In recent years, apps have allowed consumers to order a driver or a hot meal to their door in minutes. People are becoming accustomed to instantaneous services, “yet I have to wait for batch payroll,” said Jason Lee, CEO and founder of DailyPay, a software company based in New York City. Modern workers see this dissonance, but technology can improve the experience of receiving compensation — as it did for taxi service and food orders.
For people living paycheck to paycheck, the ability to receive pay at the end of a shift is enticing. These workers often lack savings, are late on bills and incur late fees as a result, further affecting their ability to save, Lee said. “It’s not the employer’s fault; it’s just that the payroll system is very antiquated,” he said. So his technology helps employers modernize pay and get money to workers ahead of their traditional paychecks. Workers use it an average of 1.2 times per week to receive an average of $66. Business results from this service are impressive: retention among DailyPay clients improved 41 percent, and they can fill roles 52 percent faster, Lee said.
Despite these results, global companies with traditional payment systems could face challenges when using alternative methods of payment. According to the Bureau of Labor Statistics, biweekly paychecks were the most common frequency of payment in 2013, with 36.5 percent of private U.S. businesses using this two-week pay period. Similarly, 32.4 percent pay employees weekly. Challenges that human resources departments could face are changing these legacy systems, as well as finding how to implement overall pay rules and practices, said Tanya Jansen, co-founder of beqom, a cloud-based compensation software provider based in Nyon, Switzerland.
Every country has a different way to define pay for workers, and regulations and taxes add to that complexity. “It’s pretty much different within each geography and within different pockets in those geographies,” Jansen said. The more variety in payment methods and frequency, the more complexity there is to manage. “If you’re standardizing the rule across the board, then it becomes much easier,” she said.
“I think it would be an administrative nightmare for payroll,” said Charles Fay, a professor at Rutgers School of Management and Labor Relations teaching human resource management. Shift-end pay was prevalent in the 1920s, when a paymaster administered cash payment to workers at the ends of shifts, Fay said. This was common practice for blue-collar hourly labor. Compared to now, though, there are deductions for health care, Social Security, taxes, Medicare and more, which would make daily payouts more complex to calculate.
Another emerging form of compensation is cryptocurrency. “Crypto is good in places where markets are relatively unstable,” said David Madden, partner in advanced technology and private equity industry practices at DHR International, an executive search firm based in Chicago. Especially in developing regions, cryptocurrency could be more valuable than the area’s cash. Where there is currency risk, cryptocurrency will likely be a major player in compensation, Madden said.
Pitfalls with cryptocurrency payment are varied. First, the volatility of the currencies mean it could be worthless one day; a lack of checks and balances mean it’s ripe for fraud and risk. Finally, some people prefer the stability of cash, Madden said.
Still, there is value in personalizing payments. If companies don’t keep up with the current trends in this area, “they’re not going to have as much access to talent,” Madden said.
As younger talent makes up an increasing portion of the workforce, business leaders must cater to their needs. These employees are less motivated by salary and bonus than others, Jansen said. If they don’t feel they are paid fairly or in a way that suits their personal needs, they will seek other employment.
“Employees are what drive a company’s success,” Jansen said, adding that business leaders should never underestimate the power of employees feeling that they are treated and rewarded fairly.
Lauren Dixon is a senior editor at Talent Economy. To comment, email email@example.com.Filed under: Talent EconomyTagged with: crypto, cryptocurrency, paycheck, payment, personalization, retention, talent