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Next-Day Pay – Is It Here to Stay? Next-Day Pay – Is It Here to Stay?

Next-Day Pay – Is It Here to Stay?

Have you heard the terms “next-day pay,” ”expedited pay,” ”daily pay,” or ”same-day pay?” The idea is that paying hourly employees more frequently could be viewed as a job attraction or retention benefit for workers. This article will explore various issues and information related to the concept of paying employees more frequently than every two weeks.  

During a tight job market, paying employees more frequently can help to attract more workers or workers with desired skills and expertise. Paying more frequently might also improve employee satisfaction, which in turn can impact retention and union avoidance.  

Believe it or not, the market is crowded with various apps and websites in this new and quickly developing market. Examples include Instant Financial, Pay Activ, Daily Pay, Salary Finance, Select Wage, Branch, and Earnin. In addition, pay cards such as Wisely are readily available.  

Changing the frequency of employer pay periods requires consideration of legal and practical issues. There are legal considerations a plenty. Each state has their own statutory requirements around minimum frequency of pay and mechanisms of pay. It is hard to conjure a scenario where next day pay would violate a state law; however, it is critical to review the applicable law prior to such a significant change. Most importantly, the mechanism chosen must instill confidence to ensure complete and full compliance with all wage and hour and withholding obligations under the Fair Labor Standards Act, state wage laws, and federal/state/local tax laws. 

In addition to legal considerations, there are important practical considerations: 
 
  • Who bears additional costs of more frequent pay—employer or employee? The previously named apps vary greatly on who pays for the more frequent pay.
  • Will your employee approve/elect the change in their pay frequency? 
  • If switching providers, what are the consequences of payroll provider termination? (This can be complex and require an independent review prior to determining if termination is the best path.)
  • What is the scope of the current payroll provider’s services beyond pay like personnel file collection and storage, and how will a change impact ancillary services provided by the payroll provider? 
Although there is a lot to consider with the evolving nature of financial and secure transactions, next-day pay might be here to stay and may just prove a valuable employee benefit, job satisfaction tool, and union avoidance tactic.  

Should you have interest in learning more, please contact any member of our Workplace Solutions team at Ice Miller. 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
 
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