With more and more hourly wage workers needing access to their earnings sooner than the typical two-week pay period, on-demand payment platform DailyPay is betting that offering real-time payments through The Clearing House Payments Co. will enable employers to give workers greater autonomy over managing their finances.
Providing daily access to earned wages through real-time payments is expected to help workers living paycheck-to-paycheck to better manage their cash flow and avoid taking out payday loans, which charge exorbitant fees. Real-time payment of earned wages also helps workers avoid late fees on bills when their pay period does not align with the bill’s due date.
“The two-week pay cycle doesn’t always align with the financial reality many workers face. When the rent is due, it doesn’t matter that payday is next week or two weeks away,” says Ron Munkittrick, senior vice president, external operations, for DailyPay. “Real-time access to earned wages gives workers more autonomy over how their finances are managed.”
Bi-weekly payroll is the most commonly used payment schedule by employers as it cuts in half the time spent on payroll processing compared to a weekly pay schedule. DailyPay is the first on-demand pay provider to use TCH’s real-time payment network, which began operations in 2017. PNC Bank will facilitate the transactions for businesses over the network.
To enable real-time payment of earned wages, DailyPay integrates its platform to an employer’s time-and-attendance application. Employees’ hours are tracked and sent to DailyPay to process the payment. DailyPay also provides real-time payments for salaried workers, whose hours are tracked cumulatively. DailyPay provides real-time payments to 80% of the Fortune 200 companies that utilize on-demand payments.
While real-time payments have been gaining momentum in recent years, the technology’s use for paying wages gained popularity during the Covid-19 pandemic as many employees had an increased need to more actively manage their finances, says Steve Ledford, senior vice president, product strategy and development for The Clearing House.
Enabling real-time payment of earned wages can also be a way for employers to differentiate themselves when hiring new employees, especially in a tight labor market. “The versatility of the RTP network enables new business models that provide opportunities for us to help clients differentiate the way they do business,” Chris Ward, executive vice president and head of digital and innovation for PNC Treasury Management, says in a prepared statement.
Paying daily wages in real time can even reduce employee turnover. Businesses using DailyPay have seen a 45% reduction in turnover, Munkittrick says.
As real-time payments become more embedded in consumers’ daily lives, more employers are expected to offer the option. “When we launched our platform, we didn’t necessarily envision a use case such as this, but now we can see more employers offering real-time wage payments, especially since you have a younger generation of workers embracing the technology,” says Ledford.
Ledford adds that peak volume on the RTP network occurs between 8:00 pm and 8:30 pm, an indication, he says, that employers are settling daily wage payments with their employees.