Stephanie Dwilson

What Are the Benefits of Customized Payment Plans?

Are your employees living paycheck to paycheck? If they are, it could be for a variety of different reasons — including the paychecks themselves. While it’s traditional to pay your employees on a biweekly or monthly basis, offering your employees the choice of when and how they’d like to get paid could be a unique perk.

With work itself becoming increasingly customizable, from flex hours to remote workers, it could be just a matter of time before this trend extends to payroll. Here’s a look at customized payment plans, from pros and cons to how you might make them this a reality for your workforce.

Pros and Cons of On-Demand Paydays

Customized payment plans are about more than convenience. They can make a big difference to employees who face challenges managing their finances. With on-demand payment, if an employee has a bill due in the days before their monthly paycheck arrives, they don’t have to make compromises to stretch their money. If they’re hit with a surprise expense in the middle of the month, this tool can help them make their payments without stressing. In these ways, customized payment setups can help your employees manage their health costs, making them less likely to skip important care or take on harmful stress. They can also cut down on predatory payday loans, which charge interest rates high enough to create a cycle of debt that’s tough to escape.

Of course, on-demand paydays have their potential downsides. You and your employees might need to pay an extra fee to use these services, as Business News Daily reports. In Walmart’s case with the Even app, according to American Banker, the mega retailer pays 25 percent of the monthly fees and employees pick up the rest. Another concern is that some employees may actually prefer to be forced to “save” their money monthly and not have every dollar immediately at their fingertips, Bloomberg Businessweek warns. But some services combine the best of both worlds by including budgeting tools within their instant pay service.

Customized Payment Plan Options

If you’re interested in offering your employees customized payment plans, quite a few services are already available to choose from. Some come in the form of add-on services and apps that deliver instant pay options. Two examples are Instant Financial (used by McDonald’s, Taco Bell and other restaurants for hourly workers) and Even (used by Walmart since December 2017). With Instant Financial, employees get a smartphone notification after their shift is done, and they can get paid through a direct deposit or prepaid debit card. Some businesses also use pay cards that work with ATMs but don’t require a bank account to access.

The Even app isn’t fully rolled out yet, but Walmart’s first six months testing it with salaried and payroll employees has been a success, according to American Banker. The app includes an instant pay option and an “OK to spend” tool that helps with budgeting, although it only allows users to draw up to half of their monthly pay early. Because it also accesses scheduled bills, it can predict how much is “OK to spend” at a time. Instant Financial offers a similar safeguard by only allowing up to 50 percent of a paycheck to be deposited immediately, USA Today notes.

Payroll providers like Gusto are also looking into implementing a service that lets employees create their own payroll schedules. Gusto launched a Flexible Pay trial in Texas that lets hourly and salaried employees choose how frequently they’d like to get paid, including the next day. Gusto advances the employees’ pay from its own funds so business cash flow isn’t affected. So far, the trial has been a success, Pymnts reports, and Gusto is planning to expand.

Customized payment plans can provide unique employee benefits that build loyalty and morale. If you want to use such a service, be sure to price it out to see if any increased fees are within your budget, and consider implementing free budgeting tools to help employees adjust to their new freedom and flexibility.

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