Vancouver company allowing employees to be paid daily
A Vancouver tech company says its instant-pay app can keep millennials from ditching work, and some major restaurant chains, including at least one in Prince George, are starting to bank on that.
The idea behind Instant Financial’s app is to put cash in the hands of employees on the same day they work. That instant reward encourages employees to opt to flip burgers, clear plates and take orders as scheduled rather than chill at home – or so the theory goes.
A lot of big businesses are buying into the concept of instant pay, with McDonald’s, Outback Steakhouse, Earls, De Dutch and Mr. Mikes among the company’s clients to date.
Here’s how the app works: at the end of each workday, an employee at a participating company can elect to take 50 per cent of his or her pay for that day’s work and transfer it to an “Instant account.” The other 50 per cent is paid out at the end of the company’s regular pay period.
Cash in an instant account can be spent or withdrawn using a debit card, or it can be transferred to a regular bank account.
Jordan Cardinal, a 33-year-old prep cook at Mr. Mikes in Prince George, has been able to receive his pay instantly for about the last six months and said he uses the app every day.
“It helps out. Usually I spend the money on bills and rent, but some days I’d like to pick up something for the kids like a special dinner, or a couple groceries,” Cardinal said.
When asked if the instant-pay system has made it tougher to cover monthly expenses, Cardinal said it hasn’t. “I have it all down to a T.” For Dave Halley, Cardinal’s manager at Mr. Mikes, the app wasn’t needed to keep employees coming in for their shifts, because they don’t have a problem with absenteeism.
But what it does do is keep Mr. Mikes “an employer of choice,” he said.
“I think in this day and age, people want things now… Nobody wants to wait, so if there’s a way for people to access the money that they’ve already earned ahead of time, it was a no-brainer for us.”
Steve Barha, the CEO of Instant Financial, said a ‘couple hundred’ restaurants are using the company’s pay system and what they see in return is reduced turnover and employee absenteeism, and happier employees.
His company is not the only one occupying the quick-pay space, with lenders abounding who can bridge the gap in pay periods. But unlike taking a payday loan, employees don’t pay crushing fees or stratospheric rates to use an Instant account.
Instant Financial makes money by charging employers for the service and merchants when its cards are used, Barha said.
Employees are not charged to take pay through the app or to use their cards, but they do pay ATM fees for withdrawals at some machines.
They are also charged “inactivity fees” when they neither load nor spend from their accounts in a 90-day period.
But Scott Hannah, CEO of the Credit Counselling Society, says instant access to a paycheque could encourage bad financial habits and make people more vulnerable to debt.
“I’m somewhat shocked,” he said about the app. “This goes against the basic financial planning principles people should learn – to have a longer-term perspective in planning their expenses, savings and income.”
Hannah believes the app could leave people more susceptible to payday loans or credit card debt because they could find themselves lacking funds to pay the bills at the end of the month.
In a perfect world, it shouldn’t matter how often employees get paid, but in real life, people aren’t as disciplined as they should be, Hannah said.
“Getting paid every two weeks forces someone to manage their money more effectively than getting paid daily.”
Hannah said the app could give companies a competitive edge in attracting and retaining staff, but cautions employers to give a second thought about the long-term impact the app could have on their employees.
He also advised employees who use the app to make sure they manage their money carefully, put a limit on discretionary spending, account for core expenses – such as rent, utilities and groceries – and put funds aside for a rainy day.