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The traditional bi-weekly or monthly pay cycle is becoming a thing of the past. Many companies now offer their employees the option of getting paid on demand - meaning they can receive their wages as soon as they earn them rather than waiting for the next scheduled payday.
However, this trend has sparked a debate among payroll and human resources professionals. While some argue that pay-on-demand is a valuable benefit that can improve employee satisfaction and reduce financial stress, others believe it can lead to financial instability and create administrative challenges for employers.
This is why we asked the members of the 17th Floor to share their take on this hot topic. While most share pros and cons, the cons outweigh the benefits. Read on to find out what these experts had to say.
Pros: Being able to access your pay before payday when unexpected bills come up.
Cons: Financial literacy in Canada is low. Employees may take out an excessive amount and not have enough funds come payday to pay bills like rent.
Cons: There is the potential for employees to get into the habit of drawing on their pay early and putting themselves in a position where they can't get ahead. And should there be a situation where an employee is on a 'paid current' pay cycle or leaves a company abruptly, it could result in an overpayment.
Pros: Convenience for the employee, improved employee morale/experience.
Cons: Scheduling issues for payroll staff (especially with the in-house payroll process), employee difficulty with managing prepayment (not having a paycheque on payday).
Pros: Added flexibility and accommodation for staff.
Cons: The extra work to keep track of the requests and payroll adjustments, and extra payroll runs if you don't have a payroll system to accommodate this automatically. Also, creating policies around such requests to ensure that all staff have equal opportunity to this option and it is handled the same way for everyone.
Pros: Looking at it from an employee perspective, if your pay for a week worked isn't received until the following week, it can help when in a financial bind.
Cons: Extra work to keep the payroll schedule on track. Also, depending on the software used, you have to make sure your payroll dates coincide with the correct pay week.
Pay on Demand can be a great thing, but it will only be successful if the employees are comfortable managing their financial accounts. As an employer, I would recommend the employer offer financial counselling before rolling out Pay on Demand.
Pros: Engaged employee retention as employees can meet their own individual financial demands.
Cons: How to calculate or claw back any pay adjustments reporting cut-offs?
Pros: If a person's credit card is full and money is needed, they could get that extra money.
Cons: Some employees will always demand their pay weekly or even more frequently and will not learn to budget—also, extra work for payroll to issue pay and to keep track of source deduction payments.
Pros: No accruals.
Cons: Oftentimes, when we have to rush a payment, errors are made at some point through the approval process. When a rush decision is required, we err on the side of caution and move to underpay, as recovering an overpayment can be quite difficult. Pay on Demand could garner an unearned amount until such time a recovery/repayment can be processed. Tracking recoveries from casual employees over long periods of irregular work could cause a lot of additional work.
Pros: Excellent feature as an employee can get the pay up to 80% of the work done and not have to wait.
Cons: From the admin point of view for the Payroll Administrator, it is difficult to keep track of large volumes, and if an employee leaves the organization and has not worked for the hours, then it is difficult to recoup it. Furthermore, an employee may ask for more advances as the cash is available every day, and they might overspend as cash is king.
Does your company offer Pay On Demand to its employees? Tell us what benefits and challenges you find with this payment modality.
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2 Comments
Paying employees on demand offers flexibility but can lead to financial uncertainty. It suits some industries but might affect employee stability. A balanced approach considering worker preferences and financial security is crucial for job satisfaction and retention.
1 year agoGreat point! Thanks, Harman.
1 year ago