On-demand wages are coming soon. Here’s what you need to know and why you and your team might love this payroll process.
On-demand wages aren’t anything new, although the technology and ease of record-keeping are definitely better than ever. You’ve likely used an on-demand wages system if you’ve hired someone to shovel your walk when it snows or paid a neighborhood kid to mow your lawn. It just means that you pay someone the same day they do the work.
Now, this might sound complicated when it comes to payroll. But gone are the days of manually adjusting payroll and tracking advances on paychecks. In fact, with most payroll services, you don’t have to do much more than submit the hours, if that.
The concept is relatively easy. When one of your employees finishes a day of work, they can opt to get paid that same day. There are a lot of reasons cleaning businesses and their employees like this type of system. But before you jump in, there are some essential things to know.
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On-demand wages: What commercial cleaning companies do and do not like about them
Think of this as a pros and cons list. Like most things, there are positive and negative aspects to on-demand wages. Sometimes that’s the process itself, and other times it’s dependent on who your payroll servicer is. And sometimes a positive for you might be a negative for another company.
Let’s look at some of the reasons why your business might appreciate on-demand wages and a few reasons you might not like that service.
1. Your payroll provider may already offer it. Numerous payroll services offer on-demand wages to their customers either directly or through third-party apps. If you’re interested, get in touch with your provider and see what they have available.
2. It may not cost anything. First, let me say to be very cautious here. Some payroll services offer on-demand wages at no extra charge as a benefit to their customers. Some, however, may charge either the employer or employee a service fee. That’s not necessarily a negative, but it is worth being aware of.
3. Your employees have easy access to wages. We all know that surprise financial issues come up. For example, the dog has to go to the vet, or maybe you need to replace a tire on your car. If your employee has to wait two weeks for their next paycheck, they could be without the funds to pay for these expenses for some time. With on-demand wages, they have access to their earnings for any shifts they’ve already worked.
4. It gives you a competitive hiring advantage. You want to hire and retain the best team you can, and to do that, you have to stand out as an employer. One way to do that is through offering benefits like on-demand wages.
5. There’s no risk. In contrast to payday lending or borrowing against a paycheck, there’s no risk. It’s not a loan. Employees have already earned the wages, so it’s already their money; they just happen to be getting it a little early.
6. Limits high-interest payday lending. Payday lending is, in theory, great for people who need fast access to cash. They borrow against their paycheck with a small loan through a payday lender that is scheduled to be repaid within two to four weeks. The problem is that, according to the Consumer Financial Protection Bureau, the interest on these loans is astronomical, with the annual percentage rate averaging around 400%! Many of these lenders don’t list their fees or rates online, either, making it difficult to know precisely what you’re getting into. With on-demand wages, it’s much less likely that your employees will end up in situations where they need to access payday loans.
7. There’s no extra work. With automated systems and apps that allow employees to access their payroll information, on-demand wages don’t require any extra work on your part.
8. Reduced turnover. When a company offers benefits, whether that’s health insurance or on-demand wages, it sends a message that employees are valued. And valued employees stick with their companies.
9. Compliance. While most reputable payroll service companies will help you ensure compliance, don’t assume it’s a given. You may run across issues with taxes or other payroll compliance factors. Additionally, some states have specific laws around the practice that may impact how, or even if, you can offer this benefit. This isn’t anything that should make you avoid on-demand wages, but it is something worth paying attention to.
10. Financial liquidity. This might be the biggest drawback to providing a benefit like on-demand wages. Put simply, you need the money in your business account in order for your employees to have access to their pay. Again, some payroll providers will help you ensure this isn’t an issue.
In the end, offering on-demand wages can be a benefit to you and your employees. But you have to read the fine print. Talk to your provider and you may find it’s a benefit you can easily take advantage of.
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