If you’re still writing paper checks, or even depositing checks directly into bank accounts, it might be time to rethink your process. A modernized payroll process can save you time, headaches, and more. Employers who offer access to pay early are on the modern side of payroll. Plus, they’re helping their employees stay one step ahead of nefarious payday loans.
We’re going to go over everything you need to know on why you should consider access to pay early for your employees. After all, the future of easy payroll is early access to wages — because it’s something almost every business or franchise can benefit from.
Checks can have their benefits, however, for many businesses, there are several disadvantages. For example:
- Consumes precious time to track checks and balance the books.
- More expensive to print, replace, and pay fees for.
- Not eco-friendly, as they involve tons of paper.
- Include sensitive business information on them, elevating an employer’s risk of fraud.
As the world moves away from paper checks, many employers are looking for new ways to pay their employees. Direct deposit can be a solution, but it too has its challenges when so many employees are either unbanked or under-banked. How do you pay those employees who don’t have access to a traditional bank account?
And even employees who have bank accounts still struggle with financial stress. Direct deposit on a regular schedule can be beneficial for employees, but what if employees need access to their pay sooner than that?
For them, access to pay early can be a financial game-changer. With same-day pay, employees can get their hands on their hard-earned wages as soon as they’ve earned them — without having to wait for their next payday.
Underbanked Employees and the Paycheck Gap
For the underbanked, access to pay early helps employees get their wages early without needing a bank account to deposit checks.
The paycheck gap is the time difference between what an employee earns in a given pay period and when they actually receive their pay. For example, if an employee is paid bi-weekly but only has access to their paycheck once a month, they have a two-week or more gap between when they earn their money and when they can access it.
Without early wage access, this gap can be a major financial problem for employees who are living paycheck to paycheck. It can cause workers to turn to high-interest payday loans, incur late fees, and develop other financial problems.
But with access to pay early, employees can close the gap and get their hands on their money as soon as they’ve earned it. This helps them avoid financial stress, and also gives them more control over their finances.
For underbanked employees, access to pay early can help avoid high-interest payday loans.
Payday loans are short-term, high-interest loans that are typically due on the borrower’s next payday. They are often used by people who are living paycheck to paycheck and need access to cash quickly.
However, these loans can be very dangerous. The high-interest rates can make it difficult for borrowers to repay the loan. With an average interest rate of 176% for a full term, employees can end up trapped in a cycle of debt that becomes almost impossible to escape.
What’s more, many payday lenders use aggressive selling tactics and target low-income borrowers. This makes it even harder for borrowers to match the terms of the loan from their next paycheck, leaving them with even less than what they earned.
But with access to pay early, employees can avoid these high-interest loans altogether.
There are a few different ways that employers can offer access to pay early.
The first way is with direct deposit. With direct deposit, employers can send employees’ paychecks directly to their bank accounts. This means that employees can access their money as soon as it’s been deposited. However, this can be costly for businesses. Fees can add up, and your accountant or payroll manager will have to put in more hours to manage it at first.
The second way is with a paycard. A paycard is a prepaid debit card that employers can load with employees’ wages. It can be offered at certain intervals or even on-demand. Employees can then use the paycard to access their money at ATMs or to make purchases. This is one of the rising benefits for workers who do not have bank accounts!
The third way is through a payroll advance. With a payroll advance, employers can give employees access to their paycheck before it’s officially been deposited. This can be done via direct deposit or paycard. However, this often puts employees in a difficult situation, as it doesn’t help the pay gap and can cause employees to continue getting payroll advances. These are costly and risky to the employer as well, especially in high turnover industries where employees may quit without notice.
Is your business still using checks to pay your employees?
If so, there are other payroll alternatives that offer more benefits to you and your workers. While there are several options for providing access to pay early, the most convenient, cost effective, and lower risk to offer access to pay early is the use of paycards.
Pivoting away from checks to a digital form of early wage access, like paycards, offers several benefits, including:
- Erasing administrative payroll headaches.
- Offering you AND your workers more financial control.
- Helping your under-banked employees avoid check-cashing fees and payday loans.
So what’s stopping you from trying out a new payroll solution?
With Juice Financial, employers can offer access to pay early with paycards. You can get started in 15 minutes or less! Sign up for Juice today to stop using outdated checks and streamline your payroll process.