Ever thought, “It sure would be nice to get my paycheck a few weeks early?”
Well, you might be in luck. There seems to be a trend taking place with companies offering their employees the luxury of providing their paycheck in advance of their regular pay date. This recent phenomenon, like many others, has been helped with the growth in financial technology solutions. While payday advances coming in the forms of loans have been around for decades, the recent trend has proposed a slightly different answer: allow employees access to wages they have already earned on their current pay cycle, without taking a loan.
The case of Walmart
Walmart, widely known as one of the biggest employers in the world, is making a move to offer such a solution for their employees. Through the mobile application Even, Walmart employees can secure a portion of his or her earned wages eight times a year for no fee. Although Even charges a fee if workers desire to obtain their earned wages in advance more than eight times in a year.
Some argue that features like payday advances only drive employees deeper into debt. Both Even and Walmart say this benefit allows employees to be more financially confident. Users can connect their bank accounts, and the app will calculate expenses such as housing, food, and phone bills. This data can be used to illustrate how much they have to spend safely before their next paycheck.
What does this mean for employees?
If more companies were to adopt this sort of service, the economy could see millions of more employees get paycheck advances. In effect, this means that employees would have access to their money sooner than expected. Federal Reserve data from 2015 found that forty-six percent of adults could not cover a $400 emergency expense, or would cover it by selling prior purchased goods or borrowing. Would paycheck advances encourage fruitless spending or financial stability?
What does this mean for employers?
From the perspective of the employer, this new technology offers more flexibility. For one, employers won’t be in the business of providing payday loans for their employees. This is a frowned upon practice as it’s known for only putting employees in an ever-growing problematic financial position. If employees did in fact desire access to their paycheck ahead of payday, employers with the option would be more attractive, leading to a larger pool of candidates for new positions within the company.
The impact of features like payday advances from technology-focused initiatives such as Even remains vague. Will the ability to access earned wages help people achieve comfort and stability in their financial conditions, or will it inspire loose spending and improper budgeting? Only time will tell.
If you’re struggling to calculate your paycheck or looking to double check your employer, you can always try our free Paycheck calculators!