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FuturePay (1)

Reimagining the Future of Pay to Instill Financial Confidence 

By Doug Politi

FuturePay_InsideFinancial wellness has continued to come into focus as one of the biggest considerations in the future of pay as today’s global events accelerate change. Even before a global health event reshaped the economic landscape, research from the Federal Reserve showed that 40% of people in the United States lacked $400 set aside in savings to cover an emergency. As employee needs and expectations continue to change, employers must address the emerging realities of pay and redefine their role in empowering greater financial confidence among workers.

Offer Flexibility in Pay Method, Frequency

Given recent circumstances, the need for greater pay flexibility is clear to see. As countries focus on reopening and restrictions on business operations begin to loosen, the learnings will have a profound impact on the path forward. This global event has underscored the need for workers to easily access their earnings at a speed that matches the urgency of the moment and through methods that accommodate a diverse workforce.

While the need for change has become clearer on the heels of today’s events, businesses have historically adapted to shifts in the way work gets done and how workers want to be paid. The growing freelance workforce and popularity of flexible schedules are just examples of the many elements contributing to this new outlook. These shifts have only intensified, with a significant increase in people working remotely and an even greater reliance on gig workers. As workers increasingly provide their talents and contributions on demand, they expect on-demand pay, too. With on-demand payments and person-to-person transfers readily available in everyday life, people are beginning to expect those same “instant” pay capabilities from their employers.

Now more than ever, allowing employees to access pay as it’s been earned, or early-wage access (EWA), offers employers a pathway to meet the critical needs of their employees. In a research paper titled “The Power of the Salary Link,” two authors at Harvard Kennedy School say charges associated with accessing funds early via an EWA program are typically one-seventh that of a bank overdraft fee, and less than one-fifth the cost associated with a payday loan. This option adds foundational support to the people powering the business while addressing the worker’s immediate financial need. This is, of course, just one tool that can help on a case-by-case basis. The need to help workers future-proof their financial wellness remains.


Provide Tools to Foster Financial Wellness

Regardless of pay method, the importance of financial wellness and preparing for the unexpected has never been more evident. It has become one of the most significant drivers in the future of pay, as both businesses and workers find themselves in states of recovery.

Even before COVID-19 changed the very nature of work and the state of the global economy, financial confidence was in short supply, with more than 40 million Americans struggling to pay their bills. Today, as the numbers shift and workers face new pay concerns, there is an even greater urgency to deliver on evolving pay demands. Sometimes by choice, though most often not, many workers are either unbanked or underbanked, which limits their access to financial options that many take for granted, such as ATM access to get cash, the ability to pay bills or shop online, and access to affordable credit. This not only creates friction, but also adds expense through overdraft fees, check-cashing fees, and payday loans. In many cases, the people most affected cannot afford the added cost. Employers can be part of the solution and help their workers better prepare for emergencies and manage debt.

Today’s technology offers more ways to integrate money management tools into employee benefits. There are a variety of third-party tools on the market, such as PayActiv and SmartDollar, that allow users to set aside a predetermined percentage of their regular paychecks into an emergency or savings account. Some also offer access to financial coaches and budget management assistance, which can help workers down the road in their financial wellness. While banks remain the most trusted sources for money management globally, employers are quickly becoming a conduit for achieving greater financial wellness.


Help Workers Prepare for the Future

Financial wellness within the future of pay extends beyond the short-term; it’s equally important to consider its impact on retirement planning. With financial stability indicating when people can securely retire, a recent Gallup Poll shows the average expected retirement age is now 66 or older, up from 63 a few years ago. Employees are loosening their grasp on expectations of retiring before age 65, with only 12% envisioning retiring before age 60. Confidence is limited as well, with fewer workers feeling comfortable with their retirement savings and many unable to afford saving for retirement. 

This downward trend underscores the need for employers to integrate supporting resources into their benefit programs. These integrated benefits programs can reduce worker stress and increase productivity by including resources such as financial planning and retirement advice, as well as digital retirement programs.  


Pave the Way for Greater Financial Confidence

In many ways, the future of pay we had envisioned has only been accelerated. While the journey to a better financial landscape faces challenges, progress will continue to come through financial education and management tools and access to convenient, on-demand pay models that integrate with how work gets done. This dynamic will continue to take new shape based on recent events and learnings. Now, more than ever, employers have the opportunity to show their employees that they’re there to provide support. As we all navigate forward that support will only deepen, allowing employers and employees alike to find more stable footing together.

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Doug Politi has been with ADP for more than 25 years and is currently the President of ADP's Compliance Solutions business unit. Politi is responsible for ADP's core Tax Operations and Global Money Movement functions as well as the WorkMarket contingent workforce solution and the ADP SmartCompliance® offering, which includes the Employment Tax, Tax Credits, Wage Payments, Wage Garnishment, Employment Verification, Unemployment Claims, and ACA Compliance product lines. He is responsible for all aspects of the business unit including marketing, strategy, service, operations, product, finance, and HR.