After the COVID-19 pandemic that hit the world in 2019, many countries’ economies have been staggering; many are just recovering from the effects of the global pandemic. Inflation has rocked many countries, and Nigeria is not excluded. The cost of living is now high, and the basic salary is not increasing. How do workers balance their spending with their earnings? How do they access the funds required to attend to their emergency needs? Do they have to wait till the end of the month before they access funds to invest in their side hustle businesses to cushion the adverse effects of the inflations? For this reason, many workers have embraced the idea of on-demand pay as a payment option.
You may have heard about on-demand pay and are looking for more answers to help you decide if it is the right option for your business and employees. This article will help highlight the benefits and the downsides of offering on-demand pay to your employees.
What is On-Demand Pay?
On-demand pay is a flexible payment method that allows employees to request and withdraw their earned salaries before their actual payday. With on-demand pay, employees can access their earned wages before the end of the month. Employees can now attend to their emergency needs without taking traditional loans with high interest.
To explain On-demand Pay further, we can analyze it with an employee’s monthly earnings. Let’s say an employee earns ₦900,000 in a month. With on-demand pay, the employee does not have to wait until the end of the month to access the ₦900,000. Instead, he can access the accumulated amount over time if the daily earnings are calculated. In this employee’s case, he will be estimated to earn ₦30,000 daily, a division of ₦900,000 by 30 days a month.
The employee might have an emergency need to attend to on the twelfth day of the month. With on-demand pay, it will be calculated that the employee has already accumulated ₦330,000 from the eleven work days. He can now access up to 50% of the ₦330,000, which will equal ₦165,000. He can withdraw the money and attend to his emergency needs. At the end of the month, he can access the rest of the money after the funds requested earlier have been deducted together with the commission.
Pros and Cons of Offering On-Demand Pay to Your Employees
On-demand pay comes with many benefits for your employees. Likewise, there are drawbacks to implementing on-demand pay for your employees. As an employer, you must know the pros and cons of implementing on-demand pay. You must weigh both the benefits and the drawbacks before you make a decision. Below are some of the pros and cons of implementing on-demand pay.
Pros of implementing on-demand pay
- Reduces the need to seek loans
Employees who wait till the end of the month to access their salaries are often pressured to take loans when faced with financial drawbacks. With on-demand pay, they can access the money they have earned over the period they have worked and will not need to wait till the end of the month or seek loans to attend to their financial needs.
- Helps employees attend to their emergency needs
Employees sometimes face emergency needs they importantly have to attend to. This can be in the form of medical bills, tuition fees, car maintenance, etc. These bills come without notice, and mostly they need immediate attention. Waiting till the end of the month can be too late. With on-demand pay, your employees can attend to these bills with ease.
- Increases the chances of attracting new talents
When the news gets outside the walls of your company that you prioritize employees’ financial wellness, new talents will want to work with your company. On-demand pay option for employees is a way of showing them that you care about them. With this, you will be top of your game in the competitive market for talent hunt.
- Improves productivity in the workplace
When employees are bothered about their financial drawbacks, they find it challenging to dedicate the required attention to their work assignments; when employees have divided attention, productivity at the workplace drops. When your employees can solve their financial drawbacks, they will be able to dedicate the amount of attention your work needs, which will translate into work productivity.
- Increases employee retention rate
When employees know that an employer cares about their financial wellness, they feel safe working with such an employer. Making on-demand pay an option for your employees shows that you care about their financial well-being, and this will make them stick with you.
Cons of implementing on-demand pay
The major drawback of implementing On-demand Pay for employees is the service charge/commission attached to the service. Some On-demand pay service providers come with charges that some employees might perceive to be much. To solve this, you should subscribe to On-demand Pay service providers with affordable service charge rates such as Earnipay.
In conclusion, managing one’s finances with the current inflation rate can be challenging, especially for employees living from paycheck to paycheck. As an employer, the financial well-being of your employees should be a top priority. Happy employees translate to productivity in the workplace, which will make your business thrive.
To provide an On-demand pay option to your employees, you need to consider a service provider that charges low for their service. Earnipay provides an On-demand pay service to businesses for free and at an affordable service charge to employees who sign up for the pay option. You can head to earnipay.com to learn more about the on-demand pay product.