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How Daily Payroll is Impacting Business: Challenges, Benefits, and Potential
by Eden • Wed, 18 Jan 2023 07:01AM
Daily payroll is one of the most interesting global trends that few payroll and HR professionals are familiar with. In light of the rise of the gig economy, daily payroll is worth taking a closer look at.
There are a lot of critical things to consider when managing employee payroll. One of them is the payroll cycle. There are some payroll cycles that are commonly used by companies such as bi-weekly and monthly cycles. But today, a revolutionary payroll cycle trend is emerging and that is daily payroll.
The development of modern payroll technology and payroll solutions is one of the factors that make daily payroll popular. On the other hand, it also happens because of growing worker demand and the tight labor market.
Companies are hoping that providing daily payroll can become a beneficial perk to attract and retain the most qualified talent. However, there are a lot of factors to determine whether the daily payroll system is effective for your company, or if the other cycle still fits better.
What is Daily Payroll?
Daily payroll or on-demand pay is an alternative payment method that allows employees to receive payment after each workday or collect several paychecks that they already earned before the scheduled payday. This system gives employees more flexibility and gives financial reassurance if there are any unexpected expenses.
CBS News reported that a lot of companies, including worldwide fast-food chains and retailers, are now using this system, allowing their workers to get paid every day. Although, there are several different ways to run daily payrolls. According to Workstream, some companies only allow employees to request and instantly withdraw up to 50% of their daily pay. The rest of their wages will be paid on the designated payday.
To determine whether this system or other daily payroll systems, is right for your company, you should first look at the pros and cons of daily payroll. Then you should decide if it fits your company's needs and situations.
Potential Benefits of Daily Payroll
Daily payroll has become popular not without a reason. Maybe this policy looks like it is more focused on increasing the welfare and flexibility of employees. However, in reality, this policy also has a lot of potential benefits for employers.
A More Productive Workforce
Employers that offer daily payroll can be considered an employer that cares about their employees' well-being. Because somehow, if employees are having financial challenges, they can potentially get distracted and stressed out.
According to Business News Daily, running a daily payroll might be giving employees a larger financial safety net. As on-demand pay or daily payroll will affect employees' financial flexibility, employees will potentially become less distracted and therefore become more productive at work.
Increased Employee Engagement
Furthermore, employers can build more trust and satisfaction by offering employees the perk of quick, private, and secure access to their earned wages. When used as a recruitment incentive or engagement tool, it can increase employee engagement, improve employee satisfaction, and reduce turnover.
Daily Payroll Challenges
By implementing daily payroll, there are a lot more layers of complexity that employers have to face. This will create more room for errors, thus employers need to be more cautious and thoughtful when running daily payroll.
The first challenge that employers have to face in running daily payroll is to implement it in compliance with applicable laws. Managing this data, added to the daily payroll calculations, will ultimately cost the company more. Additionally, whenever an employee withdraws funds, there might be a transaction fee or transfer fee.
Although, depending on company policy and regulations, these extra costs may also be billed to employees. So to reduce unnecessary confusion, you can start by offering this benefit only to interested employees, explaining the terms and conditions, then developing the next steps based on that.
Need Additional Training
Several sources mention that daily payroll will eventually change everyone's approach to budgeting and spending. In the transition from monthly or bi-weekly payroll to daily payroll, some employees might forget to save funds for big expenses. Netchex suggests companies give employees additional financial planning training to smoothen the transition process to daily payroll.
Also Read: Top 3 Payroll Trends to Watch in the Near Future
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