A report issued two years ago is providing employers with a reason to rethink their policies when it comes to employee payroll.
According to an article written by Ryan Golden for HRDive, the report released by CareerBuilder in 2017 indicated that as many as 78% of workers in the United States are living paycheck to paycheck today. The report further suggests that this trend is not just affecting workers who are in low paying jobs but also those who earn between $50,000 and $99,000 annually. Even 9% of those earning $100,000 or more are affected.
A survey issued that same year by advisory firm Willis Towers Watson concluded that more than 30 percent (37%) of all workers could not come up with $2,000 in the case of an emergency. According to managing director of retirement at Willis Towers Watson, Alan Glickstein, such events that fall outside of regular pay periods could cause workers to put themselves deeper in debt by relying on credit cards, or worse, payday lenders.
The cause of this may be in the age-old practice by companies and organizations to issue paychecks on a bi-weekly basis. Safwan Shah, founder, and CEO of employee finance platform PayActiv, is uncertain where the tradition of biweekly paychecks began, but he believes it may have its roots in slow internal approval processes within companies, the banking process, or even supply issues. “Employers are responsible for creating the problem in the first place,” Shah told HRDive.
Part of the solution is that PayActiv and other companies have created apps that allow workers to access some of the pay that they have earned within a current pay period to help them for those times when the need for emergency cash arises. Walmart has had success by offering its employees the ability to access up to 50% of their pay for the current month through its Instapay program which utilizes PayActiv’s technology.
Both Shah and Glickstein believe that while offering workers earlier, access to their pay only provides a short-term solution. According to both men, the real focus needs to be helping workers to better manage their financial lives and can be best accomplished by offering workers access to education and planning.