Almost every aspect of human life has become more efficient and easily accessible. However, one significant part of life that affects nearly all of us has moved the other way – our pay! While banking and electronic transfers have enabled some improvements to the movement of our money, most workers are paid just once a month, fortnightly if they’re lucky. The reason for this, employers claim, is that they need to maintain their cash flow and limit expenses to the business – it costs time and money to run payroll. This might make some sense, although the resulting rise of payday lending in Australia to cover income timing shortfalls felt by employees highlights the downside of such a system.
At the same time, increasing the frequency of the payroll process isn’t a great solution. It’s not sustainable to increase costs to the business, so it begs the question – is there another solution that benefits everyone? Fortunately, there is. Paytime offers Earned Wage Access solutions, allowing your employees to access their earned pay whenever they want, for a small platform fee that is less than the cost of a cup of coffee. Let’s take a look at how a fixed (monthly or fortnightly) pay cycle may impact your employees as well as how Earned Wage Access can improve the situation.
A Fixed Pay Cycle Pay Drives Irregular Spending
With over 60% of Australians claiming to have financial difficulties before payday, it’s not surprising that money hitting their account brings a sense of relief (or even euphoria). 58% consider payday as a ‘celebration’ and proceed to spend more than they usually would, such as a luxury purchase, new clothes or a big night out. Inevitably, this immediate rush to spend their new pay leads to difficulties later in the month, as they again fall short before their next paycheck.
It’s easy to see how this cycle perpetuates itself as there is a constant reliance on the next payday to meet bills and other financial obligations. Irregular spending is the result of infrequent pay, where employees fall into the trap of ‘spending it while they have it’. It’s a harsh reality for many workers, and it’s a tricky trend to escape from, especially when the constant overhang of credit is used to plug the cash flow gaps later in the month (every month!)
Current Solutions are Prone to Create Harmful Debt-traps
When a person lacks the cash to pay a bill or unexpected or emergency expense, what do they turn to? For many who do not have emergency savings, it’s a credit card, bank account overdraft, or a payday loan. The reality is that these options can cause far more damage than the problems they solve. They’re expensive, designed to ‘trap’ you into continual usage and are not always available when you may need them. Relying on external credit is a bad idea.
Paytime, the Alternative that Works
Paytime, an Earned Wage Access app, provides employees with access to wages that they’ve already earned. It’s not debt, and there’s nothing to pay back.
Studies have found that consumers are more likely to spend when money is not theirs. This means that Paytime users only access a small portion of their earned income. They know it’s their own money and are likely more responsible with its use, putting it towards emergency expenses and not fluttering it away. Earned Wage Access, also commonly known as wage advance, offered by Paytime helps employees avoid the burden of credit and the resulting negative debt spiral many find themselves stuck in!
Paytime Improves Financial Habits Over Time
Earned Wage Access does more than simply provide a one-off reprieve from financial issues. By providing flexible and on-demand access to earned pay and helping them avoid harmful credit, it plays a role in stopping employees getting stuck in the dreaded debt-trap. This effect accumulates, leading to an improved ability to meet future financial adversity and avoid financial stress.
Using a mobile app such as Paytime helps employees protect their future financial position and is a sustainable solution to a lasting problem. The monthly/fortnightly payday is old thinking and impacts employees more than we might initially realise. The alternative of more frequent pay is not an efficient solution for businesses either. Paytime is positioned between the two, simply integrating with your payroll process and offering a get paid early app to your employees without your business changing a thing!
Empowering your employees to have greater control over their finances is a sure-fire way to improve their engagement, productivity and loyalty to the workplace. If your company wants to challenge the monthly payday and improve your employee’s financial wellbeing by enabling flexible on-demand access to their earned wages, contact Paytime today!
