On-demand pay could become huge in 2022
A lot has happened in 2021 in the employee experience space- a new hybrid working model has become commonplace at multinational companies around the world. Global employees who previously commuted into the office five days a week and work standard office hours are now working two or three days of the week from home.
The pandemic has changed office life, the labor market and office culture-the employee experience is now uppermost in the minds of global employers simply because global employees have a lot more choice with whom they work for. This is because remote working has made them eligible to apply for roles regardless of location. Some companies have already gone 100% remote and the likelihood is that many others will follow.
Human resources managers and leadership teams at organizations everywhere are therefore, a lot more interested in anything that can improve their staff retention figures. The hiring process can be time-consuming and costly, labor pools containing specialist talent are scarce and the hiring landscape has become even more competitive.
Securing and retaining top talent will not be easy next year. There has been an explosion in HR technology packages centered around employee retention. The issue of pay is talked about quite a lot, and there is a great deal of interest among global employees about accessing their wages and salary ahead of the standard day of the month in which they normally get paid. On demand pay is on the rise and it could become huge in 2022-in this article, we'll take a look at what it is and why it matters.
A new way to pay
Global payroll is evolving, as are attitudes around the old way of doing things when it comes to receiving payment for employment services. Many global employees have the luxury of experiencing on demand services in their personal life- from their banking services to their entertainment.
This has not gone unnoticed by the HR software industry or the fintech industry this past year, who have spotted a gap in the market and an opportunity to bring this on demand philosophy into the payroll services industry. Essentially, leveraging software and digital platforms to provide global employees with access to pay they have earned much quicker than the standard ‘last Friday of the month payday’ which has been in existence for decades now.
The global pandemic has been responsible for major culture shifts in all walks of life. It is unlikely that on demand pay would have become such a big thing without the global pandemic, but the reality is, it is gathering huge momentum and global employers are beginning to take notice.
The great resignation has forced many to take notice- global corporations are losing staff in unprecedented numbers. Something has to be done to halt the slide-the largest focus of attention (aside from pay increases) seems to be on providing the most positive employee experience possible. Payroll has a role to play here, and companies who enable early pay or on demand pay access have a real opportunity to differentiate themselves in a highly competitive hiring environment.
The benefits are clear- early access to any pay bump or money earned is very attractive from an employee perspective and can be of real value with things like credit card repayments and the avoidance of bank overdraft fees. A general sense of control over finances and a reduction in financial stress would be a natural and welcome consequence. Employers would benefit from happier and more productive staff, and crucially, a key recruitment and retention differentiator. Quick or real-time access to paychecks could be key to implementing a strong employee retention programme.
Out with the old
All of this is very much connected with digital transformation- this is something that is happening across HR software, global payroll software and financial accounting. Many organizations are currently in the process of digitally transforming some of their business-critical services, and, while doing so, are open to the idea of adding software that enables on demand pay for their global workforce.
This would mean that employees can access their salary as they earn it instead of the old way of waiting until a fixed day in a month. Theoretically, in the second week of a month, they could access the wages they earned in the previous week. From their perspective, they will say why not?, they have provided services as an employee and earned that money, so their view is simply a question of why they should have to wait until a fixed period in the calendar. This is the old way of doing things, but a new day is dawning, employees are paying attention, so it is important that HR and business leaders do likewise.
The on-demand pay market, also known as earned wage access (EWA), leverages fintech technology for rapid payments and daily pay. Employees can complete their working day, and with the help of a rapid digital payment system, find that they have been paid for that day's work within an hour of them completing their working day. Digital payments technology has exploded in recent years and many fintech organizations are very confident that they can supply the technology to global employers to make this a reality.
A powerful retention tool.
Happier employees are generally more productive and loyal employees-this is just how the world works. Today, thanks to remote hiring, they have a lot of options in front of them when it comes to deciding who they want to work for. Global employers need to differentiate themselves both in their compensation and benefits packages, as well as additional perks.
It is also the case that most people today want to work for a digitally advanced organization-nobody wants to feel stuck in the past, nobody wants to work with legacy technology that belongs in a different era. Many global employees have a desire to see their office technology mirror the functionality of the technology they experience in their personal life- they have on demand movies on Netflix, they can log on to their online banking and ping money around the world at any time of the day, and they can book a flight to a far-off destination while standing in a supermarket queue. So, why wouldn't they want on-demand early pay access to wages they have already earned?
Proactive global employers who are able to interpret trending information fully understand how desirable and attractive this can be for existing employees and applicants to open positions. This can be a genuinely powerful recruitment and retention tool if handled in the right way. Attracting and retaining top talent is a major priority at multinational companies everywhere, so it makes sense that HR leaders are having conversations around business cases for technology partner investment, that can make on-demand pay a part of any rewards and benefits package.
This could turn out to be a particularly important retention tool for any organization that employ hourly workers or gig economy workers. These might be the types of employees who most value daily pay access to their earnings. Such workers will likely be drawn to the competition if it turns out that they offer early pay and their current employer does not-resignations and staff retention issues will be the result.
The future has arrived
2022 is going to be a major year in the online digital payment space- expect a lot of innovative financial services applications to come onto the market and expect many of them to offer on demand pay services to global employers.
Fintech companies will likely dominate this space and talk about just how easily their specific application integrates into a HCM or global payroll software service, for swift digital payments into an employee bank account. They will look to offer global employees flexibility, so that they can process daily, weekly or periodic bank transfers of any payment amounts earned by employees.
Global employers will need to consider the administrative implications of this- how will this impact the global payroll department, how to keep track of all the data and online bank transfers, how to process all of this in a fully legal and compliant manner. It may take some time for all of this to become clear, but what is clear right now, is that on demand pay and daily pay is going to be huge in 2022. It is time that HR managers and leadership teams were having serious conversations about this topical subject.
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