How to Offer Flexible Payment to Your Employees

In the past, companies had only a few ways to handle pay day. Now, modern workplaces have access to a number of non-traditional payment options.

In an increasingly digital world, offering flexible payment options can be an excellent way to improve employee satisfaction. These flex pay options can also appeal to the younger generation of workers who are accustomed to fast and flexible financial options in every area of their lives.

Why offer flex pay?

If your payroll system has remained the same for the past decade or so, it can seem like a lot of work to add new options. But when you add more flexibility to your payments, you increase convenience—and reduce stress—for your employees. If they have additional control over how and when they receive their paychecks, it can help them stay focused on the job rather than worry about money.

Providing flexible payments as part of your employment package can also help you attract and retain the best talent. New hires will feel more confident that they won't have to wait for their first paycheck, and long-standing employees will feel like you're taking good care of them by providing options.

What are the main flexible payment options?

Alternative payment systems come in a variety of formats. It's quite possible you may already be using some of them. Here are the most common types of payment options.

Direct deposit

Automated Clearing House, or ACH, direct deposit has been available for quite some time, and it's already the most popular method of payment in America. Results from the 2022 Getting Paid in America survey conducted by the American Payroll Association and National Payroll Week found that about 93% of US workers receive their paychecks via direct deposit.

ACH payment offers several benefits to employers. This method not only saves you money as an employer—negating the need for check printing—but it also allows you to process payroll from anywhere, and it keeps employee information more secure.

In order to offer direct deposit, you'll need to start using a payroll service. You'll also need employees to fill out direct deposit forms, which will collect each employee's bank account number, routing number and Social Security number, among other information.

Direct deposit of payroll will occur on pay day, meaning your employees can access their funds as of the start of business on pay day.

Pay cards

Not all employees have a bank account or choose to use one. For these employees, you can still offer a payment option similar to direct deposit with pay cards. These are prepaid debit cards that can receive payroll deposits electronically.

These pay cards are insured by the FDIC, but they can have user fees for actions like ATM withdrawals, which can make them a more expensive choice for employees. However, this can still be an attractive payment option for unbanked employees because it recreates the instant nature of direct deposit without requiring a bank account.

Wages on demand

On-demand pay is a service that allows employees to access their wages as they earn them up to a certain dollar amount, rather than make them wait until the end of the payroll cycle. Some payroll service companies offer this as a perk to your workplace as part of overall services provided.

Fees for on-demand pay are typically only incurred at the time of use, and they're paid only by the employees using the service—meaning it won't affect your payroll costs or employees who don't need wages on demand. Review your service provider's fee schedule to make sure the specific service will serve your employees' best interests.

Providing your workers with a variety of flexible payment options can improve their financial health and set you up for a solid long-term relationship. Your employees will know you want to meet their needs, which is one of the best ways to encourage loyalty and support in your staff.