Key Podcast Highlights
Is Same Day Pay Right for Your Business?
- One of the biggest problems small businesses face is attracting and retaining workers. If you consider that 40 to 60% of Americans live paycheck to paycheck, offering same day pay can be a good way to attract workers.
How Does Same Day Pay Work?
- The best way to administer same day pay is by working with a payment platform and issuing debit cards to your workers. The debit card will have your workers earnings on it and they can then use it at retail stores. When your workers use their debit cards, the payment platform gets paid by the merchant advances. You don’t have to pay anything to the payment platform yourself.
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Hey everybody, it’s Gene Marks and welcome to another episode of the Hartford Small Biz Ahead podcast. Thank you so much for joining me. This week I wanna talk to you about paying your employees on the same day. Whenever I bring this topic up to business owners or people that I speak to, I always get the eye roll because people are like, well paying it on the same day is… seems like an administrative burden and I don’t know if my cashflow can support that. And that’s not really the case. So, first of all, let me just be clear. Go ahead and Google and research this, but it’s like somewhere, anywhere from 40 to 60% of American workers are living paycheck to paycheck. So you’ve got a lot of people that are out there that do not have many savings and are really kind of scraping on the line.
A lot of these people are hourly workers as well. Now listen, I’m sure like many of my other clients, your biggest problem is attracting and retaining good workers. So, what do you do to do that? Well, let me offer you this suggestion. Offer same day pay to your workers. It’s also called earned wage access as well. So, I don’t wanna sit there and tout any specific companies doing this on this podcast, but you can google same day pay or earned wage access and you’ll find lots of companies out there that, that do this. But lemme tell you what the better companies do and how this works, because first of all, it doesn’t have to change anything you’re doing with payroll and it doesn’t have to cost you a thing to do. So, same day pay or earned wage access, basically works like this. You tell an employee like, “Hey, you work for me, you’ll get paid that day, or at least 50% that day, and the other 50% at the end of the pay period.”
So some of these same day pay platforms work like this. Somebody works for you, they put in their time card and after that day of working, they get 50% of their pay, and then the other 50% comes at the end of the pay period. Other, same day pay or earned wage access platforms work differently. They will pay up to a hundred percent of what that worker owned within the next 24 hours. Now, in both of those cases, you have a scenario where you don’t really have to pay anything out of your own pocket to do this. Why? Because the companies that provide this service, they actually, do this with making their fees the other way. To set up earned wage access or same day pay, the best way to go about doing it…
And by the way, there are many of options. I mean, you can do it through a wire transfer, you can do it through a payroll transaction. But the way it works the best is you issue debit cards. So somebody gets a debit card and the earnings for that day get placed on the debit card, and then of course, the person could use that debit card for whatever purposes they want to do. Why you wanna do it this way is this reason. First of all, it’s the easiest way to do it. And for many of the same day pay or earned wage access platforms, the money that gets transferred on the debit card is generally used at retail stores. People buy groceries or whatever and they get merchant fees for that. So the platforms get paid from the merchant provider, not from you.
So let me make sure we’re clear on this. You sign up for one of these services, a same day pay or an earned wage access platform and if they’re a good one.
You don’t have to pay anything or your employees don’t have to pay anything. They get their cut from the merchant advances when they use the actual debit card. Hopefully that makes sense. And again, the employees do have options. They can choose other forms of payment, but sometimes there are fees associated with them. So if you do it the debit card route, it really works well. Now, if you have a same day pay or an earned wage access company working with you, they do all the calculations for payroll. So I know you’ve got health insurance and maybe a retirement plan or other types of benefits, taxes, things that need to be taken out.
You don’t worry about any of that. They do all those calculations. So even if somebody is getting their pay on that day, they will do the calculation to see what should be allocated to them for those benefits and those other type of withdrawals, including taxes. Also with a good same day service or an earned wage access service. You don’t have to change your payroll periods. Some people are like, “Oh my God, that’s gonna cost us, because my cashflow can’t support, I gotta pay every day.” That’s not the case. You can set it up in such a way. So if you’re paying your workers weekly or biweekly, you still fund payroll weekly or biweekly even though these people are getting their money in. And that’s just the way the services work. And again, they can earn money off the interest float, I guess, their merchant fees can pay for it.
When I talk to some of the merchant… some of the same day pay or earned wage access companies that do provide this, they say it’s a slam dunk. The reason why it’s difficult for them to sell their services is because, it takes some setup time. And, it’s not that the setup time is that hard, it’s just we’re all busy. So setting all this stuff up, it takes a little bit of time to do. And then of course, you gotta educate your employees and explain to them how this works. But let me assure you something, and across the board when I’ve interviewed people that have been using these services and I wrote a piece on this recently. You have to understand that like people love it and lot of employees go for it, but a lot of ’em do. Both salary and hourly people…
They can choose it one week and not choose it the next week. So it’s completely up to their discretion. What this is, is a recruiting tool. When you’re looking for a good hourly worker in your business and you’re competing against the guy up the street, well, if the guy up the street is not providing same day pay, and you are, and again, 40 to 60% of these workers, find themselves living paycheck to paycheck, that could be the difference between hiring that person or losing them to somebody else. So hopefully I’ve convinced you, same day pay or earned wage access systems. This is not a scam. This is not a joke. I have plenty of clients and companies that are out there that use these systems and they use it as a great recruiting and a retainage tool. It doesn’t have to cost you anything other than the time you put it at the very beginning to get things set up.
And even that’s not that big a deal. Consider a same day pay system or an earned wage access system. Go ahead and Google those words. You will find the companies that do that. Get an education about it… could make a big difference to help you find good workers and retain them as well. My name is Gene Marks and you’ve been listening to the Hartford Small Business Ahead podcast. I hope this little bit of advice helps you to run your business. I know same-day pay has really helped a lot of my clients. If you need any advice or tips or help in running your business, please visit us at smallbizahead.com or sba.thehartford.com. Again, my name is Gene Marks. Thanks so much for listening. We’ll be back to you next week. Take care.
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