Everyone who has collected a paycheck in the past decade knows the process and the feeling that comes with it. You wake up in the morning, remember it is pay day, quickly check your bank account (most likely through a banking app on your phone) and rejoice as the account balance is much larger than it was when you went to bed the night before.
Direct deposit is the vehicle for which most organizations compensate their employees and it commonly occurs on a bi-monthly basis. That, however, could soon be changing. Amid a tight labor market, organizations are looking for ways to differentiate themselves to attract and retain talent. Offering nontraditional payment methods and frequencies could be one of those ways.
The ADP Research Institute’s “Evolution of Pay” study found that 78% of the 2,900 employers surveyed agreed that organizations will need to customize payment options to remain competitive in the war for talent. Meanwhile, 62% of the 4,000 employees surveyed said off-cycle pay options, such as the ability to choose pay frequency, would make a difference when considering a job offer.
“From raises, to robust benefits and workplace perks, employers today are using every opportunity to attract and engage talent,” said Ahu Yildirmaz, co-head of the ADP Research Institute. “However, our research shows raises and benefits are not the only perks employers should consider if they want to remain competitive. Employees are seeking companies that offer access to alternative pay methods and financial wellness offerings when they assess a job offer.”
ADP’s research indicated that employers have put the wheels in motion to accommodate, as 43% of employers are already offering nontraditional payments such as paycards, mobile wallets, digital platform and cryptocurrency.
“The reason employers are already offering these alternative methods is to attract and differentiate themselves from competitors,” Yildirmaz said. “And because they believe that pay can have an impact on talent management.”
ADP’s research backed up this claim, as 79% of employees said they are willing to accept payment from their employer via mobile, digital or prepaid card. There’s a clear generational connection to this inevitable transition, too. Most younger employees already utilize various digital payment apps such as Venmo and Apple Pay for goods and services. Therefore, it stands to reason that paychecks would soon follow suit.
As of now, however, very few employees (5%) are utilizing these alternate forms of payment, according to ADP’s research. However, 93% of employees said they believe employers will pay them via paycards, digital platforms or mobile wallets 10 years from now. Yildirmaz compared this projected shift to that of initial reactions of direct deposit when “the idea of transferring money with a computer was unfamiliar and they were concerned about privacy and tracking of payments,” she said.
The other evolution underway is how frequently employees will receive their checks. Millennials crave flexibility, therefore organizations could look to capitalize on that by customizing pay per employee in the future, Yildirmaz said.
“More than one in two employees would actually be willing to pay for early access to their pay whenever they need it,” she said. “Just customizing based on the employee’s needs. So, employers really need to think beyond the traditional ways to attract talent and offering different ways to pay the employees is one of them.”
COMPENSATION FUTURE ROUNDUP
In this CNBC article, Lora Kolodny reports that Tesla has rolled out an employee-loan benefits for its employees. The process will be facilitated through London-based financial tech startup, Salary Finance, and funded by its partner Axos Bank. The benefit lets workers borrow up to 20% of their salary and pay it back at rates under 5%.
Paying with Bitcoin
Bitwage is now able to offer United States businesses a way to offer salaries in Bitcoin and Ether to regular payroll employees. This Bitcoinist article explains how Bitwage partnered with the HR company Simply Efficient to ensure support for W-2 salary reporting obligations. The piece explains how this is potentially game-changing for many employers and their employees.
Paying in a Digital World
In an article for Workspan magazine, David Foote of Foote Partners LLC, details the challenges of compensating tech professionals in an increasingly digital world. Foote explains how it’s nearly impossible to rely on salary and bonus alone when paying tech workers and how using a model that values skill specialization is a quality solution.
Robots Affecting Pay
Walmart is poised to rollout a fleet of robots to assist in its day-to-day operations, which has employees worried, writes Jennifer Calfas in this piece for Money. Calfas’ article delves into Walmart’s shady labor practices and how this move could effect the compensation — negatively or even positively — of hourly employees at the massive supermarket chain.
Compensating in the Future
This BambooHR article contemplates the future workforce that will be made up of Millennials and Gen Z and what they mean when it comes to compensation. The author suggests seven ways employers can adapt their compensation and rewards program strategy to appeal to the future workforce while also meeting the needs of today’s employees.
About the Author
Brett Christie is a staff writer at WorldatWork.