year is saved on people paying overdraft fees a partner report.
Urman said the benefit of same-day pay offers peace of mind and a good safety net.
“I know if your car breaks down, or you have an unexpected bill, or even a vacation, that sort of thing, it’s really nice for people to be able to get something done right away without adding credit card debt or borrowing money, like, like. For example, payday loans are where they’re getting a lot of interest,” Urman said. “It can be huge. While it may not be necessary for me every week or month, it’s nice to know that if something happens you have some sort of backup system where you don’t have to put yourself in another bad position.”