The U.S. labor shortage is a major issue for businesses.
Ninety-percent of businesses say it's difficult or very difficult to find workers right now, according to a report from the Chamber of Commerce. Although job openings reached a high of 8.1 million in March and restaurant and retail traffic is up 47% since January, many businesses are reducing hours because of a lack of workers.
The current state of affairs spells opportunity for forward thinkers who are willing to take risks and explore new ways to recruit.
Read More: Does your payroll need a makeover? How earned wage access can help employees take financial control
There are many things businesses can do to stand out and hire faster including offering hiring bonuses, increased benefits packages and better work-life balance — but there's one thing they're overlooking: faster pay.
It's estimated that anywhere from 56% to 76% of Americans live paycheck to paycheck and contingent workers are in an even tougher spot. When we surveyed independent contractors about their finances, just 15% had enough to cover an emergency expense. The disconnect from when bills are due and when they get paid can set off a devastating cycle of debt. People often turn to credit cards, payday loans and payday advance apps to make ends meet.
Americans paid off $83 billion in credit card debt in 2020. It was a record high, but a pick up in consumer spending following the lifting of COVID restrictions could undo recent progress in debt reduction. Credit cards are an expensive way to borrow money, with rates hitting close to 16%, on average, down from a peak of 17.8%.
Read More: Long story short: How your HR department can manage both full and part-time employees
While other industries struggled during the pandemic, payday loans and other high interest debt thrived. Analysts found many Americans used their relief funds from the government to pay off debt out of necessity. All the while, payday loan interest rates skyrocketed above 500% in seven states.
Payday advance apps charge workers a fee for what's rightfully theirs already, and they automatically withdraw repayment from a person's bank account, which could result in overdraft fees. These apps claim to be an affordable solution to getting cash quickly, but the reality is these are just a band-aid to what's really broken: the two-week pay cycle.
The two-week pay cycle has been around for about 80 years, borne out of the need for the government to collect social security and payroll taxes. Businesses found that it was more efficient to deduct and calculate taxes every two weeks to have regularity in the process. But that was decades ago. The technology exists today to pay people daily and make it simple.
Read More: Ernst & Young is tackling complicated payroll processes with this new app
In our survey, we found 72% of hourly workers and 91% of contract workers want daily or weekly pay. And yet, the U.S. Bureau of Labor Statistics says 67% of workers are on biweekly or longer pay cycles.
The problem is that the two-week pay cycle has become institutionalized and most businesses are unable to adapt. But coming out of the pandemic, especially when competition for workers is so high, there's real opportunity to innovate.
Paying workers daily can help you stand out as an employer and attract more workers. Imagine being able to list "Start today, get paid tomorrow" in your job posting. For people who have been out of work or hard hit by the pandemic, this immediate reward for their work can be a true game-changer.
Read More: Exclusive research Faster wage payments disrupt the traditional payday
Our data confirms 82% of independent contractors said they would be more likely to work for a company if they got paid on the same day as the work performed. When faced with two similar jobs, if one pays biweekly and one pays daily, it's a no-brainer to pick the one that gives you access to your earnings faster.
Having access to wages in real time gives workers the ability to budget better, save more frequently and handle unexpected expenses without having to turn to credit or other debt.
Read More: ADP rolls out new app to help employers manage payroll
Every payroll administrator or business owner is going to shudder at the thought of processing payroll daily. But that's because they're thinking about all the busy work that comes with antiquated payroll software.
When you remove the operational headaches that compound over a pay period — tracking down time for approval, fixing pay discrepancies — and instead are able to solve issues quickly in real time, paying more often can actually save you time. Modern payroll tools are built like consumer apps that make it simple to verify hours and run payroll in just a few swipes on your phone.
The way we pay is changing. Venmo your friend in an instant, tip your delivery driver in seconds and pay your workers right after a shift. That's the future. If you stop delaying pay, you can start hiring faster today.
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August 04, 2021 at 07:00PM
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The two-week pay cycle is broken, but employers can fix it - Employee Benefit News
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