How Payday Apps Can Help Small Businesses

Originally published at

January 29, 2018

Small businesses often think of themselves as a family, but when employees get into a financial jam, they’re often on their own. One way for companies to support their work families is to ensure that they don’t have to stress about a cash shortfall between paychecks. Payday services with friendly smartphone apps may just do the trick.

Payday apps — some of which are gateways to employer-sponsored or approved services — allow workers to cash in on money already earned before they receive their formal paychecks. Companies can contract for these services, and some even offer them as HR benefits to help paycheck-to-paycheck workers avoid high-interest payday lenders or overdrafts. Some apps also operate independently and employer-free.

These are not loans or charity. This is money already earned but that can be distributed on demand.

Why are payday services needed?
Today’s increasingly unstable economy is often characterized by volatile work schedules, low pay, and part-time or contract employment. Workers who struggle with cash flow problems often face unpleasant and expensive choices that can plunge them deeply into debt.

According to professional services network PricewaterhouseCoopers, some 70 percent of U.S. households live paycheck to paycheck. A report from the Federal Reserve, based on 2015 data, found that 46 percent of adults could not meet an emergency costing $400 and would cover it by selling belongings or borrowing money. Another 31 percent — some 76 million adults — said they were either financially stressed or just getting by. Among the one-third of adults with fluctuating monthly income or expenses, 42 percent struggle to pay their bills.

How do payday apps work?
With apps like Earnin, FlexWage, DailyPay, Instant Financial, PayActiv, and others, employees can avoid the clutches of price-gauging storefront lenders charging loan shark interest rates and fees or paying endless overdraft charges. That alone is a good reason for companies to facilitate loosening the purse strings before weekly, bi-monthly, or monthly payday rolls around.

Available both for iOS and Android, payday apps allow workers to tap into services that let them easily access earned money currently parked in a scheduled payroll pipeline. Increasingly, employers in retail and service, hospitals and healthcare, restaurants, manufacturing, factories, call centers, non-profits, and others – especially those with a variable workforce – are open to making immediate cash available to tide workers over rough spots.

How can payday apps help small businesses?
While large companies like Uber, McDonald’s, Goodwill, and Outback Steakhouse now offer such resources to help workers through rough patches, this kind of service is a natural fit for smaller companies. There’s nothing like a little assistance with financial pressures for attracting and retaining employees. Workers who feel like their company cares enough to offer a helping hand where it counts can also be more productive, less distracted, and have a better attitude on the job.

The use of payday systems is also associated with a reduction in turnover and absenteeism, time saved recruiting new workers, reduction in labor costs, and employees willing to put in longer hours because they can immediately experience the benefit. Many people need motivation to keep working, so that getting paid by the day or at a needed interval is its own reward. The ability to consistently meet financial demands gives employees peace of mind so they can better concentrate on their work.

Not everyone qualifies for all apps
There are a number of payday apps available, and each has a range of stipulations and requirements. Service costs are reasonable, though not completely free. For employer-sponsored HR benefit apps, the company can opt to help even more by paying the nominal fees charged for early transfer of money as part of an employee benefits plan. Some app services have strict rules about employee payment and time tracking.

Each service operates under its own rules, so you need to research and choose one that works best for the way your company does business. Even if you don’t want to offer payday apps as a specific benefit, just alerting employees to their existence can be helpful.

Here are a few reputable payday app services small businesses might consider using or recommending to employees.

FlexWage is an employer-sponsored benefits program that distributes a reloadable Visa or Mastercard payroll debit card, which workers can tap into ahead of payday. The platform is linked to employer HR and payroll systems so employees can access accrued wages within the pay period. Paycheck advances come directly from the employer account, and you determine how often employees can make early withdrawals and the maximum amount they can request. Because funds are transferred to a pay card, the money is immediately available, even for people who do not have bank accounts. A mobile or web app lets employees see how much money they are accruing every day. FlexWage charges a fee of $3 to $5 each for early transfers.