Your Complete Guide To On-Demand Pay

What Is On-Demand Pay?

On-demand pay is a service that allows employees to receive their payments as and when they like. They can decide to take out pay one day at a time, or back up pay and take it all out in one large amount. This allows them to take out wages earned so far before their next scheduled pay date, be it monthly or fortnightly.

This creates a culture of earning wages as you work the hours. Very often, limits or periods are set, so that only a portion of the net pay can be accessed before the next payday.


Did you know that U.S. gross domestic debt is the highest in history? For the third year in a row, the percentage of Americans naming inflation or the high cost of living as the most serious financial problem facing their families has reached a new high. The 41% naming the issue this year is up from 35% a year ago and 32% in 2022.

It’s not surprising that in 2024, 84% of American adults say they worry about money. The top factors people cite as contributing to feelings of financial stress are the cost of food (50%) and housing (40%) and lack of savings (36%).

As an employer, you probably understand how much your workforce struggles to make ends meet. It may not always be possible to increase their wages, but there are other ways you can help. One way to help your employees is to offer more financial liquidity.

Read on for our must-know guide for on-demand pay, and find out how it can help your company.

How Does On-Demand Pay Work?

To implement on-demand pay services, an employer must first sign up with a company. This company will have their own methods of working.

Some companies send out a message to mobile phones once the person has finished their shift. This is not necessarily best practice because it puts cognitive pressure on employees to take money before payday even if they don’t need it.

Some services allow employees to access their earned wages when they want. For example, even if the company pays them every two weeks, they may decide to be paid weekly or every few days. With On-demand Pay, they can access their earned money anytime and get the remainder on the scheduled payday.

On-Demand Pay vs. Traditional Payroll Systems

In a world where, with just a few taps, people can pay bills, transfer money, and manage their finances entirely on their smartphones, payroll should not lag behind. Today’s employees expect their employers to move with the times and offer them the same consumer-grade experiences they enjoy outside the workplace.

The traditional weekly or two-week payment model is no longer viable for everyone.

Benefits of On-Demand Pay for Employees

Allowing quicker payments and easier access to wages allows more freedom for your employees. This helps them to manage their money better. It can mean they can pay bills instantly and can save and spend on their own schedule.

In cases of extra shift work, it means that employees have access to the extra money they have worked for. Overtime can often take a long time to pay out, way after the employee has worked and needs the money. This instant access helps them manage finances and can help them avoid debt.

Benefits of On-Demand Pay for Employers

For employers, this can translate into a happier workforce. By giving your staff more flexibility with on-demand payments, they will face less distraction from money worries and troubles. In fact, as many as one in four employees admit to neglecting their work or being distracted because of financial problems.

This can translate as you caring more about their wellbeing, making them more productive and loyal to the company. This will increase retention among your staff, as people may be less willing to move on to other places where they have fewer incentives in the workplace. It can also help you attract better quality staff, as it shows you offer more perks and flexibility.

On-Demand Pay Cons

If a provider requires your employees to withdraw earned wages after every shift, this can add up as a cost for employees. It’s important for you as the employer to understand the cost to your employees for such a service. For instance, does the provider charge for daily pay? do they offer a free / no fee model for On-demand pay?

For employers, the cons are mainly administrative, though even these are minimal. Employers must agree to provide time and attendance data to the service provider and apply a payroll deduction before processing payroll. Payactiv has this automated with API integrations with all major Time, Payroll, and HCM providers.

Finding an On-Demand Pay Service

An on-demand pay service is a huge benefit to both your company and its employees. However, when finding a service, there are a few considerations that you should make.

The first is the amount that companies charge in fees. If users are charged a fee for daily pay, it can add up very quickly. This can act almost like a payday loan, placing your employees in precarious financial positions that have been facilitated by you. For this reason, Payactiv provides two models that users can choose:

1. Access FREEdom – With direct deposit to the Payactiv card, users can access their earned wages anytime between paychecks at no cost. Nada, zero!
2. Access Choice – If users don’t want to use the Payactiv card, they can transfer their pay to their own bank account/card. The cost is $1 per day of use, and it’s capped at $3 for a weekly payroll and $5 for a bi-weekly payroll.

On-demand services work best together with good financial management, and that’s why the Payactiv app includes free budgeting and savings advice by phone appointments, discounts on everyday items like gas and prescription medicine, and a savings tool.

Implementing On-Demand Pay in Your Business

Once you’ve selected your on-demand pay provider, it’s vital to carefully consider the practicalities of embracing this flexible payment option.

Regulation

Be sure to familiarize yourself with state and federal laws applicable to on-demand pay programs, including the rules and guidance relating to:

• Fees
• Wage recovery and recourse
• Required disclosures

Technology Integration

Many organizations fear that integrating on-demand pay with their existing systems will introduce an additional workload for their payroll team or even result in payroll errors. Fortunately, the best on-demand pay providers’ services can be easily integrated with major workforce software.

Here are some features to look out for in an on-demand pay solution:

• Connecting with your existing payroll system should be straightforward, with no adjustments needed for your current payroll process.
• It should be easy to integrate with your timesheet software.
• Employees shouldn’t be required to set up new bank accounts to receive their wages.
• The system should allow payroll administrators to make payroll deductions before releasing funds to employees so you can rest assured you’ve collected the funds you need to send to tax authorities.
• It should allow you to quickly issue off-cycle payments, such as termination pay, bonuses, or reimbursements.
• It should allow you to pay employees remotely, even during disasters.
• Even if some of your workers don’t have a bank account, they should be able to use their on-demand pay payroll card just like a regular debit card at any merchant that accepts debit card payments, such as grocery stores, gas stations, and retail outlets.

Employee Adoption

Like any employee benefit, if people aren’t aware of your on-demand pay program, they won’t use it. Be sure to communicate this new benefit and how it works through diverse internal communications channels. You might consider developing a short explainer video to highlight the practical usage of the benefit during the early adoption stages.

Beyond On-Demand Pay: Complementary Financial Wellness Benefits

Pay on demand forerunners have built platforms that empower employees with lasting financial wellness. They’ve embedded savings, budgeting tools and other free financial literacy resources into their solutions—improving employee engagement, satisfaction, and retention.

Talk to a Specialist Today

When looking for on-demand pay advisors, shop around for quotes. See who offers the best rates and services for both you and your staff. You need a company that works for you, not the other way around.

Your first stop should be Payactiv. As well as on-demand earned wage access, we have a host of awards and a financial wellness package. Contact us here to learn more about Payactiv and put the financial power back in the hands of your employees.