For anyone who has found themselves in the position of having too much month left at the end of the money, the increased popularity of On Demand Pay Apps is no doubt good news – but is it great news for HR professionals?

Payday – every day

As new technology continues to dominate every area of our business and personal lives, some employers have deemed the practice of set payday to be outdated and inflexible for employees who may struggle to meet unexpected costs when paid monthly.  Last year, shopping giant, Walmart, was one of the first major employers to introduced On Demand Pay – a mobile phone based system whereby employees are able to draw from their salaries without having to wait until the end of the month.  Working via a mobile phone app, On Demand Pay gives employees the option of withdrawing a set amount from their forthcoming salary as an advance payment to be deducted from the final salary at the end of the month.  Walmart says that the system was introduced in order to give employees an alternative to expensive payday loans when it comes to unexpected expenses.

On Demand Pay technology is linked to a business’s payroll system and provides automatic calculation of an employee’s earnings to date and, therefore, calculates the amount that the employee may withdraw.  Over the decades, the role of the HR department has changed and evolved as technology becomes smarter. In 2019, recruitment, staff selection and monitoring have all become digital and so, on paper, On Demand Pay seems like the logical next step in allowing technology to lighten the load for employees. Although the system has been welcomed by Walmart’s 1.5 million employees, what will it mean for HR staff?

A question of intelligence

Despite being still in a relatively early stage, On Demand Pay is becoming extremely popular and, as more businesses choose to offer this flexible option, the more the technology will evolve. As with most mobile phone apps, On Demand Pay will harness the power of AI (artificial intelligence) in order to make decisions about which employees should be eligible for the scheme. As this technology evolves, HR teams will need to be trained in its use and implementation – something which, for the most part, will be a simple labour swap as, currently, HR teams are responsible for making these decisions and, for entering employee details into the app – a process which can be time-consuming and subject to errors.

In addition, payroll and payslip technology will need to be updated to include itemised information regarding funds already withdrawn against the balance to be paid on payday.

A question of responsibility

In most cases, On Demand Pay is a useful employee perk which allows for expenses such as car repairs, utility bills and other day to day expenses to be covered without bouncing cheques or taking out interest-heavy loans.  Unfortunately, rolling the system out universally to all employees is to risk irresponsible spending by employees. Although it’s not, of course, up to HR professionals to become the ‘spending police’, this may become an issue if employees abuse the system, leaving themselves short at the end of the month.  Many businesses combat this by applying different limits to different employees and, again, this would ultimately be the responsibility of the HR team.

A question of monitoring

Those businesses who have already begun using On Demand Pay have found themselves obliged to report to management on the effects on employee well-being as well as any issues, including overspending and employee attitudes.  Some employers report that the use of On Demand Pay has produced a side effect of employees behaving like contractors which has seen an increase in absenteeism.  In this case, employees are choosing whether to attend work in direct correlation to the cash in their pocket. Although, for the most part, companies report that employees able to access quick cash are happier and more productive, this alarming side effect is very much cause for concern.

A question of sharing responsibility

Although, in most businesses, there is a direct link between HR and Finance – many see payroll as predominantly the domain of the HR team.  For this reason, HR professionals will no doubt be expected to take on most of the responsibility for the implementation and maintenance of the business’s On Demand Pay scheme including personnel decisions, updates and trouble-shooting – all on top of their usual workload.  

The solution may be for businesses to produce a new department – one which bridges the IT, Finance and HR departments to create a specific hub for On Demand Pay.  As the technology evolves, it will certainly need qualified and experienced staff to run it in order to avoid a chaotic system and, a potential security hazard.

There’s no doubt that On Demand Pay will see a huge increase across companies in the next few years and, now is the time for HR Managers to establish how much of the responsibility for this will lie with them and their team.

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