Same day pay, similar to on-demand pay, is not a new concept, but is growing in popularity. Employers are advertising this benefit of employment to help attract and retain workers, especially in high-turnover jobs and industries.

What is same day pay?

Same day pay is a payroll practice under which employees are paid the same day they perform the work. This system allows employees to access their earned wages earlier than with traditional pay schedules that pay at the end of the pay period, such as bi-weekly or even weekly.

What are the benefits?

Employers who offer same day pay may see improved ability to attract and retain employees. Flexibility is increasingly important to workers, so the more flexibility an employer can provide, the more attractive the employer may be. Additionally, giving employees more control over their personal finances may help them be more engaged at work with better productivity and attendance.

What should I watch out for?

Implementing same day pay may increase payroll costs, including transaction fees, labor, and technology investments. There are also potential compliance risks relating to wage and hour laws, as well as taxes and other deductions. For example, calculating and deducting taxes for tipped employees may get tricky depending on the amount of tips and how regularly the employees work.

Who should consider same day pay?

Same Day Pay tends to be most popular for low-wage and/or hourly employees, particularly in the hospitality and food and beverage industries. On-call employees, and others who do not work a regular schedule may also appreciate being able to access their earnings immediately.

Takeaway

In the highly competitive labor market, employers are getting creative in their strategies to attract and retain talent. Workers are looking for employers offering flexibility, not just in scheduling and working from home, but in all aspects. Employers struggling to attract and retain workers, especially in hourly and low-wage jobs, may want to consider adding same day pay as an attractive benefit. However, it is also important to be aware of and weigh the costs and risks against the benefits before deciding to implement.