How to Offer Flexible Payment to Your Employees
In the past, companies had only a few ways to handle pay day. Now, modern workplaces have access to a number of non-traditional payment options. In an increasingly digital world, offering flexible payment options can be an excellent way to improve employee satisfaction. These flex pay options can also appeal to the younger generation of workers who are accustomed to fast and flexible financial options in every area of their lives.
Here's what you need to know about flexible payment options.
Why offer flex pay?
If your payroll system has remained the same for the last decade or so, it can seem like a great deal of work to add new options. But not only does adding more flexibility to your payments increase convenience for your employees, it can also help them feel less stress. If employees are given some additional control about how and when they receive their paychecks, that can help them stay focused on the job rather than worry about money.
Providing flexible payments as part of your employment package can also help you attract and retain the best talent. New hires will feel more confident that they won't have to wait for their first paycheck, and long-standing employees will feel like you're taking good care of them by providing options.
What are the main flexible payment options?
Alternative payment systems come in a variety of formats. It's quite possible that you may already be using some of them. The most common include the following:
Automated Clearing House (ACH) direct deposit has been available for quite some time, and it's already the most popular method of payment in America, with nearly 93% of US workers (PDF) receiving their paychecks via direct deposit as of 2019. ACH payment offers a number of benefits for employers. This method not only saves money for the employer, given that it negates the need for check printing, but it also allows you to process payroll from anywhere and keeps employee information more secure.
In order to offer direct deposit, you'll need to start using a payroll service. You'll also need your employees to fill out direct deposit forms, which will collect the employee's bank account number, routing number and Social Security number, among other information.
Direct deposit of payroll will occur on pay day, meaning your employees can access their funds as of the start of business on pay day.
Not all employees have a bank account or choose to use one. For such employees, you can still offer a payment option similar to direct deposit with pay cards. These are prepaid debit cards that can receive payroll deposits electronically.
These pay cards are insured by the Federal Deposit Insurance Corp., but they can have user fees for actions such as ATM withdrawals, which can make them a more expensive choice for employees. However, this can still be an attractive payment option for unbanked employees, given that it recreates the instant nature of direct deposit without requiring a bank account.
Wages on demand
On-demand pay is a service that allows employees to access their wages as they earn them, up to a certain dollar amount, rather than making them wait until the end of the payroll cycle. Some payroll service companies offer this as a perk to your workplace as part of the overall services provided.
Fees for on-demand pay are typically only incurred at the time of use, and they're paid only by the employees using the service—meaning it won't affect your payroll costs or employees who don't need wages on demand. Employers should review their service provider's fee schedule to make sure the specific service will serve their employees' best interests.
Providing your workers with a variety of flexible payment options can improve your employees' financial health and set you up for a good, long-term relationship. Your employees will know that you want to meet their needs, which is one of the best ways to encourage loyalty and support in your staff.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.