Easier access to wages is a hot button for many employees. One reason is the number of unbanked and underbanked individuals in the U.S. The FDIC reports approximately 7.1 Million U.S households are unbanked. This means no one in the household has a checking or savings account at a bank or credit union. This became a vital issue as federal stimulus checks attempted to get in the hands of these individuals recently.
In addition, ‘underbanked households’ have just as big a challenge with nearly 20% of U.S households falling in this category. Underbanked households have at least one person with an account at a federally insured institution. However, they also use alternative financial services and products, like payday lenders or check-cashing services, on a regular basis.
Unbanked/underbanked rates are higher among Black, Hispanic, American Indian, Alaska Native, and working-age disabled households at nearly three times the national average.
The number one reason cited for people being unbanked/underbanked is they do not have enough money to meet minimum balance requirements (48.9%). Traditional banks charge these accounts for not maintaining a minimum balance. Most of these individuals are living paycheck to paycheck and carry minimal average daily balances in their accounts.
A June 2021 research study states over 125 million U.S. adults are living paycheck to paycheck. In addition, 70% of Millennials (currently ages 25 to 42) currently live paycheck to paycheck. This is the largest share of any generation. Thirty-three percent of Millennials struggle to pay their bills on time.
Most Americans, even those with higher wages, have little money left over at the end of the month. The pandemic has compounded some of the complexities of balancing finances. These circumstances suggest the need for more immediate access to wages will grow in the months and years ahead as new challenges and opportunities emerge. Such tools may be vital in helping consumers cover the expenses that can arise as part of daily life.
Payroll departments are looking for ways to help with these issues while keeping costs at a minimum. In a recent poll of payroll professionals, 25% stated on-demand pay is necessary for improving the employee experience. They believe earned wage access is a differentiating benefit for employers in the future.
Modern Pay on Demand applications offers easy access to a federally insured bank account with a debit card at no cost to the employee or employer. Workers submit their request via mobile app at the end of their shift when funds are needed, and available wages are transferred onto this debit card. These funds are immediately available to the employee. This can be done because these Pay on Demand services are integrated with the company’s Time and Attendance System.
Because workers set up their direct deposit to this new account, when payroll is deposited, the system automatically collects for any wage advances. Many companies protect their employees by only offering a portion of their total wages to be available with this service. The advantage is there is no additional workload on the payroll, and employees get immediate access to a portion of their earned wages at no cost. This is especially important to the unbanked/underbanked employee. They no longer need to use costly payday lenders or check-cashing services. Ultimately, this improves the financial well-being of employees, increases retention, lowers costs, and helps with diversity and inclusion initiatives.
To learn ways we can help your organization by offering Pay on Demand at no cost to your employees or your company, contact Time Equipment Company at firstname.lastname@example.org or 800-997-8463.