By reducing the number of days between traditional pay periods, employers provide employees and gig workers the flexibility to access earned compensation when they need it. (Photo: Shutterstock)
In 2022, benefits are key to retaining talent.
And winning that competition has never been more important. According to the Bureau of Labor Statistics, the total nonfarm quit rate rose to 3% in November 2021. That's tied for the highest quit rate ever recorded — all the way back in September. Over 4 million people have quit their jobs every month since July.
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To stop the losses, HR leaders are concentrating on the employee experience. One strategy is to provide better benefits. A recent benefits survey found that 88% of employees would consider taking a lower-paying job with better benefits over one that paid more but had worse benefits. One popular new benefit is on-demand pay, in which employees can choose to receive their pay at any time rather than just on a set payday. In a report from EY, 80% of people said they would use a form of on-demand pay.
Nico Simko is CEO at Clair, a financial services company that provides on-demand pay access to hourly and gig workers at no cost. Nico previously worked in payments at J.P. Morgan and as an analyst at Goldman Sachs before co-founding Clair in 2019. Here are three ways on-demand pay can help you keep your employees happy and working for you, at little to no cost to your organization.
1. Flexibility
Historically, workers were paid every two weeks. But as the world's financial needs are evolving, more employers are considering on-demand pay solutions. On-demand pay lets workers pay their bills after a single day's work.
By reducing the number of days between traditional pay periods, employers provide employees and gig workers the flexibility to access earned compensation when they need it. That can be critical when workers face unexpected expenses or emergencies and eliminates the problems associated with late paychecks.
2. Ease
Compared with some benefits, on-demand pay is easy for HR leaders to put in place. Applications integrate with most payroll and workforce management systems, making this a benefit that provides a quick win for workers and leaders. When you allow workers to access their pay on demand, it brings the practice in line with their expectations of on-demand service in the rest of their lives, from transportation and food delivery to entertainment and more.
3. Access
Especially when many businesses are completely cashless, on-demand pay offers workers access to a broad suite of financial services.
According to the Federal Reserve, there are nearly 63 million unbanked or underbanked Americans, a problem that disproportionately affects those with lower incomes. Nineteen percent of households with an income of less than $30,000 a year are unbanked. (An additional 18.7% of households, or 48.9 million adults, have a bank account but used alternative financial services in the past year.)
Without bank accounts, workers don't have easy means to save money, apply for credit, or cash checks, leaving them vulnerable to predatory services and worries about money. Chronic financial stress means lower productivity, higher absenteeism, and more turnover, as well as being detrimental to employee health and well-being. A 2020 EY study tells us that 70% of U.S. and U.K. employees experience chronic financial stress, and 35% fall financially short between paydays. EY says on-demand pay offers a "compelling economic case for employers and better financial outcomes for employees when compared to the many alternative financing options."
Retention will continue to be a difficult problem in the coming year. The employers who solve it will be the ones who offer employee benefits that are popular with their workers and let them stand out from companies that don't meet expectations. On-demand pay is an employee- and future-focused approach to benefits that will help you to retain and attract the best talent.
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