On-demand pay (also known as Earned Wage Access) is gaining more traction in global businesses all over the world as they search for ways to maximize flexibility. By allowing employees to access and withdraw accrued pay as and when they want, and entirely independently of payroll staff, the workforce can enjoy greater freedom around their finances. Not only that but the payroll team is relieved of the administrative burden of fixed payroll cycles, so that they can add value through work elsewhere in the payroll process.
We recently held a webinar that explored why on-demand pay has naturally become the direction of travel for payroll in the months and years ahead. Sammy Molinaro, Cloudpay’s Senior Solutions Consultant, shares his views on what these developments mean from an employee, payroll, and business perspective, as well as what good on-demand pay solutions and providers look like.
Meeting employee expectations
Now more than ever, employees want to feel valued by their employers and receive experiences that better fit in with their lives away from work. This doesn’t mean simply paying them more: it means recognizing that if pay is flexible, it can better align with the demands of an employee’s life. For example, if their car suddenly breaks down and they need to pay for a repair, on-demand pay means they can access the money they need without having to rely on loans, credit cards, or debt, improving their financial well-being.
Sammy highlights that in the current economic climate, with many employees facing hardship, the importance of on-demand, flexible pay is even higher: “I think the cost of living crisis is one of the reasons that this is becoming such a hot topic so quickly. We need better ways to facilitate employees being able to interact with their income in a quicker and more seamless manner, especially in Europe where payroll frequencies are often monthly.”
He goes on to emphasize the statistic that 80% of employees would use on-demand pay if it was offered to them. This high level of awareness of the options available means that expectations on employers to provide it are also high – to the point that it can make a major difference to talent acquisition and retention capabilities. “Employees are aware, and they’re actively searching for it,” he says. “So when they’re looking for job opportunities, they’re looking for this to be part of your benefits offering – it is a differentiator.”
Common misconceptions around on-demand pay
There are some common negative perceptions that have emerged among some payroll leaders surrounding on-demand pay, leading them to shy away from adopting it. These include ideas that it’s only suitable for low-paid workers, is time-consuming and expensive to administer, promotes financial mismanagement by employees, or that it merely works the same as advances or loans.
Sammy is keen to stress that none of these are necessarily the case: “We’re only ever talking about the wages that an employee has earned up to the point that they interact with the platform. If you’re sourcing a product, it should have the ability to give you control over how much of an employee’s earned wages they have access to: you might want to limit it to 60-70% [to account for tax and other deductions].
“Also, there are many countries around the world where employee requests for payroll advances are statutory obligations. This can be a large part of the administrative work for payroll teams. So if you imagine a world where employees can just go in and request a portion of their wages through an application, and then get those wages in minutes, that can alleviate some of the payroll administrative burden.”
The global businesses leading the way
Sammy concludes the webinar by exploring a stand-out example of on-demand pay working successfully within a large global organization. Fashion giant Ralph Lauren was one of the first adopters of Cloudpay NOW, our on-demand pay platform, and has rolled it out to 5000 employees across 12 different countries in the EMEA region. The results have generated an especially positive result from Paul Simpson, Ralph Lauren’s Senior Director for EMEA Payroll & Benefits.
“The biggest gain for Paul was the fact that he was able to bring something to the greater C-suite,” Sammy explains. “It helped them meet their business objectives, which is not something that payroll is often able to drive within a business. From that perspective, this was a big gain for him.”
To get a more detailed view on how on-demand pay is reshaping employee experiences and payroll operations, watch the full webinar at any time here.