Published: July 18, 2018 | Comments
Between a tight labor market and changing employee expectations, it's increasingly difficult for contact centers to stay competitive. Data shows that adopting real-time pay technology can be the missing piece in the recruiting and retention puzzle. Here's how.
Let's consider the issues most industries- including contact centers- face today.
The unemployment rate is at its lowest since 2000, and it continues to decline. We live in a tight labor market with low wage-inflation, which means competition is looming. Your employees will leave for modest increases in wages, causing turnover expense at your company.
Turnover isn't cheap either. According to the Center for American Progress, the average cost of replacement ranges from 16% to 216% of the departing employee's annual salary.
Even if job-hopping is the new norm, a startling 78% of full-time workers still live paycheck to paycheck. These workers incur, on average, $1,000 per year in late and overdraft fees as they wait to get their next paycheck before paying bills.
As a result, contact centers can draw conclusions about creative ways to stay competitive and answer to a changing job market.
The Introduction of On-Demand Payments
The labor market statistics only paint part of the picture. Changing social patterns are also playing a pivotal role in how employees view their employers and job preferences.
For example, contact centers are now competing with the on-demand work economy and other work-from-home jobs that offer comparable pay and increased flexibility.
This tells us that our employees are looking for convenience more than ever. In fact, convenience is becoming the expectation. It makes sense - we expect instant gratification and accessibility for almost everything in our lives:
- When we shop - Amazon
- When we need a ride - Uber or Lyft
- When we want to watch TV or movies - Netflix
The list goes on.
The same logic is increasingly applied to compensation. A two-week pay schedule should no longer exist in today's world. It's a relic of the past, developed nearly 90 years ago.
With modern technology, employees shouldn't have to wait weeks to get paid.
What On-Demand Payment Can do For Your Organization
My company DailyPay, for example, is a benefit for both employees and employers. Companies can leverage payroll as a cheap alternative or complement to wage increases and bonuses, and employees feel financially protected by their employer.
Improves employee productivity
We've found that one of the most incredible results of on-demand pay is that when employees find financial stability and keep stress at bay, their productivity levels soar.
The problem that exists today is that lower-income earners pay, on average, $1,000 per year-or 7% of their take-home pay-in late fees. Between checking account fees or lackluster loan options, unanticipated charges arise. Suddenly a $50 loan turns into a $200 loan, adding additional financial stress.
Financial stress directly impacts job performance. According to a recent International Foundation of Employee Benefit Plans survey, personal financial issues:
- Increase stress among 76% of employees
- Limit the ability to focus at work for 60% of workers
- Increase absenteeism and tardiness by 34%
By offering on-demand pay to your employees, you will allow them the ability to access their earned and unpaid wages before payday so they can have money to pay bills on time and avoid late fees. Less time spent worrying about finances means more time engaged at work.
Improves employee engagement and reduces employee attrition
One of our partners, CaLLogix, needed to find a way to re-engage their employees to stop increasing attrition rates at their facilities. CaLLogix considered several perks to help improve engagement and determined DailyPay was a cost-effective, low-risk, and a uniquely helpful option to pursue.
The launch of DailyPay was met with internal excitement. In the first week, 20% of employees activated their new DailyPay accounts and made a transfer. By the third week, 34% had used the product, and the participation rate continues to grow steadily.
CaLLogix believes that the adoption rates of the technology are directly tied to the efficacy of the application - employees now have help avoiding late fees, overdraft fees, and high-interest payday loans. So rather than skipping to the competition for slightly higher pay, employees are staying on board and working harder to keep their jobs.
Not only have engagement levels at CaLLogix been positively impacted, but our data across the industry also shows that DailyPay partners see, on average, a 41% reduction in turnover after adopting an on-demand payment option.
Companies that offer on-demand payments have a competitive edge, which is essential in a tight labor market. Our data shows that job hunters are 1.9 times more likely to apply for a job that pays daily over a job that pays weekly, making it a great recruiting tool.
