SD Worx a leading provider of Payroll and HR Services has launched a new employee benefit solution, SD Worx Advance Pay. It enables employees faster access to pay. Many monthly paid workers struggle with cash flow problems at different times of the year, especially Christmas. Some organisations try to alleviate this by running their December pay run earlier. While this may help in part it also makes January a very difficult month for many. Ad hoc expenses can also cause a problem that leaves employees requiring funds turning to loans.
SD Worx Advance Pay allows employees instant access to their earnings for a small fixed fee. This makes it an attractive alternative to the high rates of interest offered by pay day loan companies. The recent demise of Wonga not withstanding, there are still many companies out there offering payday loans, often referred to as High Cost Short Term Credit loans (HCSTC).
The solution allows employers to give employees instant access to this benefit via a mobile app. The new benefit is available to both salaried and hourly paid employees. They are able to select how much of their next pay packet they can withdraw and the amount is deducted automatically. Either the employee or the employer can pay the fixed fee.
This is an innovative move by SD Worx. However, there are some unanswered questions. How much is the fixed fee payment? Is the amount that employees can withdraw limited by their effective accrued pay to date or are they able to draw down an entire monthly pay? Also, are companies able to offer this to all employees or just some of them? Additionally, can they determine the maximum amount that employees withdraw?
One assumes that the funds to pay employees are customer funds. This brings the challenge that for many companies its payroll is its largest expense and drawing down funds early will impact cash flow considerably. While this is a benefit that many employees will want to see their employers adopt, the finance teams will need to consider the impact carefully and mitigate any risks before implementing.
What does this mean
SDWorx Advance Pay is certainly a benefit that many employees will want to take advantage of. That SDWorx have delivered a simple mobile enabled solution, integrated to payroll, makes the process easy for the employee. It should also not add to the burden on the Payroll/HR team either. The deductions are automatic, limited and without, one assumes, HR authorisation, though some may take umbrage at that. Whether companies will be as excited will be interesting to see. This might be a case where rather than the “computer says no”, it’s the finance team that does so instead.
The case for adopting this benefit though is delivered powerfully by Melissa Goddard, Chief Product Officer, SD Worx: “We’re delighted to offer our customers the ability to give their employees greater control of their finances. 85% of employees are paid monthly, and with personal finance worries being cited as one of the biggest causes of employee stress, the option of being able to offer employees the ability to access their earnings using a simple to use app, at any time, will help employers offer a practical solution to alleviate some of these financial concerns.”
It may alleviate employee concerns, but will it add to the employers financial concerns.