Payroll Insights
January 13, 2025

In the face of rising costs, companies turn to on-demand pay: New research

Employees and employers around the world face growing financial pressure. That’s why more employers are looking to on-demand pay as a unique way to support employees with anytime-anywhere access to earned wages. 

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Employees and employers around the world face growing financial pressure. That’s why more employers are looking to on-demand pay as a unique way to support employees with anytime-anywhere access to earned wages.
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Today’s employers are caught in a balancing act between employees’ rising expectations and ever-tightening budgets. Inflation may have come down since its peak, but the pain of high costs will be felt by employees and employers for a long time to come. Employees are struggling to cover their day-to-day expenses, let alone save for the future. Employers face higher operating costs across the board, making it very tough to hike wages, especially in low-margin industries. In fact, three quarters of HR executives cited inflation as a primary concern impacting their talent strategies in 2024.  

Amidst these challenges, on-demand pay has emerged as a unique way to ease workers’ financial strain without adding significant cost to the employer. Some companies might still hesitate to offer employees anytime, anywhere access to their earned wages. But as recent research shows, growing financial urgency is pushing more employers to look at on-demand pay with fresh eyes.1  

Boosting productivity and hours worked 

On-demand pay provides a major incentive for people to work harder and more often. They work harder because they feel more financially empowered, and they work more often because they can cash in on the rewards as soon as their shift has ended.  

In a study of over 800 on-demand pay users, more than one-third said that financial stress negatively impacts their productivity, but nearly three quarters said they were more productive as a result of having access to on-demand pay. On top of that, 72% of on-demand pay users said they were more willing to take on extra work when they knew they could get paid immediately after. This number has risen 26% since 2022, and the eagerness to work harder and longer is especially found in younger workers (aged 18-29), who are more than twice as likely as workers aged 50+ to say they’ll pick up more work because of on-demand pay.  

Positive impact on culture and retention 

An employee’s opinion of their employer is critical for retention, especially in industries with high turnover rates. Resistance to on-demand pay can suggest that an employer doesn’t trust their workers. This can have a massive impact on culture, as 67% of surveyed users said they felt a sense of belonging and empowerment in the workplace as a direct result of having access to on-demand pay. But the story doesn’t end there. What’s even more noteworthy is that this sense of belonging and empowerment went up as the worker’s earnings went down, meaning the positive cultural impact of on-demand pay was disproportionately felt by lower-income workers. Companies operating in low-margin industries can’t ignore a result like that and its potential impact on their workforce.  

The cultural benefit of on-demand pay extended to retention, too, as more than half of users (57%) surveyed said that on-demand pay was one of the reasons they’d stay with their employer, a major increase from the 36% response in 2022. Other major increases have occurred in the number of users saying on-demand pay has a positive impact on their view of their employer (79% compared to 63% in 2022) and in the number of users saying they would not work for an employer that doesn’t offer on-demand pay (up from 21% to 35%). In all cases, a changing world continues to make on-demand pay more impactful and, in some cases, necessary for employees hoping to attain financial wellness.  

Positive impact on financial wellness 

Covering day-to-day needs 

Employers know the importance of a reliable cashflow, and so do employees. Waiting for payday can lead many workers to use credit card debt or even high-interest loans to cover their day-to-day needs, especially if they face an emergency expense. After years of high global inflation, it’s no wonder that surveyed workers are relying more than even on on-demand pay to cover their day-to-day expenses with earned wages instead of borrowing.    

Among the workers we surveyed, some of the most common reasons for accessing on-demand pay were helping to pay bills on time and helping to buy enough food for a family, both cited by nine in 10 respondents and both up more than seven percentage points since 2023. A further eight in 10 said on-demand pay significantly or somewhat helps them pay for their family’s medicine and health care and pay off credit card debt. This rising financial urgency makes the case for on-demand pay ever stronger, especially for employers with little room to move in their compensation budgets.  

Saving for the future 

Financial leaders like Warren Buffet say that no matter what a person's income, they need to invest some of their money in the market to have any hope of building wealth. For a low-income worker, this might require running a low checking balance to invest more of their money. On-demand pay helps them do this by alleviating the fear that they’ll get caught by an unexpected expense between paydays and take on more debt to cover their costs in the interim. 

When it came to savings, being able to save/invest earlier saw the largest increase in importance (+12%) among our surveyed respondents since 2023. The youngest group of workers was most emphatic about the importance of this ability, with more than half saying it was extremely important. A further three quarters of users said that on-demand pay helped them invest their wages sooner, and seven in 10 said that it helped them contribute more to their monthly savings.  

Positive impact on emotional wellness 

It’s probably not surprising that improved financial wellness would translate into improved emotional wellness for employees. Life is getting more expensive and waiting for payday is stressful when there are bills to pay. It’s little wonder that 86% of surveyed users reported a positive impact on their mental health because of on-demand pay, a 16% increase since 2022. A further 83% said on-demand pay helps reduce their stress. 

Moving forward  

The financial pressures facing employers and employees aren’t going anywhere soon. In the current reality, employers can’t afford to overlook solutions that provide major financial benefits to employees without adding significant operational costs. And that’s aside from the benefits to culture, productivity, retention, and a host of other KPIs that on-demand pay can bring. With employees around the world facing growing financial pressure, on-demand pay might quickly become a must-have for employers looking to retain a productive, reliable workforce.   

Learn more about how on-demand pay can make work life better at your organization 

 

1. This self-administered survey was conducted online by SSRS on behalf of Dayforce between September 12-16, 2024, among Dayforce Wallet users in the United States (n=810). Dayforce Wallet users were defined per client sample as active users who had recently registered or have a balance in their account within the past 30 days. They are considered to be the most active and engaged Dayforce Wallet users. 

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