Industry News

Workers Get Faster Access to Wages With These New Apps; Instant pay helps boost employee attendance, but can make saving hard to do


Kelsey Gee | Friday, November 24, 2017

The Wall Street Journal Online

For more workers across America, every day is payday.

Uber Technologies Inc., McDonald's Corp. and Bloomin' Brands Inc.'s Outback Steakhouse are among a growing group of employers giving workers near-instant access to their wages through payday apps.

New tools that allow people to spend the money they just earned have provided some workers an alternative to short-term, high-interest loans, say the technology startups offering the services. The payment plan also can boost employee attendance and tenure, managers say.

Employers across the retail, restaurant and service sectors are searching for inexpensive perks to attract and hold on to employees in the face of low unemployment. For workers, immediate access to cash can provide liquidity to cover emergency costs, but economists say it is unclear whether smaller, more frequent paychecks will help U.S. households under financial strain.

"It's almost like a drug" for employees, says Ed Shaw, executive vice president of human resources for Caspers Co., which operates 54 McDonald's restaurants in Florida.

Roughly 1,300 of the franchiser's workers have signed up to use a smartphone app, Instant Financial, since Caspers began testing it in April. Workers have quickly taken to the service, Mr. Shaw says, as demonstrated by the waves of angry phone calls he received from workers on the few occasions that the app experienced a glitch.

Every day at 10 a.m., the app notifies users how much they earned in the previous workday, prompting them to decide if they want to deposit as much as half of that money onto a debit card. Roughly 20% of employees accept the money every day, says Mr. Shaw, who has reviewed aggregate usage data.

Instant Financial costs employees nothing to use and instead charges business owners a fee to operate the money-dispersement service. Other apps have a revenue model that eats as much as $3 from a worker's daily paycheck.

Daily payments could help some workers smooth out the financial volatility of fluctuating work schedules and income, economists say.

Many Americans remain on shaky financial footing with little in savings years after the recession's end. That prompts some 12 million consumers to take out payday loans each year, which quickly accrue interest and fees, according to research by the Pew Charitable Trusts.

Readily available cash might make it even harder for some workers to build savings.

Barbie Roland, a shift manager at Hardee's in Callahan, Fla., says it took her a few weeks to figure out how often to cash out her daily earnings, after she was surprised by how little was left on payday. She accepted so many daily payments when first testing the Instant Financial app in October that her biweekly paycheck shrank to $500 from around $900.

"I thought, did I really press accept that many times?" says Ms. Roland.

Since then, she has learned it is easier to budget if she cashes out three days of the five days she works, on average, taking home around $41 typically for the day, or half of her $10.25-an-hour wage.

"In some ways, employers are actually helping you save money by not paying you until the end of the month," says Jonathan Morduch, an economics professor at New York University and director of the school's Financial Access Initiative research center.

Even so, instant-pay perks are growing in popularity. More than 4,500 Outback Steakhouse employees in the U.S. receive their tips through Instant Financial, and ride-hailing services like Uber and Lyft offer similar features from other payroll partners for hundreds of thousands of drivers.

The services have produced some unexpected benefits, managers say: Employees are more willing to put in longer hours as they see the immediate results of their work.

The 86 crew members using Instant Financial at one McDonald's restaurant in Tampa, Fla., now call in sick less often, says general manager Rebecca Kyeretwie. She used to have to find workers to cover about 10 hours each week when others didn't show up.

"People are begging to come into work now," says Ms. Kyeretwie, a 21-year McDonald's veteran, who added that she can now reliably set shifts on the restaurant's calendar days in advance. Ms. Kyeretwie says she doesn't use the app personally, because she found it difficult to incorporate into her cycle of bill payments and investments.

Lawrence Davis quit a $400-a-week warehouse job about a year ago to become a courier with DoorDash Inc., lured by the notion of getting paid after each shift.

"It's a blessing," says Mr. Davis. While working full time in his previous job, he says he occasionally relied on short-term loans and cash advances if he needed quick cash to cover unexpected costs.

"Knowing that I'm going to get paid instantly keeps me working every day, and keeps the goals I'm trying to reach in mind," says Mr. Davis. He says he typically works around nine or 10 hours a day, stopping when he has earned around $250, before taxes.

DailyPay Inc., a financial technology startup, administers the perk for DoorDash and other companies, including GrubHub Inc. DailyPay typically charges workers a fee from $1.25 to $3 each time they deposit their earnings into their accounts. The cost doesn't bother Mr. Davis, he says, because he earns three or four times more than he did in his last job. 

Write to Kelsey Gee at kelsey.gee@wsj.com

This article was licensed through Dow Jones Direct.

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