Back to glossary

What is on-demand pay?

Table of contents

On-demand pay is when employees receive their salary wages before their scheduled payday. With on-demand pay, employees can receive their wages daily or the total amount of money they earned during a pay period.

How does on-demand pay work?

If employers use on-demand pay services, employees can choose to get paid after each shift or for the days since they were last paid. On-demand pay allows employees to decide how they want to get paid.
Employers looking into on-demand pay can contact a payroll provider or on-demand payroll service and enroll the company’s employees. Once set up, employees can choose to get paid after each shift or for the days since they were last paid.

What are the pros of on-demand pay?

There are several benefits to on-demand pay – from making employees feel more financially secure to attracting new talent. Here are the advantages:

Helps employees feel more financially secure

In the case of unexpected setbacks or personal situations, employees will have the funds they need without needing to take out loans. Additionally, feeling like they can navigate through unforeseen personal situations can help employees feel more at ease and allow them to focus on their work.

On-demand pay can improve employee retention rate

When employees have the financial flexibility they need, they may feel happier and more satisfied in their role, reducing turnover rates.

It sets companies apart from competitors

Many workers are swayed by a company’s benefits when it comes to choosing their next employment opportunity. On-demand pay can set businesses apart from one another and help attract new talent.

What are the disadvantages of On-Demand Pay

On-demand pay also has its drawbacks:

  • Requiring fees: To get the funds, employees may need to pay some fees to collect the money before the next pay period.
  • The ability to impact financial health: on-demand pay schedules can impact payroll, cash flow, and liquidity. This will require businesses to plan payroll in advance so they have enough funds when employees want to withdraw.
  • Need to understand specific regulations: Employers need to pay special attention to state and federal legislation to stay compliant, which takes time and resources.
Lady in green Lady in green

Benefits of unified payroll payments

Free report: how Papaya streamlines the complexities of global workforce payments

Download Here