When payday can be any day at all

Luis Vazquez and his girlfriend were down to their last US$50 after she got sick and had to miss work for a month.

Faced with a similar cash crunch years ago, Vazquez had resorted to a high-interest payday loan. But the couple and their toddler son were eventually evicted from their apartment because they couldn’t make both their rent and the loan payments.

Vazquez vowed never to take out such a loan again. This time, he had another option. An overnight support manager at Walmart, Vazquez was able get a US$150 advance on his pay using an app that allows the company’s employees to access up to half their earned wages during a pay period.

A growing number of US companies are rolling out services that allow employees to receive part of their pay when they need it. This can help workers avoid unpleasant and potentially costly options such as borrowing from loved ones, running up credit card debt, selling possessions or taking out highinterest loans when bills come due or emergencies arise.

Developers of flexible-pay services say adhering to a rigid pay cycle doesn’t make sense.

Josh Reeves, chief executive and co-founder of the payroll company Gusto, sees a model in the way parents pay their children for doing chores.

“If they mow the lawn, they get paid right away,” Reeves says. “We think in the future, everyone will get paid [for their work] when they do it.”

Some experts acknowledge that giving employees early access to their pay can backfire if, for instance, they spend the money unwisely. But the need for flexible pay services is clear. About one-third of US adults were either unable to pay their monthly bills or were one modest financial setback away from financial hardship last year, according to a recent survey by the Federal Reserve.

Writing cheques for every employee used to be time-consuming and costly, but now the process is largely automated.

“It takes no extra effort or little effort, so leaving people subject to an outdated rhythm payment or cadence, there’s no real logic to it,” says Rachel Schneider, of the Aspen Institute Financial Security Programme.