In 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.
In 2019, employees filed a class action lawsuit against a prominent employer for allegedly selling out its workers’ 401(k), costing the plan tens of millions of dollars in excess fees and underperformance, in exchange for mega-donations and lavish personal gifts. These shady dealings with employees’ savings were being finagled at the same time financial wellness program promotions admonished employees to “understand their values and get their finances in order.” (Learn more in my Financial Whatness? article.)
On the other hand, Dan Price of Gravity Payments, who, in 2015 raised his company’s minimum wage to $70,000 per year while slashing his own salary, launched a plan in 2019 to establish the same healthy wage for employees of a new acquisition in Boise, Idaho. Mr. Price has his naysayers, but you’ll be convinced he understands his values when it comes to employee wellbeing — financial and otherwise — after you listen to this interview:
S4 EP13: The CEO Who Radically Cut His Pay to Give His Employees a Radical Raise
You know those organizational inventories we recommend for other dimensions of wellbeing? Before launching a physical wellness program, for example, we conduct audits of workplace factors that influence physical health, like pretty stairwells, healthy food in vending machines, and so forth. Before launching a culture-of-health strategy, we assess the current state of the organization’s culture, using criteria like “Is wellness mentioned in the company’s mission statement?” and “Does the CEO visibly model wellness behaviors?”
We should do the same with our ever-popular financial wellbeing strategies. Before launching strategies to promote savings, budgeting, debt management, and retirement planning, let’s assess Continue reading »
What wellness vendors sell, and what employers buy, often contrasts with what employees want. Over the course of my career, I’ve heard directly from more than 100,000 employees via surveys and face-to-face interactions, and this is one of the most valuable lessons I’ve learned.
Using an unscientific approach, I’ve summarized some of the differences below. Continue reading »