In recent years, flexible pay arrangements like salary advances and on-demand pay have emerged as a tool offering immediate relief for the working class facing unforeseen expenses or temporary financial setbacks.
With inflation rates soaring, many working Nigerians seek out and often find themselves at the hands of predatory loan sharks. These loan sharks often resort to forgery, impersonations, harassment, and even breaches of privacy to recover borrowed funds. Unlike countries where paychecks arrive bi-weekly, Nigerians receive monthly wages. At the same time, expenses like rent, food, and transportation often require upfront lump-sum payments, exacerbating financial challenges.
These advances play an important role in unlocking financial freedom for employees.
It’s not just about the numbers. It’s not just about bridging the gap between paychecks; it is providing benefits that extend beyond conventional financial management. It is about the people.
Companies that offer this to their employees cultivate loyalty and goodwill, nurturing a culture where every individual’s welfare is valued. As a result, they experience increased productivity and workplace morale, as their staff no longer endure financial strain.
In a country where every Naira counts, these arrangements serve as lifelines, ensuring that pressing needs are met without plunging people into debt.
What’s the difference between Salary advances and On-Demand Pay?
- With on-demand pay, employees can access the wages they’ve already earned up to the current date, allowing them to access funds for the hours they’ve worked up to that point in the pay cycle. In contrast, salary advances typically grant access to a portion of the upcoming paycheck before it officially disburses on the regular payday.
- Traditional salary advances may impose interest or fees for the advance, akin to a loan, while on-demand pay services generally do not charge.
- On-demand pay often integrates with an employer’s payroll system, enabling real-time tracking and access to these funds. In contrast, salary advances may be provided directly by the employer or through a third-party financial institution, but they may not always integrate with the employer’s payroll system.
Money Earned Is Spent Better Than Money Borrowed
According to data from South Africa’s Paymenow, the average withdrawal by users on their platform amounts to ZAR350 (approximately $16) twice per month. the study conducted by Paymenow in collaboration with 60 Decibels revealed that 2.5-7.5% of total earned wages are typically spent on essential items such as food, transportation, medical expenses, and utility bills. This underscores the significance of on-demand pay services in helping individuals meet their day-to-day expenses.
Although users are typically granted access to 25% of their salary through the platform, the data showed that only 12-14% of these funds are used on average. This suggests that users recognize these funds as their own hard-earned money, leading to a more conservative approach to accessing and utilizing them.
- On-demand pay allows employees to access their earned wages when they need them, providing greater financial flexibility and helping them to manage unexpected expenses, avoid late fees, or cover emergencies without resorting to high-interest loans or credit cards.
- Offering on-demand pay can boost employee morale and loyalty by demonstrating that the employer cares about their financial well-being. It can also attract and retain talent, particularly in industries with high turnover rates, by providing a competitive edge in benefits packages.
- Financial stress can negatively impact employee productivity and engagement. By reducing financial stressors through on-demand pay, you can be more focused and productive at work.
- Offering on-demand pay can differentiate an employer from competitors and attract candidates seeking flexible and modern benefits packages.
- On-demand pay platforms can help employers ensure compliance with wage and hour laws by automating calculations and tracking hours worked. This reduces the risk of costly lawsuits or penalties associated with payroll errors.
- It is adaptable. On-demand pay solutions can be tailored to meet the unique needs of different industries, organizations, and employee populations.
At Earnipay, we believe you can sidestep the high-interest payday loans, by using our more sustainable and cost-effective option, our on-demand pay. It will provide you with the financial flexibility you need without the expensive interest rates.