Pay Apps - What are They and Should we be Using One?
How do They Work?
Allows hourly workers access to wages they have already earned before receiving a scheduled paycheck.
• The apps pair with the employers scheduling and payroll system.
• Companies in this space: DailyPay and PayActiv. They are actively raising VC funds and continue to grow.
• Each app has different stipulations i.e. frequency and the amount of funds employees can withdraw.
• How popular are pay apps today? Hundreds of thousands of employees are using pay apps on a daily basis.
• Big companies have taken notice – i.e. Uber, McDonalds, and Walmart.
• Looking forward: ADP and Payroll companies will look to develop their own platform.
Benefits for Employees:
• Small business with hourly workers can benefit.
• Employees are paid each workday
• 70 percent of U.S. households live paycheck to paycheck.
• Forty-six percent of Americans don’t even have the liquid funds to cover a $400 emergency.
• Employers report their workers are willing to work longer hours and more shifts when they receive an immediate return on their efforts.
What Are The Disadvantages Of Pay Apps?
• Budgets may be more difficult to follow.
• Benefit issues i.e. 401k or pension contributions.
• Behavioral economics: workers save more when auto enrolled in a 401k with a defined contribution amount.
• Instant gratification effecting enrollment in other employee benefit programs.
• Employers can make sure all deductions are accounted for and incorporate features to earmark funds for such obligations.
• Don’t forget about state wage and hour laws.
• Employees pay is still based on an hourly wage rather than a daily rate.
• Precautionary measures: allowing employees to access only a portion of their wages after each
• Several states maintain laws preventing employers from mandating that employees be paid via direct deposit or a “pay card.” If your business operates in any of these states, you must give each employee the option to use the pay app, rather than forcing them to do so.
Brett Owens is an attorney in the Tampa office. He devotes his practice to all aspects of labor and employment law. Brett has litigated employment disputes throughout state and federal courts in Florida, including, individual claims of discrimination, harassment, and retaliation, trade secret and restrictive covenant disputes, and class and collective actions under the Fair Credit Reporting Act and Fair Labor Standards Act.When employers are faced with litigation, Brett strategically relies upon... View Full Profile
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