How Does On-Demand Pay Work?

Flexible pay models like on-demand pay enable employees to advance a portion of their wages as they need it. If employee needs their cash on hand to fix a flat tire or snag midnight release concert tickets ahead of payday, they can do without resorting to payday lending, incurring credit card debt, or other measures that take their finances out of their control.

The following considers some of the mechanics of on-demand pay, and how Clair levels up this benefit.

    How Does On-Demand Pay Work? 

    On-demand pay supplements existing employee pay structures. Rather than replacing existing weekly, bi-weekly, or monthly pay cycles, on-demand pay allows employees to claim a portion of their earned wages. On-demand pay providers calculate an employee’s daily earnings, making a percentage of those wages available to pay out on the same day. Employees have the option to claim that available percentage as they want or need it.

    The process is seamless for employees and employers alike. The on-demand pay advance is repaid when an employee’s paycheck hits their account, with the remainder deposited as usual. By filling in the gap between earnings and payday, on-demand pay providers allow employers to maintain the pay schedule that works best for their business.

    Are there any risks associated with on-demand pay?

    On-demand pay, also known as earned wage access, offers benefits such as increased financial flexibility and improved employee satisfaction. However, there are some risks associated with this employee benefit. While having early access to your earned wages can be helpful in managing unexpected expenses, it may also lead to increased reliance on short-term borrowings, such as payday loans or cash advances, which can be costly in the long run. 

    In addition, on-demand pay providers collect and store personal and financial information from employees which raises concerns about data privacy. It is important for employers to choose reputable providers that have built-in security measures in place to protect employee data.

    Does On-Demand Pay Affect The Payroll Process For Employers?

    The short answer is, it depends. Implementing on-demand pay could have an impact on an employer’s payroll process but the impact may vary depending on the employer and the implementation of on-demand pay. This is where Clair On-Demand Pay shines. Not only is it free for employers to offer, but also a breath of fresh air since employers have fewer worries knowing that implementing on-demand pay from Clair won’t touch their payroll or existing business processes. 

    If you want to learn more, here are some general considerations: 

    1. Integration with payroll systems: When implementing on-demand pay, employers need to ensure that their existing payroll systems can integrate with the on-demand pay platform. This integration allows for accurate tracking of employee hours, earnings, and deductions. 
    1. Additional administrative tasks: Implementing on-demand pay may introduce additional administrative tasks for the payroll team. This may include managing employee requests for on-demand payments, reconciling on-demand pay transactions with regular payroll cycles, and ensuring the accuracy of wage data. 

    Is On-Demand Pay Free?

    When it comes to whether on-demand pay can be free for your employees, the answer is straightforward: "it can be." While many on-demand pay providers are eager to offer this service to your employees, they are often constrained by fees that need to be paid each time employees request early access to their earned wages.

    However, Clair takes a different approach. We believe in the power of financial empowerment and keeping the focus on the benefits for both employers and employees. That's why Clair offers on-demand pay that can be free for employers to offer and free for employees to use. 

    On-Demand Pay As A Benefit

    On-demand pay functions as an added employee benefit. Like any benefit, employees have the option to take advantage of it or not. Either way, employees have the added financial flexibility that comes with being able to access their wages on demand.

    This benefit has a tangible impact. Financial security and well-being are pressing concerns for many Americans, with only 39% able to cover an unanticipated $1000 expense in 2021. Credit cards are a costly safety net, with financially challenged households spending nearly $214 billion on fees and interest.  

    On-demand pay is also a benefit to employers in that it improves a number of key metrics. For one, on-demand pay can improve employee retention and reduce turnover. A recent Harris poll found that 78% of respondents would feel more loyal to an employer that offered on-demand pay.

    The increased financial flexibility that comes with on-demand pay can also improve employee productivity. According to the 2020 PwC’s Employee Financial Wellness Survey, 50% of employees surveyed felt that financial stress had negatively impacted their work performance.

    Importantly, offering on-demand pay demonstrates an employer’s commitment to employee wellbeing. By offering employees more financial autonomy, employers can improve employee experience by making an appreciable impact on their daily lives and futures.

    In a world of work increasingly characterized by worker dissatisfaction and resentment, going the extra mile for employees can make a significant difference in public perception and internal culture.

    How Clair Levels Up On-Demand Pay

    While there are many on-demand pay providers on the market, Clair provides a service above and beyond its competitors.

    For one, Clair On-Demand Pay integrates with existing time and attendance or payroll providers without added hassle for employers or employees. Clair partners with existing HR tech providers including uAttend, Attendance On Demand, Worklio, DecisionHR, When I Work, and 7Shifts. For added accessibility, Clair can also operate without provider integration. Employers can sign up with no changes to their existing payroll system, no contractual obligations, and no disruption of cash flow.

    The process is equally transparent and simple for employees. Hourly and salaried employees can sign up as soon as Clair On-Demand Pay is enabled. Employees can manage transactions and access their pay immediately using Clair’s app.

    Importantly, Clair does not charge employees any fees for using on-demand services. On-demand advances do not carry any transaction charges or interest rates. Clair instead monetizes through interchange fees linked to its debit Mastercard that users receive when they sign up.

    Clair further empowers users by offering free spending and saving accounts, as well as accessible financial tools and services including mobile wallet support, no-fee in-network ATM access, savings reminders, virtual check mailing, and domestic ACH transfers.

    Professional Employer Organizations (PEOs) also benefit in partnership with Clair. Unlike many traditional Earned Wage Access (EWA) providers which require employer contracts and certain scales of business, PEOs can easily adopt Clair to add to their existing benefits and features.

    Changing On-Demand Pay

    Clair provides a no-cost benefit for businesses and financial empowerment for employees. From maintaining employee financial well-being, and improving performance to bolstering retention, Clair offers employers and employees the benefits of accessible and seamless on-demand pay.

    To get started with Clair, sign up here.

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