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What is on-demand pay?

On-demand pay is access to income as it's earned, helping build financial resilience and wellbeing.

Uber, Deliveroo, Netflix, Amazon – it’s fair to say that across many different industries, the days of waiting are done. We expect things on demand and we get things on demand. So if expenses are due every single day, then why don’t we get paid that way? After all, a day’s work is worth a day’s pay.

On-demand pay is just that – money that's been earned, on demand. Because waiting 30 days to be paid is essentially employees loaning their employers money, EY estimates that a total of $1tn accrued pay is held in employers’ treasures across OECD countries¹ – and sometimes these loans come at great personal cost.

 

Why are most people paid monthly?

Receiving a weekly wage ceased to be the norm in the UK after the 1960 Wages and Payments Act made it legal for companies to pay workers by cheque. This shift in payment schedules was hastened by the introduction of computerised payroll systems designed around monthly salary payments. It made it easier for employers to control cash flow, but harder for employees who were used to budgeting weekly.

At that point in time, the idea of accessing the money in your bank account through a mobile phone would have been ludicrous. In fact, mobile phones were a few decades off. But even though there have been dramatic changes to daily life – like our mobile phones, tap-and-go and subscription payments – there has been little change in the frequency at which we’re paid. Until recently.

How does on-demand pay work?

When an employer partners Earnd, we integrate with the employer’s payroll and time and attendance systems so employees can track their pay daily and also withdraw a percentage of it when they need to.

When an employee chooses to withdraw money, the money is paid directly into their bank account by Earnd. Any deductions are then taken into account during payroll reconciliation, before the employee is paid the remainder of their wage on the day their employer pays salaries.

Most on-demand pay providers will have a percentage of earned income available, ranging from about 20-50%.

 

Are there fees and/or charges for accessing pay on demand?

Depending on which on-demand pay provider an employer partners with, there may be fees or charges. Earnd doesn’t charge employees to access their earned money, because our central mission is to help people improve their financial wellbeing. However, other on-demand pay providers do. This can come in the form of:

  • A standard fee for each withdrawal
  • A percentage fee for each withdrawal
  • A membership fee for use of the product.

While the fees may be small, they can add up and prevent people from being able to use on-demand pay to get the most out of their money and only rely on it in emergencies. For example, if someone can access their money on-demand at no cost, they could use it to pay a weekly wage or save their earnings before their employer pays them to maximise interest earned.

 

How do on-demand pay providers make money? 

How on-demand pay providers make money depends on the provider. For the providers that charge employees fees, that’s a way they generate income. For a company like Earnd, we make money by charging private sector employers a small fee for each active user.

The money invested by employers is then made back through increased employee wellbeing which leads to:

  • Improved retention
  • Decreased levels of distraction on the job
  • Decreased levels of absenteeism.

 See more about the results that offering on-demand pay can have.

How does on-demand pay fit into financial wellbeing?

Broadly, financial wellbeing is about:

By providing a clear picture of what’s being earned and offering the facility to work to a daily budget, on-demand pay helps people to keep their spending in check and always have a good understanding of their financial situation.

In terms of debts like credit cards, overdrafts, loans and mortgages, on-demand pay offers a way to pay them down faster and reduce the overall amount of interest paid. On-demand pay is also an alternative to having to borrow when hit with an unexpected expense – again reducing interest and avoiding any late fees.

Once all that is done, people have more headspace to make decisions about the future. On-demand pay can be used to make daily or weekly deposits into a savings account so people can build savings faster and reach their goals sooner.

What next?

See more about how Earnd works.

¹ EY

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