One of our partners, DialAmerica, saw this technology as a way to help the company increase its applicant pool. Denis McHugh, VP Workforce Management at DialAmerica notes especially that new agents can obtain their pay much more quickly, shortcutting the new-hire onboarding process by allowing employees to receive their first paycheck immediately instead of waiting the traditional 2-3 weeks.
DialAmerica has improved its ability to attract and retain the right talent. On average, we've seen open positions filled 52% faster when companies offer daily payments rather than weekly pay.
3 Steps Toward High Adoption and Long-Term Benefit Success
Contact centers that have found long-term success with on-demand payment programs attribute early and high adoption rates to their victories.
On average, our contact center partners experience a 15% adoption rate in the initial week the benefit launches and can reach about 30% enrollment after the first 13 weeks.
Earning high adoption takes both the right type of on-demand payment solution and strategic implementation. Consider the following components:
1. Ensure Full Access
Capping access to an employee's earned but unpaid wages is possible, but can negatively impact the overall effectiveness of the benefit.
Adding limitations to how much an employee can receive of their earned wages can lead employees to believe the program is more like a paycheck advance against their earnings rather than an accumulating balance of earnings. There are two key points to address here:
A) Avoid the "use it or lose it" model
Some programs encourage daily usage with a "use it or lose it" model. This type of structured program encourages employees to cash out on their day's pay because the earnings disappear if not exercised. This inherently creates behavior that may have negative consequences. Employees will cash out more frequently with the fear of facing an unforeseen hardship before payday. Consequently, this affects budgeting and having enough funds on payday.
Conversely, an on-demand option that has an accumulating balance of earnings over the pay period gives employees the full flexibility to access any portion of accumulated earned and unpaid wages.
B) Access to real-time earnings is necessary for appropriate planning
One of our partners asked me whether they should limit the amount available for early transfers to protect employees - for example, 50% of an employee's earnings. While this is possible, limiting the available amount to a company-determined threshold -- here, 50% -- changes how the employee thinks about her earnings. This experience can make each transfer feel less like the employee's own money, and make budgeting more challenging. Without full access to earned wages, employees may not have enough when faced with an unexpected or emergency expense. Real-time access to earned wages gives employees ultimate control and the highest likelihood to have financial leverage in a time of need.
2. Make the benefit available to everyone
Don't make assumptions about who will use this technology, because it runs the gamut.
From our experience, power users range from salaried to hourly employees that make anywhere from minimum wage to six figures.
Additionally, most users are device agnostic, which is a huge component of making this benefit available to everyone. It is likely that many employees without the latest smartphone will want access to the benefit. As such, an on-demand payment benefit needs to be accessible not only through an app, but also through the web on a computer, or even a flip phone.
A successful on-demand program should also consider where employees prefer to get paid. A strategic on-demand payment program is one with which employees can receive early transfers into their direct deposit, pay card or prepaid cash card. Forcing your workforce to change their payment preferences will undoubtedly hurt the rate of benefit adoption.
Again, the more people can access the program, the higher the success rate.
3. Should be Instant
Remember, this benefit is integral to boosting financial security in the workplace, so it is vital that it be available in the direst circumstances.
Take, for example, one of our partner's employees who was driving to work when her tire blew. The employee was able to access her money to pay for the tow truck and tire repair, and still make it to work that morning. For someone that lives paycheck to paycheck, a situation like a flat tire could be crippling.
A successful on-demand pay program is one where your employees can request funds and receive money instantly. This could mean the difference between an employee making it to work on time or avoiding a late fee, non-sufficient funds fee, or payday loan.
The flexibility to adjust a budget can help your employees meet their financial goals more easily.
The Bottom Line
Launching an on-demand pay benefit is one of the most effective ways to improve your team's productivity. Like all benefit programs, it requires your diligence to assess what is best for your particular employee population. However, early adoption, strategic planning, support, and the right on-demand payment program can make this benefit one of the most important to your organization.