How faster paychecks became a recruitment tool
Companies that give employees early access to earned pay don't want to be lumped in with payday lenders, so they are putting a new spin on their pitch: It's a tool to lure and retain valuable workers.
Gig economy companies like Lyft already do this for drivers, who may need instant access to funds to refuel and maintain their vehicles. In other sectors — such as fast food and health care — DailyPay allows companies to offer employees immediate access to money they've already earned, and the New York-based company is adding saving tools to provide a more complete financial service to its clients.
"It's been fascinating in how it has become a way to attract new talent," said Jeanniey Mullen, chief innovation and marketing officer at DailyPay. "If you can pay someone $11 an hour, and someone else pays the same, who are they going to pick if you also tell them they can get their money every single day if they want to?"
That sort of offer to an employee is becoming increasingly common in the digital payments era."It's a really interesting idea, one that initially came out when Stripe set that option up for Lyft and its drivers, in letting them take money out of their pay when needed," said Thad Peterson, senior analyst with Boston-based Aite Group. Those drivers get access to money through ExpressPay, the Lyft-branded version of Visa Direct or Mastercard Moneysend.
"What Lyft discovered was the drivers were sometimes using it to buy gas so they could keep working," Peterson said.
It's why the access to earlier pay has found its niche with Uber drivers and in other gig economy businesses as well.
A significant number of people live paycheck to paycheck, and those individuals are going to run into cash flow problems, Peterson added. "This idea of payroll access really addresses that point," he said. "This is a really smart product and it actually is part of the launch of a trend."
For DailyPay clients, it has become the benefit that resonates most widely with employees.
Quick-service restaurants, in particular, are seeing DailyPay as a way to reduce turnover in an industry generally close to a 100% attrition rate. In using either the DailyPay app on their smartphones or the web-based app, employees with DailyPay can monitor how much of their payroll balance is available before payday, choose an amount to withdraw, and tell DailyPay which account to send it to.
"Those companies paying with DailyPay are seeing an average of 40% reduction in turnover, and one client in particular, Parker's Kitchen, has had a 71% reduction. That is real money for the bottomline," Mullen said.
Executives at Parker's Kitchen, a chain of more than 50 convenience stores across Georgia and South Carolina, view DailyPay as the benefit that boosts employee morale and translates to better service for customers.
That customer service "starts with providing the best possible work environment for our employees, both at the worksite and in their lives outside of the job," said Corey McClimans, director of human resources at Parker's. "DailyPay empowers our workforce with financial freedom to access their wages whenever they need them, not just on payday."
Employers using DailyPay decide how to present the benefit and which employees can use it. Once DailyPay integrates with a company's payroll system, all employees are eligible for the access. But DailyPay works strictly with employers, not individual employees, because it needs the accurate rate and hours each employee works.
"Some employers will test it a bit," Mullen said. "They may use it with hourly employees first and then with salaried employees. But we can customize it any way an employer wants."
DailyPay has an artificial intelligence filter that analyzes payroll data to assure the available balance shown on the app takes into account the amounts needed on actual payday for the employee to cover taxes and other deductions.
DailyPay currently has more than 200 employer clients working on the platform across various industries, making the wages access available to millions of employees.
"People overlook how payment can be the most important part of your experience with the company," Mullen said. "It's kind of the reason you are there, to get paid, and how you do it and the ability to create this positive pay experience can impact the bottom line."