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Utah Business

New technologies are making it possible to pay employees daily. But should they be?

Should your employees be paid daily?

When Robb Holmes’s tire blew out, he could have been stranded for almost a week. 

“Normally, I wouldn’t have had the extra money,” he says, referring to the fact that the majority of his paycheck is allocated towards his rent, car insurance, and other bills at the beginning of each month. However, Holmes was able to solve his dilemma thanks to everyday pay: a process where employees are paid within twenty-four hours of their most recent shift. 

Chip, a local cookie delivery company, has recently adopted the everyday pay model, and as one of their bakers, Holmes was able to access the funds he needed for his tire almost right away. After confronting his defunct car, he quickly thought, “Oh, I’m getting paid from Chip tomorrow―there’s eighty bucks! That’s enough to get a tire change!” 

Ultimately, he says, being able to access his paycheck on a daily basis saved him from having to wait six more days―until payday―to fix his car. 

A brief history of bi-monthly paychecks

According to Nelson Lichtenstein, a professor of history at UC Santa Barbara, worker compensation in the nineteenth century was synonymous with indentured servitude. Agricultural workers were tied to the land and were paid in the form of food and shelter while sailors were paid once every two years for their daunting work at sea. 

As industrialization came about, factory laborers were compensated for their toils once a week―on Saturday afternoons―with the understanding that they could spend their paychecks on drinks at the local pub that evening and use Sunday as an opportunity to recover from their stupors. 

In the 1930s, Social Security came into existence, followed in 1942 with the first payroll tax that encompassed the entirety of the working class. This time also brought the advent of primitive computers that could manage massive paycheck calculations, and checks came to be used in order to properly report income tax information to the Treasury. 

In order to organize this information for the tax regime, and implement a predictable schedule for the transfer of information in regards to employee salary, employers adopted the traditional model of bi-monthly paychecks. As a result, it appears that we are still operating off of a payment model that was born of the crude technology available to us in the 1940s.

It’s clear that our technology has evolved exponentially since the second World War, however for the first time in history, employee-first ideologies are beginning to come to the fore. As companies expand, employers are exploring options to provide the best employee experience in an effort to attract and keep top-notch talent. 

But, will everyday pay be more than just another company perk? Can it really offer an opportunity to help individual employees? 

What everyday pay does for employees

When Ron Ross’s daughter went off to college, he found himself faced with a distinct predicament: even though his daughter had a job, she continued to come to him for short-term loans to cover expenses that popped up between her scheduled paychecks. 

From what Ross could tell, there seemed to be a disconnection between when his daughter worked, when she received her paycheck, and when her bills were due. “People who are living paycheck-to-paycheck have earnings that are locked up in the pay cycle,” he explains. “If they had access to those earnings, they wouldn’t have that issue.”

This challenge prompted Ross to cofound Everee, a payment and HR management company that helps companies give their employees access to everyday pay. “We service companies that have a lot of gig workers or contractors,1099 employees, full-time and part-time employees; we built a solution that’s flexible and that can facilitate paying any type of employee or arrangement,” Ross says. 

“This new pay model points to the formation of an environment where employees feel connected to a larger sense of purpose―something that is becoming a priority for many startups.”

Chip has been working with Everee to deliver everyday pay to its employees since January 2020. “I was looking for a benefit I could offer to my employees,” says Sean Wilson, founder and CEO. “Because as we all know, it’s a competitive market out there. I felt like this was one of those benefits that everyone could enjoy. No matter what position you’re in, everyone thinks, ‘Man, it’d be nice to have that money in my bank account a little sooner.’” 

Connor Brookes, for one―manager of Chip’s Provo location―found it nearly impossible to cover the cost of his undergrad education with the bi-monthly pay model. Budgeting for his living expenses and his school payments every couple of weeks was too challenging: he repeatedly found himself falling short when it came to making his payments, and, consequently, was forced to take out a personal loan to cover his tuition.

