There have been many changes to the world of work in the past few years, including the advent of new workforce payment models. Instead of the bi-weekly paycheck being the norm, many companies—both W-2 and 1099—have accelerated the pace of pay to their workforces.
Figuring out how frequently to give out paychecks isn't just another routine payroll question to ask—it can affect how happy and productive your team is. Should you stick to paying every two weeks, or is there a better way to keep your team motivated and satisfied? In this article, we're going to explore the ins and outs of how often you should pay your employees, considering what's best for both them and your business.
1. Benefits of Faster Pay
Faster payment frequencies go beyond just financial transactions; they impact the overall employee experience, contributing to a positive work environment and a competitive edge in the quest for top talent. Here are just a few advantages of faster pay:
Boosted Morale and Productivity: Accelerating payment frequency can positively impact employee morale. More frequent paydays can provide a sense of financial security, reducing stress and enhancing overall job satisfaction. According to PWC’s 2023 Employee Financial Wellness Survey, one in three employees claim that financial stress has negatively impacted their workplace productivity. The report also found that financially stressed employees are nearly five times more likely to cite their personal finances as a distraction at work. When employees feel financially stable, they are likely to be more focused, engaged, and productive at work.
Stronger Recruiting and Retention: In a competitive job market, attracting and retaining top talent is crucial. Offering accelerated payment schedules can be a powerful recruitment tool and contribute to higher employee retention rates. Job seekers often consider the entire compensation package, and a more frequent pay schedule can be an attractive perk that sets your business apart.
Competitive Edge in the Labor Market: With a growing emphasis on employee well-being and flexibility, businesses that adapt to the changing needs of the workforce gain a competitive advantage. Accelerating payments aligns with workers’ growing desire for more financial control, making your company a more appealing choice for prospective employees in today's tight labor market.
2. Pay Frequency Options
While the benefits of faster pay are clear, your pay schedule may be influenced by a number of additional factors including your business model, your cash flow, and your industry. The location of your business can also mandate the minimum requirements for payroll. For example, manual workers in New York are required to be paid weekly unless a business receives a special exemption. In other states such as North Carolina, there are no requirements in place. Here are some of the most common payroll schedules in the U.S., along with considerations for each:
The U.S. Bureau Of Labor Statistics found that a biweekly pay schedule is the most common payment frequency in the private sector. According to the BLS, 43% of businesses in the U.S. pay their employees biweekly. However, for many workers, this method is becoming outdated.
Inflation has made it difficult for workers to keep up with mounting living costs. Whether it’s an unexpected medical bill, the rising cost of child care, or another expense, people need improved cash flow in order to avoid predatory payday loans and to avoid accruing credit card debt.
The expansion of the gig economy has also changed the game and created the expectation that flexibility and speed will be prioritized for workers. They want the ability to work when they want, and also the power to earn right away. Workers know that they can find a company to pay them faster—and they’ll leave if you don’t catch up.
Weekly pay is a good start for companies who want to test out the idea of faster workforce payments. While this faster payment strategy may not be enough to win talent who are looking for even more immediate pay, it is an attractive option for many employees, especially those who have been paid less frequently in the past.
Whether in the form of cashless tips that servers or other service-industry professionals can take home after each shift—or paying healthcare workers at the end of each shift—same-day payments can be incredibly incentivizing for workers. In fact, 83% of U.S. workers believe they should be able to access their pay at the end of each workday.
By switching to same-day pay, you can help your workers to gain more solid financial footing. Same-day pay can alleviate financial stress for employees who may be living paycheck to paycheck. The ability to access funds immediately can help in meeting immediate financial obligations, reducing anxiety related to financial matters. These quick payments can also help for your own financial projections, giving you clearer insight into your current cash flow and business solvency.
Offering instant payments—whether you’re a W-2 or 1099 company—gives you the ultimate leg up over the competition. For example, Uber pays out its drivers after every ride completed. They are one of many companies starting to explore how people can be compensated immediately after work is produced.
While this model may not work for all companies, it certainly points to an important trend: workers are expecting to be paid faster. If you’re looking for the best way to accelerate payments to your workforce, Branch offers a suite of faster pay solutions. Get your demo to learn more!