The pandemic has influenced every corner of the workplace. It has plunged many workforces into the realms of excess stress, and now more than ever, workers are seeking easy and reliable access to their income.
Here to discuss how payment models can be reimagined in the post-Covid world is Jeanniey Walden, the CMO of American financial services provider DailyPay. In this guest post for The Fintech Times, Jeanniey identifies the optimal payment models that’ll increase both employee retention and satisfaction, and cites the recent findings of Josh Bersin in her argument.
As the workforce all over the world prepares for returning to the office at some point, employers have been warned that the employees that were forced to remote work will not be the same ones that return. As Harvard University management professor Joseph Fuller wrote in late June, “It’s the Next Normal we’re headed to, not ‘back to normal,’ and that, for a lot of companies, is going to feature changes in work practices, changes in employee expectations of their employer, and companies learning from this duress about what they can do to be more effective and efficient and attractive employers.”
Yes, returning to work is about “the next normal.” But the crux of the issue is in the last part of the Fuller quote. Companies are learning how to change in the wake (or in some cases the last phases) of the pandemic. Their value systems, work habits, and emotional states will be different. And it is a somewhat unexpected development, but no less an urgent one, that fintech has a part to play for companies that aim to meet this goal. For example, in the US, the standard model of fintech has been expanded, and it’s a development that is happening exactly at the right time. As the workforce is experiencing maximum stress, on-demand pay is showing up as an unlikely fintech hero to help alleviate that stress.
The on-demand pay technology is not new but its relevance has never been stronger. In fact, esteemed HR technology guru Josh Bersin has created a new report that details this new urgency behind what will become an essential back-to-work strategy for many companies. According to Bersin, on-demand pay and its ability to address the financial wellness crisis behind many hourly or gig economy workers current state can provide a real-time tech solution for a process that has been decidedly archaic.
But before diving into Bersin’s report, let’s set the stage for this financial crisis that has affected several industries such as hospitality, travel, some sectors of retail, and the gig economy. Because the profile of a consumer who lives paycheck to paycheck and therefore would be most in need of a financial option, such as on-demand pay, has changed.
A late June PYMNTS.com report shows that 54% of consumers in the United States today live paycheck to paycheck, including 53% of those who earn $50,000 to $100,000 per year.
That’s just one part of the difference in the lives of some members of the workforce as the economy opens up. Many employees have struggled through the pandemic. Financial wellbeing is one of the biggest drivers of workforce stress: 46% of people with debt also have a mental health diagnosis, and 86% of people with mental health issues and debt say their debt makes their mental health issues worse.
That’s the backdrop against which Bersin filed his report. In it, he makes three essential points about on-demand pay:
The first is the benefits to employers of having an on-demand pay option in a changing and often tight labor market. According to Bersin, on-demand pay is not just another financial wellbeing tool. It addresses the root cause of financial stress, which is finding the means to effectively address short-term financial issues. Bersin cites a study from ADP that showed 60% of employees would choose a job that featured the flexibility to select pay frequency.
Another study, this one from PwC, showed that 72% of employees with increased financial stress due to the pandemic are looking for an employer who cares for their financial wellbeing. As some sectors of the labor market, most notably hospitality, struggle with finding enough workers to fill open spots, alleviating financial stress could be the difference between finding productive employees and struggling with an understaffed, high-stress business.
This led Bersin to discuss a different advantage for on-demand pay in the post-pandemic work environment, the on-demand benefits for the mental and financial stress for employees. He points out that on-demand pay, in addition to having the digital features and user experience advantages that fintechs provide, can
be accessed anywhere, and funds can be delivered by cash, card, or into a bank account. In this case, fintech helps workers view and gain access to funds and gives them real-time data about withholdings. The best on-demand pay providers will cost the employee little money. DailyPay, for example, charges a flat fee for as little as $1.99 per transaction (equivalent to an ATM fee).
On-demand pay structures are hardly consistent across a crowded set of solution providers, however, leading Bersin to his third key point. He is aware, as are many employers, that the history of using a paycheck to get an advance has had a checkered history dating back to the recent days of high-interest payday loans doled out by sketchy companies. As they evaluate an on-demand pay provider, Bersin recommends that they ask the tough questions first before diving in with a solutions provider that lacks the transparency needed to make on-demand pay a positive and usable tool for employees. For example, are the fees transparent and low? Some providers have sliding scales for access, some have no fees but ask for “tips” and some hide their fees in the fine print.
Bersin says the paradigm of an ATM for your wages makes these fees easy to communicate. A flat fee per transaction without any upfront commitment or hidden fees helps with usage.
According to Bersin, on-demand pay represents the intersection between fintech innovation and workforce strategy. As they return to work, or even evaluate their current employer, employees expect their employers to cater to their needs in the same way that brands satisfy their customer needs, Bersin says.
Without on-demand pay, it will become harder to attract, retain, and engage the workforce. As on-demand pay continues on its way to becoming table stakes for employers it behooves them to take a good look if they haven’t already and evaluate the diverse providers in the space. Getting smart about functionality and features for on-demand pay should be the first job for employers as they welcome their workforce back to the next normal.