After utilizing everyday pay, Brookes says that he was able to pay his tuition on time without the added interest of a personal loan, thereby saving him an extra cost. “I think [everyday pay is] really useful,” Brookes says. “It also makes it very convenient to get quick help if you need it.” 

“It takes a little bit of adjustment for a lot of employees,” Wilson notes. “But over time, they start to get comfortable with the idea. It just reduces the time between when you do the work and when you get paid, so I think there’s a little bit more of that instant gratification and reward than people are used to.”

However, it seems that everyday pay transcends the simple notion of instant gratification. Holmes tells me, “Today, for instance, I worked a six-hour shift. I’m getting paid tomorrow, and I already paid my credit card bill that’s due on Friday. I’m not getting a late fee; I’m paying things on time.” 

As an hourly employee, Holmes is able to mentally keep track of his hours spent working and effectively budget for his bills on a day-to-day basis. The result is that he stays ahead of his payment deadlines and avoids late fees. “It’s a lot harder and more stressful to budget a bigger paycheck every two weeks versus getting paid daily,” he says. 

For Brookes and Holmes, it’s clear that everyday pay offers a sense of personal agency―an opportunity to have more control over their finances on a daily basis, and as a result, more control over their lives. 

What everyday pay does for employers

At the beginning of 2020, twenty-one states across America increased their minimum wages. As the cost of labor continues to rise on a national scale, small businesses and burgeoning startups are striving to find clever ways to keep up with the demands required to recruit talent. 

Many founders understand that, in order to compete for high-level workers, they must offer benefits such as more paid time off or the opportunity to engage in mentorship programs. However, as employee expectations continue to rise, the resulting perks end up costing companies. 

“People who are living paycheck-to-paycheck have earnings that are locked up in the pay cycle,” he explains. “If they had access to those earnings, they wouldn’t have that issue.”

-Ron Ross

As the cofounder of Everee, Ross employed his deep understanding of how employees think in order to create something that would meet a clear demand: “I think there will come a day when employees expect to get paid on a much faster cycle. If you think about it, employees are actually creditors of their company―they’ve worked and provided value to their employer but haven’t captured that value in exchange in the form of a paycheck.”

By offering access to funds within 24 hours of working, companies can satisfy a very real need that their workers have. This new pay model poses a potential solution to the employee demand for lifestyle benefits―and it comes at a reduced cost for companies when compared with paid time off and other perks like extraneous wellness programs and company-paid gym memberships. 

However, a specific challenge employers will have to navigate when it comes to everyday pay is making an adaptation in their HR processes. Currently, HR departments organize their payroll activities to reflect the bi-monthly model, meaning that all deadlines are curated to fit this schedule. With everyday pay, companies will have to adapt by utilizing micro-processes that can be used on a day-to-day basis: keeping track of employee clock-ins and clock-outs and adjusting any errors resulting from workers forgetting to properly execute these tasks, will have to be reformatted to fit a daily calculation model. 

“We had to implement a system where we had management verifying the hours and then [have] HR and corporate verifying those hours and making sure that that was happening on a daily basis so we could continue to get everyone paid,” says Wilson. He thought this would be a difficult administrative task but found that it actually benefited his entire company.

He says that the process is kind of like cleaning your house. The idea is that it’s easier to tackle a few chores every day than it is to let many tasks pile up over a longer period of time. Chip now responds to changes in real-time, and has gained better labor data. As a result, Wilson has seen his company’s administrative procedures improve steadily. The commitment to a daily cleanup on the HR front has led to better organization overall. 

The future of work

The concept of everyday pay signifies a shift from our focus on developing technology for the sake of growing businesses, to a focus on how technology can help make people’s lives the best they can be. This new pay model points to the formation of an environment where employees feel connected to a larger sense of purpose―something that is becoming a priority for many startups. 

Everyday pay is not only evidence of an emerging perception of how employees operate in their lives; it’s an opportunity for employers to build unprecedented empathy for the individuals who contribute to their visions.