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On-demand pay is where an employee can draw down part of their accrued earnings ahead of pay day to help ease a financial shortfall, enabling them to meet their short-term financial obligations.
On-demand pay, also known as cash advances or Earned Wage Access (‘EWA’), can be helpful for employees to manage their budget on a weekly basis, whilst keeping keep funds protected for their bills and direct debits at the end of the month.
Several providers offer on-demand pay, with the models being slightly different depending on the solution offered. In this article we’ll look at some of the different models on the market and give a breakdown of costs, values and who funds the draw down.
What are the benefits of on-demand pay?
On-demand pay is a valuable employee benefit. It’s a way to help employees through the cost-of-living crisis and gives them more financial freedom by putting them in control of their pay. On-demand pay gives employees early access to pay that they’ve already earned, which leads to a more engaged workforce, increased loyalty and reduced staff turnover.
How does on-demand pay work?
- The employee makes a request for a cash advance
- Funds are transferred directly to the employee’s bank account. Depending on the model from the different service providers, drawdowns are funded either by the service provider – and recovered later - or by the employer
- When payroll is run and the employee receives their payslip, the cash advance is deducted from their net pay and shown as a deduction on their payslip
- Depending on the model from the service provider, a charge may be levied for the service and, once again depending on the model, it’s either charged to the employer or the employee
- The employer has access to reports and dashboards to see how many employees are accessing on-demand pay
Which companies offer on-demand pay?
The list of service providers that offer on-demand pay includes, but is not limited to, the following companies:
Access Payroll allows the employee to draw a maximum of their 50% of gross accrued wages throughout the pay cycle through Access EarlyPay. The draw down is funded by Access and recovered from the employer when payroll is run. Fees for accessing this function are deducted from the employee’s salary and are on a sliding scale of up to £2.75 per transaction, depending on the model selected by the employer.
US-based CERIDIAN offers Dayforce Wallet, an on-demand solution that’s free for both employers and employees. Employees can request a payout of their earnings at any time during the pay cycle. Funded by CERIDIAN and recovered from the employer when the payroll is run, the amount and frequency of on-demand pay is customisable for each employer.
Cloudpay offers on-demand pay at a cost of £1.75 per transaction, charged to the employee. Cloudpay recommends that employers allow access to between 50% and 75% of an employee’s net salary. Employers fund draw downs with Cloudpay recommending employers set aside 3% of their gross payroll value to cover the cost.
hastee offers employers the option to customise the amount of on-demand pay their employees can draw down, up to 50% of earned wages. The cost for the service is £1.75 per transaction, charged to the employee. With draw downs funded by hastee and recovered from the employer when payroll is run, the service cost can be reduced to £0 with a paid company subscription.
IRIS is another payroll service provider that offers on-demand pay with an option of a paid company subscription to eliminate charges to employees. Without the subscription, fees of £1.75 per transaction are deducted from the employee’s net pay when they use on-demand pay. IRIS allows employees to withdraw up to 50% of their earned wages and the employer funds the early wage draw down.
Paiyroll’s fee for on-demand pay is 15 pence per transaction, split between the employee and the employer when the employee uses the function. The amount that an employee can draw down during the pay cycle is fully customisable by employer and the employer funds the draw down.
PayCaptain offers on-demand pay that’s free of charge for employers and employees through an ‘Emergency Cash’ function. Funded by PayCaptain and recovered from the employer when payroll is run, the maximum amount of on-demand pay that’s available is £200 per employee per month. This protects the majority of the employee’s pay for bills and direct debits at the end of the month.
WAGESTREAM charge employees £1.95 per transaction for accessing on-demand pay. They recommend that employers allow the maximum of 50% of accrued wages, though this is customisable by employer. WAGESTREAM funds the drawdown and recovers the cost from the employer when payroll is run.
When implemented responsibly and ethically, on-demand pay can be a great solution that helps improve the financial wellbeing of employees and bridge the financial gap between pay runs. Different providers offer different models, some with charges and some free of charge as part of the solution
Like to know more about PayCaptain’s on-demand pay and Automated Weekly Cash features? Read some more articles by clicking the links below.
What are wage advances and emergency cash?
(Source: Silvercloud HR)
E&OE
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