Here’s Why Payday Is Obsolete in the Future of Work

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Clock and money represent real-time payrollIn the age of Venmo and Zelle, it’s clear that “payday” will be obsolete in the future of work  —  the near future. Several new fintech companies provide employers with real-time payroll services, and the big legacy payroll companies are close behind.

Withholding earned pay for 2-week or 1-month “pay periods” is a vestige of days gone by, serving the funds-holder but penalizing the earner.

While some companies already have introduced on-time (on-time = real-time) payment as an opt-in service paid for by employees and/or their employers, it inevitably will become the standard. This is an important option to be considered by employers genuinely committed to their employees’ financial wellness. But it only makes sense if the employees incur no fees. Employers generally don’t charge employees for other payroll services, just as they don’t return dividends to employees when they’ve managed to realize savings (say, through increased payroll system efficiencies, contracting with more cost-effective providers, and so forth.)

There is a cost… in service provider fees and the loss of “float”  (the interest employers earn on the money they’re withholding — big money, especially during periods of higher interest rates). This needs to be built into employers’ financial models.