Why companies are switching to on-demand pay

Why companies are switching to on-demand pay

You are a CEO or an HR, and you’ve been hearing about the on-demand pay option many companies have recently adopted. You are wondering what benefits employers are getting from implementing this payment system. Your next 3 minutes into this article should answer your question.

Let’s put you in the shoes of a worker in your company. Would you prefer a payroll system that enables you to withdraw your wages as you work rather than wait till the end of the month before getting paid? A flexible system where you don’t have to wait till the end of the month before you can tend to some of your emergency needs, and you can do that without taking loans? Guess your answer is yes.

Most employees would prefer not to take loans when they can access the money they have earned. You would agree that for this reason, the idea of on-demand pay will be welcome from an employee’s perspective.

Research carried out by CareerBuilder shows that more than three-quarters of the population of workers have to wait for the next payday before they have access to funds to tend to their needs. In Nigeria, most companies do not offer flexible payments. They mostly wait till the end of the month to pay their workers. Reducing the time between paydays will be a welcome idea for most workers as they won’t have to wait long to tend to some of their urgent needs.

Let’s talk about a payment system that allows flexible payment.

What is on-demand pay?

On-demand pay is a payroll system that allows employees to access their wages as they work. With this kind of payroll system, your employees will not have to wait until the end of the month before requesting payment for their work days. That is, an employee can decide to instantly withdraw the amount of money they have accrued for the number of days of working before the next payday.

For example, Mr. Adisa earns ₦150,000 as his monthly salary. This system allows Mr. Adisa to withdraw his earnings after any chosen number of work days. Since Mr. Adisa makes ₦5,000 daily for 30 days, he doesn’t have to wait until the last days of the month to access his pay. He just has to calculate the number of days he has worked after the last payday and multiply it by ₦5,000, after which he can withdraw a specific percentage of the calculated money to tend to his immediate needs.

What are the benefits of real-time salary access to your employees?

Sometimes, your employees get challenged by unplanned expenses, and attending to them will be urgent. Let’s go back to Mr. Adisa’s story. Mr. Adisa has a pregnant wife, and from their calculation, she is to deliver around March 10. To their surprise, Mrs. Adisa begins to labour on February 25th, a few days before Mr. Adisa’s payday. Where is the money to settle the hospital bills? Who will they meet in this situation where everyone complains about one hardship or the other? It is February 25; most people are also managing to make ends meet before the next payday. Now imagine the relief Mr. Adisa will get if he knows he can access the wages of the days he has worked even before the designated payday. That is one of the benefits your employees will enjoy from the on-demand pay system.

More benefits are;

  • Quicker payments: With on-demand pay, employees can immediately access the money they have worked for in previous days. This flexibility allows employees to receive, save and spend their money on their schedule.
  • A financial safety net: If an employee suddenly faces unexpected bills or other urgent payments, on-demand pay can help the employee quickly cover these expenses.
  • Avoidance of loans: With on-demand pay, employees can avoid taking desperate loans to meet their ends. The on-demand pay system allows them to access the money they have accrued over a specific period.

Benefits of on-demand pay to you as an employer

As an employer, the best way to achieve productivity in your work is to have employees willing to give all they have to achieve your company’s goals. Returning to Mr. Adisa’s story, let’s assume Mr. Adisa works for your company. Mr. Adisa’s wife has given birth to a baby boy safely thanks to the payroll system your company has adopted. Mr. Adisa knows paying the hospital bills would have been difficult if your company did not give the on-demand pay option. He now sees that the only way to repay the company is to work as best as possible to help it reach its goals. Employee loyalty is what most business owners look for in their employees.

More benefits an employer stand to enjoy by adopting on-demand pay include;

  • Better employee retention rates: Just like Mr. Adisa, employees whose employer has implemented on-demand pay may interpret this offering as proof that the employer cares about their well-being. As such, the loyalty of such employees heightens, and they may feel less compelled to leave the employer.
  • More productive employees: Productive employees equals productivity at work. According to PwC’s 9th annual Employee Financial Wellness Survey 2020 results, it is found that personal finance challenges can distract employees. Offering on-demand pay may give employees a larger financial safety net and thus limit this distraction.

Nowadays, companies recognize the benefits of the on-demand pay option to the company and the employees. They now see the need to adopt the payment system and avoid the stress it might take their accounting department through if they are to operate the system in-house. Hence, they seek financial services such as Earnipay, which makes it easy for them to register as an employer and make the on-demand pay product available to their employees.

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