Most aspects of our lives have become faster, more convenient and more flexible to suit a busier lifestyle with competing priorities. However, one of the largest components of our wellbeing, our work and finances, are hamstrung by the inefficient process of the pay cycle. In the past, before the advent of credit, many workers were paid as they completed projects, or even on a daily basis, and that’s without the power of modern digital payroll and banking technology. In Australia, most employees are paid on a fortnightly or monthly basis as a result of the cost to run pay cycles and the fact that payroll systems are simply too clunky to run a pay everyday.
It’s traditionally been difficult to balance the need of employees and employers when it comes to wages. It’s not sustainable for wage-payers to run their payroll processes on a daily or even weekly basis – at the same time, it’s not even close to meeting the optimal situation for their workforce. Fortunately, there is an alternative offering called Paytime. Paytime empowers both parties with the tools to meet their needs. Let’s take a look at the true costs of the monthly pay cycle so we can understand the benefits of an alternative.
A monthly pay cycle drives irregular spending
We know that the more cash flow is spread out, the harder it is for most people to budget until the next one. This then leads to a phenomenon known as ‘feast and famine’ – like a predator with irregular meals. A lion might only make one large catch a week, meaning they feast when they can, only to have a dry spell for many days.
The same applies to our pay, and it particularly impacts millennials who are more likely to be casual workers. 71% of 18 to 24-year old’s splurge on unnecessary purchases as soon as their salary surfaces. This creates a scenario where most of their personal free cash flow is consumed in the first week after receiving their wages. It becomes a serious issue when unexpected expenses arise in the following days or weeks prior to the next payday as there’s no money left to cover the unexpected outgoings.
Debt is not the solution
In response to the above, almost six million Australians are living paycheck to paycheck. For most of these workers, the solution is to use a credit card, use funds from important savings accounts or apply for a potentially dangerous payday loan. Australian households pay an average of $468 in bank fees every year. Much of this is due to credit card charges, overdraft fees and late payment penalties from those living paycheck to paycheck. Banks and other financial institutions make a whole lot of money out of people who already struggle with personal cash flow. The interest charges and additional fees make it very hard for them to break the cycle.
The benefits of Earned Wage Access (EWA)
Earned Wage Access allows employees to access their earned pay at any point in the pay cycle, without having to wait until their next payday. When an unexpected bill or expense arrives, instead of turning to credit or a payday loan, employees can alternatively access a portion of their earned wages to cover any shortfall.
Paytime gives employees real-time access to their earned wages through a convenient mobile app. It’s easily worked into your existing payroll system, avoiding any disruption to your usual processes. When an employee wants to access some of their earned income, they will be charged a small, fixed fee (less than the cost of a cup of coffee), and Paytime will deduct the amount from their next paycheck. Because one is accessing their earned wages, it is not a loan, there is no repayment required and there’s no interest to be paid.
If your company wants to empower its employees to tackle the challenges of a monthly paycheck, without increasing the frequency of your pay cycle, contact Paytime today to arrange a free consultation.