Advance pay app concept Offeringemployees the opportunity to receive pay daily, versus weekly orbiweekly, can introduce some real challenges to a business. (Photo:Shutterstock)

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Movies, food, transport, and more—with just a few clicks in anapp, we have access to a seemingly infinite amount of goods and services on-demand. With theever-prescient forecasters of what the people want next, gettingpaid probably should have been the number one guess. Specifically,giving employees faster access to their pay by letting themrequest and receive all or part of their earned pay after they’vecompleted the shift.

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With a staggering 78 percent of U.S. workers livingpaycheck to paycheck, it’s no surprise that on-demand pay isswiftly growing in popularity. Advantages such as coveringemergency expenses, reducing debt and staying on top of financesentice skilled talent to join companies that offer this practice.And employers can reap the benefits, as well: other than attractingtop-quality talent, on-demand pay can help retain it, reduceabsences and increase productivity.

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Related: Advance-pay apps help employees living paycheck topaycheck

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It sounds like a win/win—and it can be, if businesses are smartabout it. Offering employees the opportunity to receive pay daily,versus weekly or biweekly, can introduce some real challenges. Forexample: an employee at a restaurant enters a ten-hour shift. Thenext day, they request payment for those hours and receive it. Itsounds simple enough, but how do we know these hours are accurate?What actual activities did that employee perform? What if thisparticular restaurant has a policy requiring shifts to stay undernine hours?

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With no real-time visibility into their time and attendance,none of these questions can be answered reliably. Before embracingthe new world of on-demand pay, employers should be sure toconsider these key issues first:

Administrative challenges

As the most knowledgeable on employee attitude and morale,frontline managers will see on-demand pay as an opportunity toobserve how employees respond to the change in payroll options, andhow it affects the business. They may need to take on additionaladmin work if they must log each employee’s hours at the end of theday for payment to be made available.

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The increased responsibilities don’t stop there: payroll teamsmust also now run payroll daily, as opposed to weekly or biweekly,adding to an already challenging operation. These potentialmanagement and administrative difficulties can add up to trouble ifthe pre-payroll process isn’t streamlined. Say the restaurantalready paid the worker for ten hours; it doesn’t matter whether ornot there’s a nine-hour limit—reversing the mistake once paid ismessy and tedious, or simply impossible. Suppose this happens morethan once, with more workers: The costs will slowly add up,creating an expensive and frustratingly preventable problem.

Compliance

Does this copmany exist regionally? Nationally?Internationally? Labor laws must be managed in each country, state,or city to avoid violation risks, but many businesses stillstruggle with any manual processes they haven’t yet worked out ofthe system, slowing down the workflow and complicating complianceeven more. If a company already struggles with keeping compliancetogether, the problems will increase dramatically with on-demandpay.

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Most importantly, employers should find out whether on-demandpay is even an option. If potential changes are made withinpayroll, businesses should first seek out legal advice to ensurethat any new compensation practices comply with all federal, stateand local employment laws.

Business policies

A modern option like on-demand pay will inevitably change anumber of things within the company, and employees must be kept inthe loop – whether it requires a new handbook, modifying training,or the addition of an employee-footed transaction fee, workers needto know before anything is officially implemented.

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Furthermore, many businesses must support specific conditions,maintaining various rules and policies unique to that business oreven location. Back to our restaurant example: thisparticular establishment has a rule that shifts must stay undernine hours a day. If an employee does enter over nine hours, itmust be approved by their manager’s manager. This could introducesome complications if the restaurant relies on a basic system unfitto handle these circumstances neatly before paying out theemployee. To avoid predicaments like these, employers must find ahappy medium that can both reduce overhead and ensure accuracy.

Company-wide impact

Once on-demand pay is implemented, it’s important to keep an eyeout for any resulting after-effects. How is retention? Hasmotivation changed? Employees and managers may develop a differentrelationship than we’re used to; given the more “contract-esque”nature of daily pay, employees may begin to feel differently.

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On the other hand, of course, it may bring in more workersenthusiastic about the quick pay turnaround option. Understandingthe effects—both negative and positive—will help employers assesswhat’s working and what isn’t, and adjust accordingly.

On-demand: The new normal

Each business is an individual case, so while exploringon-demand pay as an option, employers should take care to considerany and all possible implications of the process before reaching adecision. That being said, the needs of the workforce are evolving,and on-demand pay is simply a natural response to those needs. Inan age of convenience and flexibility, businesses should be readyto accommodate workforce demands with a solution smart enough tohandle it. This means utilizing advanced capabilities around timeand attendance and payroll to meet those demands—even if it meanspayday is every day. And by doing their homework, employers can beprepared for it.

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Maggie Deptuck is global senior vicepresident and general manager of SMB at Replicon.

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