August 5, 2024

What Is On-Demand Pay: Benefits & How It Works

A woman counting cash accessed through an on-demand pay service

In the ever-changing work landscape we know today, traditional payday cycles (bi-weekly or monthly) may no longer meet the financial needs of employees.

This has led to the rise of on-demand pay, a flexible payment solution that provides employees more immediate financial relief and benefits employers as well.

Curious about on-demand pay? Keep reading as we dive deeper into what it is, how it works, and whether it’s the right fit for your business and employees.

What Is On-Demand Pay and How Does It Work?

Neither a loan nor a paycheck advance, on-demand pay is a service that allows employees to access a portion of the wages they’ve already earned before their official payday. Also known as Earned Wage Access (EWA) or early wage access, it is a unique and popular benefit that employers are starting to offer their employees.It provides employees with financial flexibility and alleviates the stress of waiting for the next paycheck. Employees can typically access their earned wages through an on-demand pay app or online platform to transfer the funds to their bank account.

The process is simple: employees log into the app, view their accumulated wages, and choose the amount they need, up to the maximum amount specified by the EWA provider.

The employee can then choose how quickly they need the money. If they want the requested funds right away, EWA providers offer a Lightning Speed feature for a small cost that enables them to get their money instantly. If the employee can wait a couple of days, they can use the standard ACH transfer that is typically available for free.

Benefits of On-Demand Pay for Employers and Employees

Offering on-demand pay as an employee benefit offers numerous advantages for both employers and employees. Let's explore some of these key benefits:

Benefits for Employees

The advantages of on-demand pay for employees are clear—giving them the power to control when they receive their hard-earned money. This, in turn, grants them:

Financial Flexibility: On-demand pay empowers employees to have greater control over their finances, helping them cover everyday essentials like gas and groceries, bills, unexpected expenses or emergencies without resorting to bank overdrafts, high-interest loans or credit cards.
Reduced Stress: Waiting for the next paycheck can lead to financial anxiety. Access to on-demand pay provides peace of mind, knowing that funds are available when needed. Since using EarnIn, 81% of employees have experienced less financial stress1.
Budgeting and Planning: With the option to access earned wages in real time, employees can manage their money better and plan for future expenses.

Benefits for Employers

On-demand pay is not just a win for employees but for employers too. With employees feeling less financially stressed and more in control of their finances, business can expect to:

Attract more talent: With on-demand pay becoming more popular, 75% of employees say it would influence their acceptance of a job2. Offering on-demand pay can give your business a competitive edge to help you attract more applicants and hire faster.
Increase retention: Finances are the leading cause of employee stress, and those who are financially stressed are 2x more likely to look for a new job3. Your employees are your most valuable asset, so why not show them you care with a benefit that enables them to take charge of their finances.
Enhance employee productivity: Financial stress is a major distraction, leading to disengaged workers and a hit to your bottom line. Studies show 56% of employees spend over 3 hours a week at work dealing with or worrying about personal finances3. By offering on-demand pay, you can help alleviate that stress. Less worry translates to a more engaged, motivated, and productive workforce – a win-win for everyone!

4 Tips for Implementing On-Demand Pay Effectively

Now that you have the answer to 'What is on-demand pay?' you need to know how this service can be successfully implemented. Consider the following best practices:

1. Researching and Choosing a Reliable Provider

Choosing the right provider goes beyond finding someone that offers this service. It’s about finding a partner that aligns with both your company’s values and your employees’ needs.

Features such as robust security measures, user-friendly interfaces, and excellent customer support are also essential to ensure the service is reliable.

For a truly seamless experience, we recommend prioritizing providers that enable you to roll out the benefit without any disruption to your business operations or payroll processes.

2. Communicating Clearly with Employees

Transparent communication is key to any successful employee benefit rollout and on–demand pay is no different.

Employers should provide detailed information on how the benefit works, including the process for requesting and receiving funds, any associated costs or fees, and any limits or restrictions in place. By actively promoting and supporting on-demand pay, this helps ensure that all employees understand and utilize this important benefit.

3. Ensuring Legal Compliance

To comply with the Truth in Lending Act requirements for an on-demand pay program, it is important to consider the ruling by the Consumer Financial Protection Bureau (CFPB). It outlines the characteristics that a Covered EWA Program must have.

4. Incorporating Financial Education

Look for features that go beyond the basics, like built-in tools such as savings, budgeting, and debt management to support your employees' financial wellness journey. These additional resources can be a major differentiator and a valuable perk for your team.

EarnIn’s Zero Integration Solution

EarnIn is a pioneer in Earned Wage Access. We provide on-demand pay to more than 4.4 million employees, enabling them to access over $20 billion of their earnings without waiting for payday.

With our platform, employees can access up to $100 of their earned wages per day and a maximum of $750 per pay period when they need it4 all without any interest, credit checks, or mandatory fees5. From day-to-day expenses like gas and groceries to embracing life’s special moments, we believe that great things happen when all employees have access to on-demand pay. That’s why we designed our platform to make offering on-demand pay easy and efficient.

Zero integration: No need to integrate with your HRIS, payroll, timekeeping, or benefits systems.
Zero employer cost: EarnIn funds 100% of the cash that employees access, so there is no cost to your business.
Zero changes to payroll: Our solution is easy to roll out and does not impact any current payroll processes or business operations.

Ready to empower your workforce with on-demand pay? Learn more about EarnIn and schedule a demo with our team today!

1. Based on EarnIn Survey of 1654 EarnIn Community Members 10/12/2023 - 11/15/2023.
2. ADP, 2022 EWA market research study.
3. PwC, 2023 Employee Financial Wellness Survey
4. Subject to your available earnings, Daily Max and Pay Period Max. EarnIn services may not be available in all states. Restrictions and/or third party fees may apply, for more information please visit http://EarnIn.com/TOS.

5. EarnIn does not charge interest on Cash Outs. EarnIn does not charge hidden fees for use of its services. Restrictions and/or third party fees may apply, for more information please review our Terms of Service available at http://EarnIn.com/TOS.